Tag Archives: Affordable Care Act


AzHHA CEO sees encouraging trends in Arizona healthcare

When he arrived in Arizona in 2013, Arizona Hospital and Healthcare Association President and CEO Greg Vigdor brought more than 30 years of experience in the evolving and ever-changing healthcare industry.

With two years in Arizona under his belt, Az Business magazine sat down with Vigdor to hear his thoughts on industry trends and challenges, the Affordable Care Act and AzHHA’s mission to better healthcare in our state.

AZ Business: What is your personal mission as president and CEO of AzHHA?

GV: Our vision as an organization is to make Arizona the healthiest state in the nation. It is my job to push us toward the changes we need to make to ensure we achieve that vision. That means finding out how we can pursue better care and better results at lower costs.

AB: What are some of the biggest challenges you face in accomplishing these goals?

GV: The good news is the healthcare industry is in its most exciting transformation in history; it is continuing to reinvent itself. The challenge is we have to be constantly trying to figure out how to get from here to there, where we want to be. We have to take the innovations that we’re seeing now and figure out how to lead them, operationalize them and capitalize on them. That can sometimes be difficult in such a resource-challenged environment that we have in Arizona. The state budget is a challenge that is concerning as well. We need better answers for state funding in the future.

AB: What are some of the trends you’re seeing in the industry on a local, national and global scale?

GV: It’s exciting to see innovative processes happening overall in organizations to improve patient care. We know patient care can be better, more effective and cheaper. We have the ability to remake patient care and delivery with new technologies we now have.

The focus now is not on the illness care alone, but rather on making people healthier. Chronic disease management is a prime example. People are living longer but are now dealing with chronic diseases such as diabetes or heart disease that have to be managed over long periods of time with treatments as well as everyday care.

AB: What impacts of the Affordable Care Act are you seeing in Arizona hospitals?

GV: As far as the long-term impact, the jury is still out. It has been successful in terms of getting more people covered and getting more people into the system if they need care. That is a good thing, simply from a moral aspect. However, when it comes to the changes our healthcare system needs, we need a more detailed blueprint than the act has provided thus far.

AB: What are your thoughts on the recent collaborations that are taking place among local hospitals and with universities, entrepreneurs and global leaders?

GV: I’ve been in this industry for 35 years and these recent collaborations are some of the most encouraging things that are occurring in the state. This trend of working together for the common good can bring a lot more scale of change and speed of change when you bring it across the community. I’m a big fan of that, and that is a large part of what AzHHA does an organization.

Local Enrollment Kiosk_Draft

New Health Insurance Kiosk Launches in Valley

Local Enrollment Services, the first health insurance kiosk in Arizona, will open at Christown Spectrum Mall in conjunction with the Affordable Care Act’s open enrollment for health insurance on November 15. Local Enrollment Services and its staff will provide self-service solutions for people to enroll in the healthcare marketplace and to educate Valley residents about the 2015 health care changes.

The Affordable Care Act mandates that every U.S. citizen must have health insurance coverage by February 15, 2015 and the Health Insurance Exchange, which includes all of the public plans mandated by the Affordable Care Act, begins open enrollment on November 15. Local Enrollment Services is designed to be a convenient, fast, free way for people to sign up for health insurance. Licensed agents will be a the kiosk helping individuals, families and businesses navigate the health care changes and become savvy health care shoppers, enabling them to take control of the many health insurance options.

Located at Christown Spectrum Mall on 1703 W. Bethany Home Road in Phoenix, Local Enrollment Services will be set up right outside Costco for shoppers’ convenience. The kiosk will be able to help four shoppers at a time. To participate in the quick sign-up process that can take as little as 15 minutes, shoppers will only need to know their address, social security number, income for this year and an estimate of their income for 2015.

Local Enrollment Services Owner Nate Plett launched Local Enrollment Services to help people get the best health insurance for themselves and their families at the best possible price.

“We are committed to help Arizona consumers make the most intelligent and informed decisions about purchasing health insurance,” said Plett. “We want our customers to feel confident in making a decision to get the best health insurance policy available. Even if people enrolled last year, they should make sure their policy is still the best option for them. Local Enrollment Services is here to be a true community resource and help educate the public on why it’s important to have health insurance and have the right policy for themselves and their family.”

Local Enrollment Services will be open seven days a week starting November 15 during regular mall hours. For more information visit www.localenrollment.com or call 866.400.8901.


Abrazo helps Arizonans with healthcare enrollment

Abrazo Health on Nov. 20 is launching its Path to Health education series aimed at helping Arizonans get affordable insurance coverage.

The new enrollment period for the Affordable Care Act’s Health Insurance Marketplace, a one-stop shop to more affordable and accessible health care, is Nov. 15-Feb. 15.

Abrazo Health will hold free Path to Health seminars this month through February to present information about the potential benefits to individuals and families regarding the Affordable Care Act, Health Insurance Marketplace and Medicaid Expansion.  Sessions are scheduled for Arrowhead, Arizona Heart, Maryvale, Paradise Valley, Phoenix Baptist and West Valley hospitals.

“We want to help individuals and their families understand the Affordable Care Act. We want to make sure our community members are well informed in order to make the best decisions for themselves and their families.’’ said Dr. William Ellert, Abrazo Health’s Chief Medical Officer.

In Arizona, about 8 out of 10 people qualified for financial assistance and cost reductions for 2014 coverage through the Health Insurance Marketplace.  The Marketplace’s health insurance plans offer lower costs on out-of-pocket expenses and premiums based on income while private plans do not. Federal tax credits, which can be used to lower premiums, are available to those who qualify.

Abrazo Health’s Path to Health sessions include:
·       Arizona Heart Hospital, 1930 E. Thomas Road: 6-7 p.m. Dec. 2 and Jan. 27.
·       Arrowhead Hospital, 18701 N. 67th Ave., 6-7 p.m. Nov. 20 and Jan. 8.
·       Maryvale Hospital, 5102 W. Campbell Ave., 6-7 p.m. Dec. 4, Jan. 10, Jan. 22 and Feb. 7 in Spanish; 7-8 p.m. Dec. 4, Jan. 22 and Feb. 7 in English.
·       Paradise Valley Hospital, 6-7 p.m. Jan. 13 and Feb. 5.
·       Phoenix Baptist Hospital, 2000 W. Bethany Home Road, 6-7 p.m. Dec. 6 and Feb. 3.
·       West Valley Hospital, 6-7 p.m. Nov. 22 and Jan. 24.

Individual appointments also can be made with Certified Application Counselors at Abrazo Health’s six hospitals to receive help in signing up for health insurance on the Health Insurance Marketplace.  Coverage can begin Jan. 1 if enrollment is completed by Dec. 15.

