In recent years, health systems nationwide have been undergoing significant transformations. Faced with the rising costs of care and the unfortunate reality of local hospital closures, these systems are not only adapting to these challenges but also seizing new business and partnership opportunities to enhance their services. Despite these changes, their commitment to providing the best possible care to their communities remains unwavering.

The recent Southern California Development Forum (SCDF) panel discussion, moderated by Angie Weber of CBRE, was a lively discussion of this topic. Panelists included Gizelle Paz of Providence St. Joseph Health, Paul Da Veiga of UC Irvine Health, Tim Hatch of Intermountain Healthcare, and Sophia Lee of Keck Medicine of USC. The panel discussed how the four major health systems in the Southwest are transforming their portfolios and growth strategies, including how they are responding to increasing costs of care, the impact of hospital closures, and how they are developing innovative business opportunities for healthcare delivery – all while continuing to provide the best care to their communities.

  Key takeaways included:

• ·         Rising Costs of Delivering Care

The panelists shared their insights and perspectives on recent mergers and acquisitions. Hatch emphasized that hospitals must care for their patients and workers yet contribute to reducing the nation’s healthcare costs. He also emphasized that healthcare is “19% of the gross domestic product, meaning one in every five dollars is spent on healthcare” today.  Furthermore, Intermountain has faced challenges with expanding in rural areas, including shortages of qualified construction labor, forcing them to think of other methods of care and building delivery.

The panelists in California addressed the challenges related to meeting the 2030 seismic compliance deadline. In addition to being extremely cost prohibitive, there are concerns statewide of pending shortages of labor in all sectors, including plan review, inspections, design, and construction. The panelists all agreed on the importance of maintaining a constant line of communication with governmental entities to advocate for necessary changes.

• ·         Healthcare Growth Strategies and Facility Development

Weber presented the issue of determining the right time and place to open new healthcare facilities. Paz discussed the challenges of opening new ambulatory care facilities and emphasized that their decision-making process is largely data-driven. She explained that Providence uses data analytics and collaboration with government affairs to identify where facilities are needed and where they can best serve the community. "We build health reports for a specific set of markets to understand the needs of the market, and then we see if there are opportunities for joint ventures or partnerships." This approach allows Providence to make informed decisions that benefit the people in these communities.

Da Veiga added to the conversation, noting that, before their recent acquisition of 4 Tenet Hospitals, UC Irvine had been investigating available land in north Orange County to align with their strategic growth plans. Before proceeding with development, they make sure to conduct surveys and assessments to understand scope and risks.

• ·         Strategic Partnerships in Healthcare

To keep up with strategic growth, strategic partnerships are being formed with other healthcare entities. Da Veiga highlighted this by discussing UC Irvine’s partnership with Lifepoint Rehabilitation.

"The benefit is partnering with somebody who specializes in a particular service. They do rehab well…  And so, when you partner with somebody who's an expert, I think that it just enhances your brand and stability,” he said. “Leveraging Lifepoint’s expertise improved their overall quality of services while maintaining the UC Irvine brand.” Likewise, Keck Medicine of USC recently partnered with Henry Mayo to bring much needed care to the Santa Clarita Valley area.

Lee agreed with Da Veiga and further added that building in California is prohibitively expensive. She noted that USC is working with healthcare developers to rebuild old offices, which is a cost-effective way of providing healthcare directly in their actual communities.  While competition is beneficial for the economy, partnering with other companies can enhance facility management capabilities.

Lee and Weber further highlighted that healthcare has become institutionalized, which means maintaining facilities is increasingly costly but necessary.

“For tenants and landlords, the level of sophistication on both sides is great but we need to do a better job managing, and one of the things we’ve discovered now is that we're adding more to our basis of design as we’re building these smaller clinics throughout the community.  In fact, two years after you build a brand-new building, something goes wrong with the air conditioning or water. Building it, in a way, is a lot easier than maintaining it. But today, we must oversee both of them." Despite the higher initial costs, she argued that this approach is more cost-effective in the long term.

Hatch noted Intermountain’s recent partnership with Providence and other leading U.S. health systems to start Civica RX, a nonprofit generic drug company aimed at keeping the costs of medication down and available for those who need it.

• ·         Branding and Real Estate Strategies for Healthcare

When asked the question “How do you handle your facilities from a design and branding standpoint?” Hatch emphasized the need to focus on branding design rather than architectural design.

Lee agreed that most of USC’s branding is based on the culture of their clientele. The level of changes done to a building is based on USC’s branding, and the vernacular of the patients, all of which is enhanced by the value-add strategy.

Weber wrapped up the panel by including how branding has changed over the past ten years. What once seemed insignificant ten years ago is now hugely important and can affect the presence and visibility of health systems.