Weekly Health Care Real Estate Briefing: Advocate Health Will Reduce Leased Footprint by 65% | Medical Properties Trust Expects $300M Charge to Earnings | New Episode of HCRE Advisor Podcast with Vikas Sunkari of SSM Health

The nation’s fifth-largest health system operator, Advocate Health, has developed a new strategy of cutting costs through staff attrition (rather than layoffs) and has delayed some capital projects. In response to recent economic challenges, Advocate also said it will reduce its leased space footprint by about 65% over the next four years.
In the latest episode of the Health Care Real Estate Advisor Podcast, Joel Swider sits down with Vikas Sunkari, Senior Managing Counsel at SSM Health, to discuss how a large health system handles the real estate component of M&A transactions, large and small.
Two development projects in Louisville, KY are expected to be among the largest medical office projects to be completed in the U.S. this year. One involves Baptist Healthcare’s Breckenridge Lane Center for outpatient care, which includes 126,800 sf of physician, ASC, lab and urgent care space at a cost of about $58 million. The other is a joint venture between Norton Healthcare and Goodwill Industries and involves a 120,000 sf medical office building on a former brownfield site that will eventually include a new Norton hospital with a total investment of over $100 million.
In a collaborative development effort, TWG and Innovcare have plans to develop a $65-million project which will address two major needs in downtown Indianapolis: medical services and housing. Adult & Child Health will occupy the medical office side, which provides primary care, addiction and mental health services.
In connection with a recent deal by Steward Health Care System to sell its operations at five Utah Hospitals, Medical Properties Trust, one of the nation’s largest owners of hospital properties, expects to take an approximately $300 million charge to earnings due to a change in tenants at the five hospitals.
Following in the footsteps of other Kentucky cities, the City Council of Erlanger, KY, recently met to discuss and vote on reforms to its current CON requirements. The resolution, which passed the Council’s vote, would not immediately eliminate or scale back the CON requirement; it was merely a vote to continue further discussions surrounding potential reform of the CON.
Medical Economics ran a story on the significant impact of private equity transactions on the value of physician-owned real estate. In cases where the PE group buys or takes an ownership stake in the practice entity (if permitted under state CPOM laws), restructuring the lease between the OpCo and PropCo prior to negotiating with the PE group can allow the physicians to extract more capital from the real estate and the overall transaction.
HCA Healthcare plans to focus on multiplying its freestanding emergency departments as it seeks to expand its TriStar Health System in Tennessee and Kentucky. This strategy allows for quicker access to emergency care for patients as well as freeing up ED space at TriStar’s hospitals.
HealthAffairs argued that nursing homes could use a total redesign to address challenges related to COVID-19 and staffing shortages. The article advocates for small “household models” of skilled nursing care, which would mean smaller facility sizes and private rooms to help stop the spread of illness and increase staff satisfaction, as CNAs would have broadened domestic roles (cooking, housekeeping, etc.) in addition to traditional nursing roles.
Finally, a few updates on the social determinants of health front. Hawaii Hospitals are struggling to meet the needs of the chronically homeless. Kaiser Permanente is piloting a program to connect patients experiencing homelessness to permanent housing and New Hampshire’s housing crisis is impacting the availability of beds at psychiatric hospitals.