Under the Affordable Care Act, people who do not enroll in health insurance by Feb. 15, 2015 will have to pay a penalty fee of $325 per adult and $162.50 per child or 2 percent of their annual income, whichever is higher, and it will be collected when they file income taxes.

Some of the important health benefits covered under Marketplace plans include emergency services, maternity and newborn care, lab tests, preventive services and pediatric services. Free preventative services include screenings for blood pressure, type 2 diabetes, cholesterol and colon cancer.

For a schedule and more information, visit AbrazoHealth.com/PathToHealth. To register for a Path to Health seminar, call 866-893-8446.

Arizona Health Care Cuts, AHCCCS

NAIOP Arizona announces opposition to Prop 480

The NAIOP Arizona board of directors has unanimously opposed Prop 480, an item on the Nov. 4 general election ballot that asks Maricopa County voters to approve a $1.4 billion general obligation bond over 27 years for the Maricopa Integrated Health System (MIHS).

If passed, Prop 480 would be the third largest bond issuance in Arizona history, according to the Arizona Tax Research Association (ATRA), the group spearheading the effort to defeat the proposition.

The NAIOP board could have supported a narrower bond request focused more on the behavioral health component and replacement of the Level One Trauma Center and Arizona Burn Center, NAIOP-AZ President Tim Lawless said.

However, it is opposed to the bond issuance, which would pit a taxpayer supported institution against a number of private healthcare systems where there is much duplication of services and excess hospital beds that private payers must support within a relatively small geographic radius of about five miles.

“We are especially concerned about duplication and unfair competition with taxpayer money,” Lawless said. “While the proponents claim there are three discrete funding components, the wording of the ballot proposal seems far more open-ended regarding the purposes the monies can be used.

“The timing of the bond issuance is also troubling as there was a massive property tax shift from residents to businesses during the Great Recession and these same businesses are still struggling to recover,” Lawless added.

From fiscal year 2010 to fiscal year 2014, there was a 30 percent increase in property tax rates for businesses. If the bond passes, a typical small business with assessed valuation of $1 million will be paying $7,800 more over time in property taxes.

“We also believe patience is the watchword as we still are not certain of all the impacts of the Affordable Care Act, which was allegedly created to better meet the needs of the uninsured yet who are cited as the primary reason for the bond,” Lawless said. “Related to this, the state expanded Medicaid insurance to the poor to draw down more federal dollars and there appears to be an equity issue that only Maricopa County residents are being asked to pay for the MIHS services when these same taxpayers already pay $65 million per year.”

The point that proponents make where interest rates are near or at historic lows thereby decreasing overall costs seems valid until it is realized that the total cost of the bond ($935 million is the actual amount) with principal and interest will exceed $1.4 billion over 27 years.

The NAIOP board says it needs the Affordable Care Act provisions to be understood with all of the attendant costs associated with its implementation before Arizona embarks on the bond issuance where a new hospital and multiple clinics financed by taxpayer money are constructed only to compete against private hospital systems in an area that already has excess bed capacity and duplication of services. The costs will be shouldered by the same private payers.

“Our board has also set aside some level of funding for the opposition campaign formed by ATRA,” Lawless said of a $10,000 contribution to be made by NAIOP Arizona to the opposition campaign.

Ron Genovese, founder and designated broker of GPE.

Op-Ed: A healthy advantage

The Affordable Care Act has upended the healthcare landscape, and along with it, the office footprint for many physician practices. Fast-changing technology and related healthcare reform requirements are also shaping tomorrow’s medical spaces.

Meanwhile, demand for medical office buildings will increase up to 20 percent by the middle of this decade, estimates the Urban Land Institute. During the next 10 years, demand for space is expected to increase by more than 60MSF.

Are you ready to take advantage of the ongoing shifts in healthcare real estate? Most owners are finding it difficult to make smart real estate acquisition decisions amid these seismic shifts.

The average medical office building tenant understandably focuses on patient care — not real estate. Current and future owners of medical office buildings will find themselves navigating challenges brought on by the new healthcare laws, all while working with hospitals or hospital-employed physicians. Prospective owners may lack the local knowledge of hospital politics and other facts necessary to make smart acquisition decisions.

That’s why working with companies such as GPE gives buyers a healthy advantage. From working within the hospital systems to working with doctors and medical users, to leasing, developing, marketing, selling and consulting, GPE’s staff offers a full complement of skills, experience, and above all, local knowledge of Arizona’s medical office market. Choosing to work with an expert in healthcare real estate will get the answers to questions many buyers don’t even know to ask.

childrens hospital

PCH Helps Families Understand ACA

Families considering their health care coverage options have a new resource from the experts in pediatric care.

Phoenix Children’s Hospital has created a webinar to help parents understand how the Affordable Care Act impacts their health care coverage and what to look for in both private insurance as well as the new marketplace exchanges.

Whether families are already familiar with health care reform or they need an introduction to the basics, Phoenix Children’s Hospital wants to help Arizonans better understand this complex law and what it means to them and their child¹s health care coverage, especially if their family is a frequent user of pediatric specialty care.

“With the changing environment in health care, resulting from the implementation of key provisions of the Affordable Care Act, we want to provide our patient families with information on those changes and guidance on making health insurance purchases in the future,” said Laura Handy-Oldham, MHA, Director of Patient Access for Phoenix Children’s and presenter of this webinar. She shares a wealth of information for patient families, helping them to make an educated decision to provide them with the best health care option for their family.

The webinar is free and available online at www.phoenixchildrens.org and click on the Health Care Reform box.

Photo by Gregg Mastorakos

Healthy Side Effect: ACA's impact on CRE, sustainability

Mark Stapp, professor of real estate practice and executive director of Arizona State University’s Master of Real Estate Development program.

