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Health Care

'Obamacare' Could Spur Medical Office Development

By J. Elias O'Neal, posted Oct 11, 2013
More outpatient clinical development, such as NHRMC's new cardiology and imaging services building (above), along with medical office leasing could increase with the implementation of Obamacare. (Contributed rendering)

As enrollment for the Affordable Care Act opened up this month, area commercial brokers and investors said the sweeping health care law might push up demand for medical office space as more people become insured.

“I’ve had it in the back of my mind for years,” said Steve Anderson, a Wilmington-based developer who specializes in class-A office space development and has monitored the Affordable Care Act, also called Obamacare, with interest.

Not because he’s going to sign up in the insurance exchanges that opened Oct. 1, but because of the number of newly insured residents and medical practices that will need additional space to accommodate future patients.

“This is going to bring on some added patients,” Anderson said, “which means physicians may need additional space to accommodate the growth.”

According to a spring report from the Robert Wood Johnson Foundation – a Princeton, N.J.-based philanthropic organization devoted to the study of public health policy – more than 1.5 million people in the Tar Heel state did not have medical insurance in 2012, roughly 1 in every 5 state residents.

And some of the highest rates of uninsured North Carolina residents came from greater Wilmington.

In a January report released by the N.C. Institute of Medicine – a quasi-state agency chartered by the General Assembly in 1983 – nearly 32,000 residents in New Hanover County, or roughly 16.9 percent of county’s total residents, did not have medical insurance between 2010 and 2011. In Brunswick County, 16,000 residents, or 17 percent of the county’s population, lacked health insurance. In Pender County, 9,000 residents, or 18.2 percent of its population, did not have medical insurance – the highest rate in greater Wilmington, according to the report.

But with Obamacare now in place, many of those residents must purchase health insurance either through their employer or health care exchanges or face a tax penalty.

Across the area, a number of regional brokers are reporting increased demand and inquires for medical office space.

And while brokers say they are unsure if the spike in additional medical office leasing and development is related to the Affordable Care Act, many say given the timing, there could be a correlation.

“We know that hospital officials are having their discussions about their future facility needs to deliver health care to the community,” Benjamin E. Bivens, principal and co-founder of Charlotte-based MedSouth Healthcare Properties, said of Obamacare’s possible impact to medical office demand.

MedSouth Healthcare Properties is a private real estate investment firm focused on acquiring income-producing health care properties in the Southeastern U.S.

In August, the firm purchased the net lease on a 9,500-square-foot condominium office space that is currently occupied by Wilmington Health in the Offices at Mayfaire II development.

“You have providers looking to fine-tune their services,” Bivens said. “And the Affordable Health Care Act will put some pressure on that.”

Bivens, along with a number of brokers, also point out that outpatient services provided at off-campus hospital sites could also increase.

Some area medical systems are already trying to deliver such services.

Construction began in June on a new $14 million medical office building that will house some of New Hanover Regional Medical Center’s cardiology and imaging services on 8.24 acres along Physicians Drive.

New Hanover Regional is also awaiting state approval for a proposed satellite emergency room.

Plans are to build a $15.1 million, 30,000-square-foot medical facility at 9110 Market St. in the Scotts Hill area of northern New Hanover County that would house 10 treatment rooms and one critical care room, according to hospital officials.

Anderson said he was already receiving inquiries for additional medical office space in his Offices at Mayfaire development.

“I already have a 13,000-square-foot medical group under contract to take the entire second floor of Mayfaire III,” Anderson said without disclosing the name of the potential user. “We have room for four additional buildings, and I’ve already been approached by another medical user that’s looking for us to build a 40,000-square-foot building for their group out there. It’s an exciting time.”

But while the demand is building for new medical office space and development, brokers caution not to expect a building craze to occur overnight.

Hansen Matthews, partner and principal broker with Wilmington-based Maus Warwick Matthews & Company, said it could take years for some medical groups to make a decision on expansion. He added that the region also has an “adequate inventory” of existing medical office space.

“Even as we see a shift in the way patients come in contact with medical practitioners and providers, there is no way to immediately ramp up for that,” Matthews said. “We can’t create enough doctors and nurses. It will take time.”

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