Skip links


Blue Cross Blue Shield and five major North Carolina health systems announced an agreement in January 2019 that means a big shift towards value-based care across the state. Duke University Health, UNC Health Care, Cone Health, Wake Forest Baptist Health and WakeMed Health, along with their respective accountable care organizations (ACOs), announced they will adopt the Blue Premier value-based model from BCBS of North Carolina.

Blue Premier, the new value-based model formulated by the participants, allows BCBS and the health systems to jointly work toward improving care quality for patients while lowering the cost of delivering that care. According to the New England Journal of Medicine, value-based care models focus on helping patients recover from illnesses and injuries more quickly and avoid chronic disease in the first place. As a result, patients face fewer doctor’s visits, medical tests, and procedures, and they spend less money on prescription medication as both near-term and long-term health improve.

National healthcare costs are on an unsustainable path. According to the Kaiser Family Foundation, the U.S. spends nearly twice on health consumption per person than the average of other wealthy countries. . .

SOURCE: Peterson-Kaiser Health System Tracker

. . . While the value of all that spending has not dramatically improved mortality rates.

SOURCE: Peterson-Kaiser Health System Tracker

Population health management (PHM) is growing in importance among the healthcare provider community. Its holistic approach strives to improve health outcomes of a population group while also reducing the costs of delivering care. PHM, delivered effectively and efficiently, seeks to create a seamless transition of care and benefits everyone – patients, physicians, healthcare organizations, insurance providers, hospitals and the entire healthcare system.

  • With coordinated care among health providers, patients enjoy better health because the providers act in concert with each other rather than in silos. Patients have “skin in the game” – they are increasingly expected to bear more of the cost of their care, forcing them to become active rather than passive participants. Patients are more thoughtful of their lifestyle choices and habits such as diet and exercise as well as taking ownership of the steps necessary to manage their condition or disease. Because patients have an increased financial stake, they become more knowledgeable of the benefits of timely, preventive care, potentially avoiding more expensive procedures in the future.
  • With improved data analytics created by and shared among the participants in the PHM model, physicians are better informed, can deliver more effective targeted care, improve medication management, improve care outcomes and have more time to meaningfully engage with their patients.
  • Healthcare organizations such as insurance companies, hospitals and healthcare systems benefit because care silos are broken down, care data is shared and gaps in care are filled. Patient volumes increase, hospital visits and readmissions decrease, alignment of prices with outcomes are improved, revenues are optimized, the patient experience is improved and the cost of delivering care can be more accurately quantified and lowered.
  • The overall healthcare system benefits from increased preventive care and, thus, a healthier population, leading to more efficient, coordinated care at lower costs.

According to BCBS, Blue Premier ties payments to doctors and hospitals over time to the value of services that improve patient health. Healthcare providers will participate in a “shared risk” financial model, requiring them to meet or exceed established quality standards via their ability to manage the total cost of care and their overall performance. They will share in cost savings or share in losses, depending on how well they perform.

So, how does this coordinated, potentially more efficient model of care affect medical real estate? According to former Tenet Healthcare CEO Trevor Fetter, “It’s really the way healthcare is moving. So many procedures now can be done on an outpatient basis. The physicians prefer to practice in these more convenient, simpler environments.”

  • Hospitals and healthcare systems are examining their real estate holdings to determine how to better optimize their investments in facilities. Before building new, many are exploring how their existing real estate can be repositioned to better uses. For example, non-clinical and non-revenue generating uses in the hospital are being relocated and the vacated spaces are renovated to increase inpatient utilization. An increasing number of hospitals are retrofitting and leasing unused floors or wings to providers of long-term acute care, inpatient rehabilitation, skilled nursing, hospice or behavioral health. Shifting administration duties into off-campus commercial offices creates lower occupancy costs while creating spaces that can generate additional patient revenues. Consolidating disparate medical offices into larger, destination outpatient care centers decreases overall occupancy costs and aggregates complementary ancillary services to offer care more conveniently. Furthermore, to attract and retain key talent in an era of ongoing shortages of physicians, nurses and medical technicians, healthcare providers must create new workplaces that improve employees’ wellbeing, productivity and happiness.
  • The continuing shift from inpatient to outpatient care is driven by a number of factors – improved clinical procedures, increasing uses of technology, advanced pharmacological solutions, decreasing reimbursements from payors. For example, full joint replacement surgery is being conducted at ambulatory surgery centers (ASC). Off-campus medical office buildings, ASCs, diagnostic imaging centers, freestanding emergency departments, micro hospitals and similar outpatient facilities are lower cost alternatives than facilities on hospital campuses. Hospital strategy officers know well of the ongoing imbalance between a hospital’s needs for facilities and operations and the capital resources it has available. Outsourcing capital and development can initiate new or expanding programs that might otherwise be shelved due to capital constraints.
  • Hospitals and health systems have financial incentive to improve access to primary care in their communities. Patients have a parallel need because they are paying more for coverage, i.e., dramatically higher insurance deductibles and premiums. Consumers, therefore, are seeking more affordable solutions and more convenience, requiring healthcare providers to think and act more like retailers. Programmatic, cost effective development solutions that deliver the right number of urgent care and/or primary care centers, strategically located throughout a hospital’s markets, serve to expand the hospital’s geographic footprint, grow market share and contribute to its efforts to expand its patient base.
  • Wellness centers are attracting the attention of healthcare providers as they initiate and expand their population health management strategies. In addition to a more conventional fitness center, services provided include physical and occupational therapy complemented with therapy pools and specialized exercise equipment and facilities. Orthopedic physicians and staff have offices, exam rooms and other spaces to conduct therapy services. In many cases, hospitals partner with third party operators who are better at efficiently managing the facility.
  • The retail and healthcare industries are colliding at the same intersection. Both are experiencing significant disruption and are embracing change. Retailers have been “Amazoned,” resulting in store closings and bankruptcies, leaving malls and shopping centers with see-through bricks and mortar. Healthcare providers need to be in more retail locations to meet consumers’ demand for convenience. Mall operators are seeking to create live-work-play environments. Offering outpatient healthcare services satisfies part of that strategy. With a presence at a mall or shopping center, healthcare providers improve their efforts in managing population health.
  • Our country has been experiencing alarming growth rates in addictions and mental disorders. Healthcare providers are pursuing solutions as part of their PHM strategies for a lot of reasons: legislation over the last few years has improved access to mental healthcare; payors and employers are increasingly recognizing the importance of treating mental health; advanced treatment methods, technology and pharmacological solutions are available; companies recognize that offering mental health coverage is a smart way to ensure higher levels of employee productivity and overall physical health; and too many patients are entering hospital emergency departments who would be better served at behavioral health facilities. Hospitals need to pair with reputable, experienced operators of behavioral health facilities to ensure quality care is delivered. The operators prefer to invest capital in their operations. Thus, third party capital and development is increasingly in need to deliver behavioral health facilities in locations that best serve the patient population. Outpatient/day treatment clinics, residential treatment centers and psychiatric care facilities are some of the venues needed to satisfy patients’ needs.

Value-based care is advancing towards replacing the fee-for-service payment model under which healthcare providers currently operate. The benefits are obvious. The conversion will take time. Healthcare providers will continue to identify ways to increase and enhance their interactions with patients to ensure they stay well and avoid chronic conditions. Keeping patients and serving them conveniently and efficiently means healthcare systems will continue to deploy proven and creative real estate strategies to manage the long term health of their communities. Our team at Flagship is available to explore these ideas with you to help achieve your capital, outpatient, recruitment, facility and patient satisfaction goals.