There’s another trend growing out of the Affordable Care Act’s (ACA) emphasis on wellness. Mark Stapp, a professor of real estate practice and executive director of Arizona State University’s Master of Real Estate Development program at the W.P. Carey School of Business, says the trend can benefit Arizona’s economic development efforts.
“You say sustainability, and people think about energy, green building and conservation,” he says. “In reality, sustainability also includes a healthy workforce. When the workforce is healthy, productivity increases.”
Stapp says a combination of Millennials’ lifestyles combined with an aging boomer population means changes in development patterns. “Improved healthcare and an emphasis on wellness shifts where and what space is in demand. The population wants healthy places to live.”
Stapp sees the trends as drivers bringing populations closer to city centers. He also believes a healthy community is a big economic development selling point.
“The movement (in the Affordable Care Act) is to maintain and improve health rather than fix it,” he says. “This is crucial with the shortage in primary care physicians. It also means that healthy living is going to become integrated in other areas of the community.”
Stapp sees new business models developing around the ideals of healthy living. “As (the ACA) evolves, its policies will change and encompass a broader range of health care and wellness options. Integrative healthcare will become far more important,” he says.
What this means to economic development, Stapp explains, is that healthy cities are more productive.
“Supporting healthy lifestyle choices becomes a competitive advantage,” he says. “This is a direct shift of a portion of healthcare responsibility from insurance companies to communities.”
Changing the types of medical practices and patterns will also change building design and usability. “Real estate has value to support an activity,” he says. “If an activity goes, so does building value.”
Stapp sees a gradual change in office environments. “There is a shrinking demand for space. Can medical campuses withstand the test of time?” he asks. The bigger pie, in terms of health care and wellness, he says, is to look ahead to rapidly emerging trends that may make today’s medical office infrastructure useless.
“People are capital,” says Stapp. “Businesses are going to protect capital, and that is going to lead to adaptation when the demand creates new opportunities with different office uses.”

Banner MD Anderson Cancer Center in Phoenix.  Photo / Gregg Mastorakos

Healthy Outlook: Affordable Care Act means new healthcare opportunities in CRE

“Tastes great!”
“Less filling!”
The old beer adage flavors trends in healthcare commercial real estate entering the Age of Affordable Care Act (ACA). There are tasty opportunities for new types of healthcare real estate and a glut of less-filled medical office buildings (MOB) that may result from consolidations.
Healthcare providers are looking for patient-luring, high technology facilities and they want to pay less for the capital development. Facilities will be smaller, more flexible and expandable. Look for an airline-style hub-and-spoke system.
The new law and changes in healthcare delivery are also going to affect real estate — building sales and leasing, and the value of physician practices and clinics. Many existing medical office buildings will have to re-adapt. Some older facilities may be destined for scraping and redevelopment into other uses.
Deadline on evolving trends

Healthcare has been evolving over the past decade and ACA merely deploys previously evolving trends. All healthcare providers are now implementing change. To understand the future trends in healthcare, the ACA backend effect has to be understood.
Cars and people both run better with 5,000 mile oil changes and 25,000 mile tune-ups — for people, it’s periodic blood tests and annual physicals. It costs significantly less to deal with preventive healthcare for people than treating preventable illnesses.
“The top five illnesses in terms of cost and numbers are lifestyle-related and preventable,” says Mark Stapp, professor of real estate practice and the director of the Master of Real Estate Development programs at the W.P. Carey School of Business at Arizona State University. Stapp says ACA’s focus on wellness is going to have “profound effects on medical real estate and economic development.”
While most political and public discourse focus on the consumer side of the law, healthcare providers are gearing up for what the law means in terms of delivering healthcare and the facilities required for delivery. ACA deploys three fundamental healthcare delivery changes:

1. Creation of Accountable Care Organizations (ACO)
2. Emphasis on keeping people healthy
3. Using hospitals for only the most acutely ill

Meeting the standards of care financially rewards healthcare providers; failing to meet the new standards results in financial penalties. The solution is a model deployed by Banner Health in the Valley — deliver healthcare into neighborhoods using a hub-and-spoke system. This is one reason Banner has built six health centers across the Valley.
Private sector healthcare organizations are not the only ones affected by the law. The Maricopa Integrated Health Service is considering a bond issue to fund its strategic plan. If passed, resulting construction and renovations will enhance its already-existing hub-and-spoke healthcare delivery system.
With thousands of Arizonans obtaining health insurance for the first time, there is an increased demand for healthcare providers. That component of ACA alone would seem to make MOBs an ideal real estate investment. The reality is, to obtain efficiencies, older buildings may not work.
“There are a lot of medical office buildings and clinics that are going to be functionally obsolete; and not just old ones,” reports Tom Weinhold, managing director of Cassidy Turley’s healthcare practices group. “Owners are going to have adapt to general office use or possibly tear offices down and replace them with other uses. Medical infrastructure has requirements today that some buildings cannot accommodate.”
Stapp says it could be a double-whammy in an already over-built office market.
“General demand for office space is decreasing,” he says. “Real estate has value from supporting an activity. If that activity goes, so does the value. The changes in medical care are driving changes in building design.”
Stapp says there are prospects because of ACA, too.
“Much of the public discourse is focused on the healthcare delivery, but there are rippling opportunities,” he says. “The emphasis on wellness is going to more broadly open that field. Community design, how and where people live, transportation options will all change development patterns. The population wants a healthy environment and business will find opportunities in that demand.”

Development opportunities

“The days of the ‘build it and they will come’ hospital towers are over,” suggests Layton Construction’s Steve Brecker, executive vice president-healthcare. “Owners large and small are looking at their dollars much more carefully than before. There is a bigger analytical process in the decision to build or renovate a facility.”
Brecker’s comment, which comes from the firm’s nationwide perspective, is that no healthcare organization is overbuilding. Everything is right-sized for staff efficiency. “Interiors are the focus today. Unlike the ‘70s and ‘80s, a lot of forethought goes into everything from the lobby design to the comfort of the waiting areas,” he says.
At McCarthy Building Companies, Vice President of Business Development Chris Jacobson has a similar observation. “It’s a lot less expensive to build a clinic in an outlying area and bring healthcare to the patients as opposed to forcing patients to drive a long distance to a medical center,” he says. “The outlying clinics capture market share for a provider, and feed more acutely ill patients into the central medical center.”
This is the gist of the hub-and-spoke system deployed by Banner.
“Banner is the trendsetter,” Jacobson says. “They are using an accountable care model (as an ACO) and emphasizing wellness to save money.”
Banner’s Vice President of Development and Construction Kip Edwards says, “We’re going to deliver care at the most convenient and accessible level to our patients. This means not only clinics, but online, telemedicine and other support and educational services.
“What we’re doing is putting physicians, PAs and nurses into a neighborhood setting, so that a patient does not have to wait to see a doctor. In the current system, you’re sick today. You call the doctor and can be seen in three days or next week. You’re not sick next week, you’re sick today. Banner is developing the facilities so a patient can get into the doctor today at the place where all his records are located. Then, if he needs x-rays, prescriptions and a lab test, it’s all in one place; no more running all over town.”
“What all this means for designers and builders is that owners are cautious and we’re not seeing new mega projects,” says Steve Whitworth, healthcare division manager for Kitchell Development. “Most projects these days are in the $5M to $10M range. We’re seeing outpatient space expansion, practices combining and technical upgrades.”

Clinics are being absorbed

Banner, along with Vanguard, Cigna and other major providers, are buying up medical practices to be those family clinics.
“Some of the practices are going to stay in their office condo or leased space,” reports Weinhold. “We’re seeing the big providers saying to doctors, ‘We’ll take your debt and administration, give you some up-front money, and you can work for us.’ Sometimes, there will be an agreement to keep current space for three to five years.”
The consolidations and acquisitions have completely chilled the market for medical practice sales. Although not CRE, many physicians and groups used to plan on a practice buy-out — with or without real estate — that would fund retirement.
“That’s just not the case anymore. No one wants to buy a medical practice except the accountable care organizations,” Dave Peterson says. The owner and designated broker of Arizona Business Intermediaries, LLC, has seen the market grind to a near halt, “It used to be I could take on a practice listing, send it out to a direct marketing list of other physicians and close a deal. Small physician practices used to value at two- to three-times earnings. Now, it’s sometimes less than one times earnings.”
Peterson says that the big healthcare organizations are buying practices on set formulas and with some upfront money. In the end, he says, the now-employee doctors will move into a neighborhood or community clinic.
“There are two impacts on the value of practices and the interest of physicians being their own boss,” he adds. “The first is [ACA]. It’s putting practices in the position of only one interested buyer — large healthcare organizations. The second, which a lot of people don’t consider, is the cost of medical school and its related debt. All of this makes working for a healthcare organization on salary appealing.”
It also causes medical practice values to plummet — dental clinics, cosmetic surgeons and other discretionary practices are not affected by ACA.

New opportunities

“With the emphasis on efficiency and limited dollars, today’s builder is a construction manager and trusted advisor,” observes Layton Construction’s Brecker. “We’re not waiting for plans and giving estimates, we’re involved in the design to use our experience to help the owner and architect design a project that delivers what’s needed for the dollars available. It’s different than just a few years ago.”
Hamilton Espinosa at DPR talks about ROI and efficiency, “As providers are pushing healthcare into the neighborhoods, they are going to spending less to build or remodel. At the hospitals and medical centers, major renovations are not going to be funded unless there is a return on investment.”
Espinosa says full-time equivalent employees and energy are the biggest operating costs for a healthcare system.
“If we can show that a renovation is going to increase staff efficiency and cut energy cost, the owner is going to be willing to put more capital into the project,” he adds.
This is another example of the builder becoming part of the overall design team early in the process. Builders may have an opportunity for more development money if offsetting operational savings are part of the construction project.
Following the Banner model opens other opportunities.
“John C. Lincoln is developing a freestanding emergency department (off Carefree Highway and I-17, Phoenix). Scottsdale Healthcare is building neighborhood clinics and urgent care centers,” points out Kitchell’s Whitworth. “The freestanding (emergency department) is the seed of a future hospital. Dignity (Health) is doing the same thing in Glendale.”
Kitchell is also using new construction techniques to build medical facilities. “It started with the Chandler Regional (Medical Center),” Whitworth explains. “We’re building modules in a warehouse and then bringing them to the site for installation. There’s a safety factor by cutting the number of people interacting onsite. Because healthcare organizations are almost using the same template for interior work, there is a cost savings building offsite.”
Kitchell does not have its own facility, but uses partner warehouse space or on occasion, leases space, for the offsite panel construction.
“We’re constantly looking for new ways to do things to reduce costs and increase quality,” he says.

New moves for service delivery

Other healthcare providers are getting ready to implement ACA strategies. Rather than acquiring practices and building all its own clinics, the Mayo Clinic seeks to affiliate and partner. This move is not at the exclusion of building its own clinics, but in addition to greenfield facilities. Mayo has affiliations with the new cancer center at Yuma Regional Medical Center and the Sierra Vista Regional Health Center is developing a Mayo telemedicine connection.

John C. Lincoln Health Network North Mountain Hospital in Phoenix. Greg Mastorakos

John C. Lincoln Health Network North Mountain Hospital in Phoenix. Greg Mastorakos

“We’re putting less focus in inpatient services,” reports Cheryl Lisiewski, director of facilities project management for Mayo Clinic. “Our remodeling and expansion are creating a better environment for outpatient services and increased examination space.”
Mayo is undergoing a nearly $350 million expansion on the Phoenix campus with a proton beam therapy facility and new cancer center.
“We’re looking to develop new clinical offices, but primarily, the expansion allows us to renovate and backfill offices for departments that are now in compressed spaces,” she says. The expansion does generate some new inpatient beds, but it’s almost exclusively designed to meet outpatient needs.
The investment on campus is not preventing Mayo from reaching into the community. “We may develop stand-alone and primary care facilities,” explains Lisiewski. “We’re also interested in strategic partnerships for the Mayo Care Network. It’s similar to what we’ve done in Minnesota and Wisconsin.”
Mayo Clinic expects to announce its first primary care clinic in an outlying community in the near future. Negotiations were not completed at press time. Mayo’s model is good news for MOB leasing, but on a small scale compared to the number of facilities. Its partnerships mean working with existing practices or newly consolidated groups.
“There isn’t a relationship between MOB office space that will be delivered and population growth,” cautions Weinhold. “Well-located space is being snapped up by REITs at premium prices. Outlying MOBs are seeing values decline. It’s not just a simple conversion to switch an MOB to a general office.”
“There are a lot of different vehicles being used,” he adds. “Walgreens, CVS and Walmart are developing in-store mini-clinics. The urgent care centers, FastMed and NextCare, are going into retail center end caps. NextCare has started building on retail pads.”
These options are not good news for owners of Class-B and -C office space.
“I had physicians who were buying medical office buildings before and during the recession,” recollects Arizona Business Intermediaries’ Peterson. “Now they want to get out, but they’ll be lucky to recoup the purchase price on some of those properties. It’s not just recession-pricing, it’s that the buildings are going to be empty under [ACA].”
“The big problem, too,” explains Cassidy Turley’s Weinhold, “is that a medical office is not

Banner Estrella Hospital, in Phoenix, during construction phase. Courtesy of McCarthy

Banner Estrella Hospital, in Phoenix, during construction phase. Courtesy of McCarthy

adaptable to a general office. Owners are going to need to come into these office condos and gut the place. It’s unlikely once vacated there are enough small practices to take up the space that’s going to be available.”

New buildings, new opportunities

“New businesses are going to model around the new ideas that come out of [ACA],” projects Stapp at the W.P. Carey School of Business. “There’s a huge impact from wellness, because healthy people reduce healthcare costs. This is going to create opportunities for wellness business — and these businesses are going to need facilities. For example, there is a shortage of primary care physicians. This increases opportunities for complementary integrative medicine. That opens the door to small niche practices not impacted by ACA.”
“Our marketing is going to change for healthcare,” McCarthy’s Jacobson advises. “Without the big projects, we need to adapt to smaller projects and facility upgrades. Cost is going to be a big driver in the process.”
Jacobson say smaller facilities provide opportunities for builders to take on multiple projects using big medical center experience: “The materials and systems are the same for the health centers. Redundancies are not required, but the electrical and HVAC still function the same way as a hospital.”
Jacobson sees opportunities with delivering healthcare into rural areas, “Telemedicine, robotics and web services may not means anything more than a room in a rural clinic, but the backbone is going to require central facilities like call centers and data centers.”
Whitworth echoes that comment, “We have a benefit at Kitchell that we can call a medical professional any time, 24/7, and they’ll tell us whether to take two aspirin, get to an emergency department or make an appointment for a doctor. That medical professional has to be located in a facility somewhere.”
“Banner is going to spend $15B over the next 10 years renovating its medical centers and building clinics,” concludes Banner’s Edwards. “Sometimes, we might find a facility we can renovate or repurpose. Other times, we might have a greenfield building. Occasionally, we might lease space.”
Multiply that by the number of healthcare organizations in Arizona, and the future of healthcare CRE has some potential.
“I just don’t see it happening next year,” says Espinosa.

Eric Jay Toll is a freelance writer based in Scottsdale. He covers CRE, development and construction, business, medical and travel news for a variety of publications. His work appears in AZRE, Az Business, USA Today, CardioSource World News, and Toll is the senior correspondent for Arizona Builder’s Exchange. Toll spent three decades as a land planner, including 17 years in public agency development and economic development department management. He lives in Phoenix.


Lease Rates Drop, Vacancy Steady in Medical Office Buildings

GPE Commercial Advisors released its 3Q healthcare report for the Phoenix Metro.

At the end of the 3Q 2013, the government had shut down and the debate over the debt ceiling was at an impasse over the funding of the Affordable Care Act (ACA). Not only are healthcare providers trying to understand the impact ACA will have on their practice, the government is at a standstill trying to understand its implementation and long-term effects and trying to implement it efficiently, starting with using exchanges to shop for health insurance. As a result, the effect the ACA will have on healthcare investment real estate continues to remain unknown. As the statistics in the Phoenix market prove to show little change since last quarter, nationally, the medical office/investment sales have been strong.

The average lease rate dropped slightly in the 3Q to $21.79, full service from $21.92 in the 2Q, according to CoStar.  The vacancy continues to hover at +/-30%.  The above data is comprised from 325 medical office buildings consisting of 10,000 SF or more, for a total of 12,995,709 SF.

Medical Office Sales Activity

In the 3Q 2013, there were 29 medical office sales transactions comprising of bulk portfolio sales, multi-tenant and owner/users. While the bank-owned properties are drying up, there still continues to be deals in the market. The total sales volume was $95,533,190, with the average price per square foot of $204.80 and an average cap rate of 8.33%.

Montecito Medical Investment Company sold six properties to CNL Healthcare Properties for $59.5M, which is $327 a SF. Three of the six properties were John C. Lincoln Medical Plaza I, John C. Lincoln Medical Plaza II and the North Mountain Medical Plaza with a combined total of 73,666 SF and are well-leased to multiple tenants, including John C. Lincoln/Scottsdale Health. The John J. Lincoln Health Network, which occupies about 45% of the buildings, has recently formed a strategic alliance with the Scottsdale Health System.

On October 1, Tenet Healthcare completed its acquisition of Vanguard Health System, Inc. (“Vanguard”). Vanguard operates as Abrazo Health Care in Phoenix. The transaction brings Tenet back to the Phoenix market after selling its former hospital assets to Iasis Healthcare in 1999.

Senior Housing Supplement

The senior housing real estate market includes assisted living, independent living, skilled nursing and dementia/memory care facilities. In the Third Quarter 2013, there were two transactions for a total of $4.285M: Reflection Bay at 2932-2942 N. 14th Street in Phoenix sold for $3.325M, just below an 11% cap rate at $109 per SF with a tenant in place; Fiesta Village Supervisory Care at 5602 N. 7th Street sold for $960,000, which is +/-$52.00 a SF.

The former Kindred Care facility at 11250 N. 92nd Street in Scottsdale is being converted to a 42 unit memory care facility. This new project, Amber Creek Memory Care, is expected to be completed at the end of 2014.



UA Offers Master’s Program in Health Administration

To help meet the growing demand for health care administrators, the Mel and Enid Zuckerman College of Public Health at the University of Arizona in Phoenix will begin offering a new accredited Master of Public Health (MPH) in Health Services Administration program in fall 2014.

“In the rapidly changing healthcare environment, administrative positions are one of the targeted areas for growth,” said Dr. Iman Hakim, dean and professor of the UA Zuckerman College of Public Health. “The passage of the Affordable Care Act and roll-out of the health insurance marketplace only magnifies the urgency to fill the pipeline with highly trained health care professionals.”

The southwest and border communities face unique issues including high rates of uninsured, unemployment, and low education attainment.

“All of these issues affect health and well-being,” said Cecilia Rosales, MD, MS, associate professor and director of the college’s Phoenix programs. “They impact our agencies and health-care systems every day. Arizona needs a well-trained workforce that understands these issues and is prepared to manage the human and fiscal resources needed to deliver effective public health services.”

The health services administration program will provide students with the knowledge of how health care services function and the business and leadership skills needed to manage them effectively in health care services organizations. The curriculum is comprised of both public health and health administration courses, with a goal to graduate highly qualified health care administrators. Courses will be offered through a hybrid of online and classroom teaching at both the Phoenix and Tucson campuses.

Rosales said the accredited program will help state and local health agencies and health-care systems by providing a workforce with skills in leadership, financial management, health informatics, marketing and human resources.

“If you go into health services administration, whether a public or private entity, you can specialize in planning, organization, policy formulation and analysis finance, economics and marketing. Expertise in dealing with these issues can be exported to other states and applied to other constituencies throughout the U.S,” said Rosales.

Rosales added, “The array of administrative requirements necessary to successfully run a complex health care organization is broad, and the significance of providing training in this complex area simply cannot be overstated. The unique combination of public health and health care administration classes in this accredited curriculum will provide students with the tools they need to understand the multifaceted administrative and business aspects of health care.”

The master’s degree in Health Services Administration is a two-year accredited program for full-time students, and offers a part-time track for students who need the flexibility. The curriculum is tailored towards working professionals in health systems, health agencies, third- party payers and health-care supply chain organizations.

Students will have the added benefit of learning from local and nationally recognized faculty members who understand Arizona’s health care issues. “Our faculty are available to meet with students in person and provide timely and meaningful mentoring,” added Rosales.

For more information about the new degree program please contact Kim Barnes at the UA Mel and Enid Zuckerman College of Public Health-Phoenix: (602) 827-2070, coph-phoenix@email.arizona.edu.


Abrazo helps guide Community Through Healthcare Reform

Abrazo Health has announced a new education series aimed at helping Arizonans navigate through the complex topic of healthcare reform and insurance reform programs. Abrazo Health will hold a series of free community events in November to answer questions about health care reform, Medicaid Expansion, and the new Health Insurance Marketplace and the potential benefits to individuals and their families. The education sessions will be offered in both English and Spanish.

Crystal Hamilton, Chief Executive Officer of Maryvale Hospital, an Abrazo Health hospital, says, “Because this community will be greatly affected by these changes, we are intent on helping individuals and their families understand this complex topic and their options.” Hamilton adds, “The complexity of the Affordable Care Act, insurance reforms and all that comes with it can be a slippery slope so Abrazo wants to make sure our community members are well-informed in order to make the best decisions for themselves and their families.”

The sessions are scheduled for the following dates at Maryvale Community Center at 4420 N. 51st Ave. in Phoenix:

·         Wednesday, November 6 at 11am – 2pm
·         Thursday, November 7 at 6pm – 9pm

Residents can register online at AbrazoHealth.com/ReformEvent or by calling 1-855-292-9355.


ACA and Dental Insurance: 5 Things to Think About

While much of the attention on the implementation of the Affordable Care Act has focused on medical coverage, Arizona residents are also able to purchase dental insurance through the Federally Facilitated Marketplace (FFM) beginning on Oct. 1, 2013, through March 31, 2014.

Delta Dental of Arizona states, “We are especially pleased that the new law recognizes the special value of stand – alone dental plans. Under the terms of the law, those who seek coverage through the Federal insurance exchange will be able to purchase separate coverage from dental carriers, like Delta Dental, that have a track record of providing services in the most cost-effective, consumer-friendly manner.”

The Federally Facilitated Marketplace can be found at www.Healthcare.gov and is particularly important for Arizona residents who do not have access to coverage either through their employers, on their own, or who aren’t covered by Medicaid. The new health care law requires that most U.S. citizens and legal residents have health insurance or pay a penalty. People are not required to purchase health and dental insurance through the exchange; they can go directly to a benefits carrier. However, if they might qualify for federal tax subsidy to lower their premiums the FFM is the place to go. Members can begin enrolling as of October 1 with coverage beginning Jan. 1, 2014.
Delta Dental of Arizona offers the following information to help you understand how the Affordable Care Act has changed dental benefits and to select a dental plan that best fits your needs.
1. Not All Networks on the Exchange are Created Equal
Dental benefits are provided through an arrangement with local dentists. Dental carriers enter into contract with the dentist, who in turn agrees to charge a certain price. The key to a great network is how your plan contracts with dentists to get you the lowest cost and highest quality of care. Delta Dental of Arizona negotiates a low cost with our statewide network of more than 3,100 dentists, and we protect members from balance-billing (the difference between what the plan pays and what the dentist charges). Lower out-of-pocket costs mean that the annual dental benefits stretch further.

But not all networks are created equal. Some dental carriers offer a small discount from the standard dental office fee. This practice can shift the burden of expense to the patient for costly services such as root canals and crowns. And the discounts offered may apply to only a very narrow network of dentists. This means the range will be smaller than a larger, robust network. Make sure dental insurance offers the lowest cost…with the most choice.

2. Do the Math
Be sure to understand what payments you are responsible for. In addition to the monthly premiums, there may be cost-sharing arrangements on services. Look for a plan that encourages preventive care by covering 100% of the costs of exams, cleanings, x-rays, sealants and fluoride treatments. Secondly, look at deductibles – the amount that must paid before the insurance company pays for all or a portion of the costs. Deductibles vary across plans. Lower monthly payment plans will typically have a higher deductible. In addition, there are also out-of-pocket maximums, which mean that once the out-of-pocket maximum has been paid, the insurance plan pays 100%.

Keep in mind; if you are purchasing your dental benefits through a medical insurance carrier on the new online insurance marketplace, you need to look carefully at how deductibles and out-of-pocket maximums apply. For example, a deductible for a health plan might be $2,000 compared to a typical deductible for a stand-alone dental plan that ranges from $25 to $100. This means you could pay for a lot of dental costs before the medical plan starts paying 100%. That can be costly for the average family.

3. An Ounce of Prevention
When choosing a dental plan, it is important to review what services the plan covers. While it may seem like all plans are the same, many vary in coverage. Look for an insurance plan that emphasizes preventive and diagnostic care. Many people don’t realize that costly and painful dental problems can be prevented by regular visits to the dentist…even at the earliest of ages. The American Dental Association recommends that children see a dentist by age 1. Dental problems such as cavities are nearly 100% preventable.

4. Getting the Most Value
Every family has a unique situation. It is important to assess dental plans based on your family’s needs. Do you have children who are ready for braces? Might you be heading for a crown or root canal? Are implants or dentures in your future? Or are annual exams, cleanings and X-rays the extent of your dental needs? Make sure you are paying for services you need and getting the best value on those services. It’s not just about cost; it’s about coverage as well. Look for the coverage that works best for you and your family.

5. Who Are You Doing Business With?
You are sure to come across many companies in the online marketplace. Some are big, but many will be small, new businesses. It is important to make sure you’re working with an established company. Review their company profile and make your decision based on the answers to several questions. How long have they been in business? How many years have they been specializing in dental insurance? Are they local or national? There has been a lot of consolidation in the insurance industry. How much experience your dental insurance company has processing and paying dental claims is important. You don’t want to get a notice from another company you are not familiar with that has subcontracted with your insurance company because that means dental insurance is not your insurance company’s main area of expertise. Established dental carriers have the benefit of smooth, accurate operating procedures.

Delta Dental of Arizona is a Qualified Health Plan issuer in the Federally Facilitated Marketplace. For questions about buying insurance on the Arizona Health Insurance Marketplace, visit www.HealthCare.gov in English or www.CuidadoDeSalud.gov for Spanish, or call (800) 318-2596. For questions about Delta Dental of Arizona plans, visit www.DeltaDentalCoversMe.com, call toll-free at:  800-352-6132, Monday through Friday (CT) or via email at customerservice@deltadentalaz.com.

Banner Good Samaritan Hospital

How hospitals, employers can help themselves with ACA

While employers in Arizona are bracing for the expected impact of the Affordable Care Act (ACA) on health insurance premiums, the long-range theory behind the act is that the costs will eventually stabilize over time. This stabilization in employer premiums can be expedited if hospital ERs, who will be impacted most by the increase in patient volume, can be proactive in their efforts to educate patients on new coverage options and eligibility.

While the ACA is slated to insure an added 30 million Americans by 2019, it seems little to date is in place to inform consumers about the new options. And even though Arizona’s new Health Insurance Exchange will go live this October, experts predict that continued lack of awareness and confusion about options will hamper individual enrollment.

Nowhere does this cause greater consternation then at the point-of-care in hospital ERs as they lose billions of dollars each year largely due to unpaid ER bills. If the uninsured don’t get signed up, continued cost shifting will take place and employers will indirectly end up paying for these uninsured patients with higher group health premiums.
With 23 percent of the population of Arizona living in poverty and millions becoming newly-eligible for Medicaid and private coverage, hospitals will need to incorporate easy to use enrollment solutions to manage this uninsured market. These solutions are especially important in order to both protect patients and to aid in diminishing the high price tag of benefits for employers. Three solutions that hospitals should consider are:

1. Coverage options rather than instant payment
The demand for upfront payment for patient care creates an adversarial relationship between the uninsured patient and the provider. In order to establish amiability with a patient, hospital staff members should take steps to have a more comprehensive and engaging “insurance talk.” When hospitals change this dynamic by employing staff to assist the patient in finding possible government coverage options and explaining them, patients will feel as though the hospital is on their side. A two-year study we conducted of uninsured patients presenting at four busy emergency rooms at Sharp HealthCare in California revealed that 60 percent of the uninsured seeking treatment were actually eligible for government programs, but were not enrolled. Focusing on coverage options rather than instant payments will protect both the patient and the hospital in the long run. For example, if a patient with no income and no coverage ends up needing more care due to a chronic condition diagnosis, the patient will wind up having to pay the hospital’s third party collection agency. These bills may end up bankrupting the patient, resulting in negative feelings about the hospital.  Also, the tone of conversation between hospital staff members and patients will be far more positive if the hospital staff members aren’t acting as debt collectors.

2. Looking beyond Medicaid
The good news is that hospitals are becoming much more vigilant about Medicaid enrollments. To this end, it’s also important for hospitals to inform patients about lesser known coverage and discounted care programs, such as CHIP in each state, various cancer-assistance options, hospital charity care assistance, and third-party liability coverage. In addition to indigent coverage plans in Arizona, COBRA is becoming more widely used, as it covers formerly-insured employees and their qualified beneficiaries anywhere from 18 to 36 months beyond employment depending on the qualifying event.
3. Software solutions to eligibility awareness
The other good news is that technology has made the process of enrollment easier through the growing use of portable hand-held software programs that can instantly inform uninsured patients of their options. One technological medium, PointCarePA, a web-based eligibility software that consists of a simple five-question quiz, helps hospital staff to quickly and efficiently screen uninsured patients for their coverage options.  The screening produces a list of personalized coverage options that allows for a more positive and engaging conversation between the hospital staff member and the patient. The list includes program contact information, monthly costs, sign-up checklists of important documents needed to enroll, applications and online enrollment links. PointCarePA is currently being used in Sharp HealthCare’s four emergency rooms.

Ankeny Minoux is president of the Foundation for Health Coverage Education (FHCE) and COO of the newly-minted company PointCare, an outgrowth of the non-profit organization. FHCE created a five-step at point-of-care that gives ER patients and hospitals instant access to free or low cost coverage options.


Greenberg Traurig Expands Phoenix Labor Practice

The Phoenix office of the international law firm, Greenberg Traurig, has expanded its Labor and Employment Practice, adding two seasoned shareholders to serve client demand. Three accomplished employment attorneys, all listed in the 2014 edition of Best Lawyers in America, and two experienced associates, now comprise the firm’s growing Phoenix practice group.

The group will host its 13th Annual Labor and Employment Seminar on Wednesday, October 2nd at the Scottsdale Plaza Resort from 8 a.m. to 6 p.m. Presentations will focus on emerging trends in labor and employment law and suggestions and strategies for enhanced compliance with applicable laws, in areas such as social media, the Affordable Care Act, immigration, wage and hour and workplace investigations.

Greenberg Traurig’s Phoenix Labor and Employment Practice includes shareholders Laurent Badoux and James Nelson, counsel Mona Stone, and associates Dana Hooper and Lindsay Schafer. The group has a wide mix of experience in labor and employment litigation and advice. Specifically:

* Laurent Badoux focuses his practice exclusively on labor and employment law, with an emphasis on compensation, employee relations and transnational employment issues. His broad range of experience includes collective and class actions litigation, collective bargaining agreement negotiations and arbitration, restrictive covenants and the defense of administrative charges involving various state and federal agencies across the U.S. Badoux is a frequent lecturer, both nationally and internationally, a former UNLV adjunct faculty member and has extensive experience in employee training.

* James Nelson represents employers and plan fiduciaries in matters concerning ERISA compliance, fiduciary responsibility, collective bargaining, wage and hour, employee benefits, safety, discrimination, wrongful termination among others. Nelson’s litigation experience includes complex litigation, class action defense, administrative proceedings and appeals.

* Mona Stone advises both entrepreneurs and Fortune 50 companies on employment policies and agreements, compliance with local, state and federal laws including the FCPA and employee issues. She is a published author on employment law including employer guides on EEOC investigations, employment handbooks and policies and non-compete agreements. Having successfully defended numerous employee complaints at administrative hearings, arbitrations, mediations and trials throughout the U.S., Stone is called upon to be a frequent speaker at seminars and client training sessions.

* Dana Hooper focuses her practice in the areas of commercial litigation, employment law and sports law. Her litigation experience includes alternative dispute resolution and collective and class action defense. Hooper is certified as an athlete’s agent and provides legal representation to sports-oriented individuals and businesses.

* Lindsay Schafer works with clients on business litigation and complex commercial disputes. She maintains a particular practice emphasis on employment litigation. Schafer is experienced defending administrative complaints and lawsuits involving claims of employment discrimination, breach of employment contract and wrongful discharge in federal and state court.

Cost to attend the Labor and Employment Seminar is $75 per person or $50 each for groups of three or more. Admission includes lunch and refreshment. For more information and to register, please visit: http://www4.gtlaw.com/marketing/LE/21955/index.html. Registration deadline is Sept. 25.


Service helps employers Understand Affordable Care Act

Mountain States Employers Council (MSEC), a leader in human resource and employment law services for the business community, announces its Health Care Reform Assessment program, a specialized service helping employers understand and comply with the Affordable Care Act (ACA), also known as the Patient Protection and Affordable Care Act (PPACA).  This service analyzes the impact of health care reform on an employer and provides steps to implement the changes necessary to ensure compliance.

The Health Care Reform assessment includes a one-hour consultation with a health care reform specialist working through a customized, detailed checklist for implementing the necessary changes related to the Act. Available to existing members, the assessment helps member companies navigate requirements of the law, including:

·         Qualifications necessary for an organization to be considered an “Applicable Large Employer,” including how to analyze variable hour, seasonal, and part time employees
·         Insurance affordability and minimum value requirement calculations
·         Potential fees for not providing compliant coverage to the vast majority of all full-time employees
·         Considerations for joining the Small Business Insurance Marketplaces
·         Eligibility for tax credits for employers who do provide insurance
·         What employee notices are required under the Act and when they must be delivered

“It’s important that employers continue to prepare for the impending requirements of the Act even with the delays of the employer mandate until 2015,” said Mountain States Employers Council’s Ryan Sarni. “Employers should take advantage of this additional time to make sure they fully understand the impact on their business and start the process of preparing for the changes. Additionally, employers who are offering insurance next year still have a host of new requirements that will impact their plans.”

MSEC also offers its members free access to the new Health Care Reform Learning Zone, a comprehensive online tool providing easy access to an interactive, informative portal to guide them through the administrative details and requirements of health care reform. Based on the demographics of the employer, the tool guides members through the relevant Affordable Care Act requirements.

Non-members who are interested in learning more about the assessment, online learning zone tool or MSEC membership can contact Karen Stafford, Membership Development at 602.955.7558 or 800.437.9262 (toll free) or email azinfo@msec.org for more information.


What does the Obamacare mean for small businesses?

Small-business owners who are anxiously waiting for regulators to finalize rules that will define the three-year-old Affordable Care Act remain uneasy. Their anxiety is justified since they are waiting for rules that will be enacted next year and no one knows what growing pains lie ahead.

But they shouldn’t necessarily view the ACA as a bad thing for business.

“Beginning in 2014, purchasing insurance coverage should become simpler and more streamlined,” said Jon Pettibone, managing partner of Quarles & Brady in Phoenix. “When a small business purchases a new insurance policy, insurance rates will vary only due to the following limited factors: family size, age, geography, and tobacco use. Insurers will no longer be able to base insurance rates on pre-existing conditions, claims history, gender, size of employer, and/or occupation of employees. In addition, insurers cannot deny a small business’s application for insurance if the business fails to meet the plan’s minimum participation or minimum contribution requirements as long as the small business applies for coverage between November 15 and December 15.  Although coverage may not become cheaper, increases from year- to-year will be based on a significantly larger risk pool and so may become somewhat more predictable.”

According to Scott B. Carpenter, an attorney with Carpenter, Hazlewood, Delgado & Bolen, the ACA will require all business with 50 or more employees to provide affordable, minimum essential coverage or face a penalty of $2,000 per employee, excluding the first 30 employees.

“An employer with 60 employees, for example, that does not provide coverage, will pay a penalty of $60,000,” Carpenter said. “If a small business owner decides to pay the penalty, the amount of the penalty is not a deductible business expense.”

So what happens if an employer realizes that a $60,000 non-deductible penalty is still less than what she would pay in health insurance?

“That decision will force those employees into the individual market or ‘exchange,’ where there is no guarantee that the subsidies and premium tax credits will make the insurance affordable for that employee based on the wages they receive,” Carpenter said. “In other words, employees who do not receive coverage through their employer may seek employers who do provide coverage. This is one of the biggest unknowns – the behavior of employees who do not receive coverage through their employer.”

Pettibone said a small business owner should analyze the “shared responsibility” payment it might owe if it makes no changes to its health insurance program.

“In some cases, a small business owner might discover that it could have a small — or even zero — shared responsibility payment,” Pettibone said. “In that case, the business owner may decide to make little change to its health insurance program. In other cases, the small business owner might discover that it could have a very large shared responsibility payment and thus needs to develop a strategy to minimize the amount of the payment.  Developing a plan now will help avoid an unwelcome surprise later.”

Carpenter also suggested that small business owners need to make sure that they are outsourcing non-critical functions — including payroll processing, IT support, etc. — to reduce headcount, if possible.

“From there, an attorney can be utilized to make sure that employee and independent contractor policies are ironclad and that possible business restructuring options are pursued,” Carpenter said. “ There is no question that today there is an incentive, until the Affordable Care Act and the various markets it will create — both good and bad — become more mature, to stay under 50 employees. Companies under 50 employees will have maximum flexibility.”

While the potential impact of the ACA remains anything but clear for small-business owners, there is one major misunderstanding that needs to be cleared up, even for companies with fewer than 50 employees.

“The biggest misconception out there,” said Rich Boals, president and CEO of Blue Cross Blue Shield of Arizona (BCBSAZ), “is that health insurance is going to be free. That’s not going to happen.”

The cost of health insurance has been a growing concern for small businesses, said Jeff Stelnik, senior vice president of strategy sales and marketing for BCBSAZ. Overall, about 71 percent of firms with 10 to 24 employees offered health insurance in 2011, compared with 77 percent in 2001, according to a 2011 Kaiser Family Foundation survey. Of firms with three to nine workers, 48 percent offered insurance in 2011, compared with 58 pecent in 2001.

“While the Affordable Care Act gives more people access to health insurance coverage, it doesn’t address the affordability issue,” Stelnik said. “In the coming year, small businesses will see higher premiums that are the result of the ACA provisions including essential health benefits, guaranteed issue, ratings and taxes/fees. These increased premiums are a weight that could have a significant impact on the bottom line of small businesses.”

Another misconception is that many small business owners don’t think there are not many requirements if they stay under the 50 full-time employee or 50 full-time employee equivalent threshold, but experts said that is not the case.

“Small employers still need to be educated on their compliance responsibilities,” said Shay Bierly, director of client services for MJ Insurance’s employee benefits department. “Those compliance responsibilities include maximum waiting periods, how to distribute medical loss ratio rebates, SBC (Summary of Benefits and Coverage) disclosure rules and reporting requirements, to name a few.”

Bierly said that all business owners — no matter the size of the business — need to educate themselves and prepare a strategic plan with a professional consultant or advisor so that they don’t fall prey to the many misonceptions that are floating around regarding the ACA.
“The law is here and is not going away before the big implementation date of January 1, 2014,” Bierly said. “Business owners need to understand the expectations, possible financial impact and prepare themselves and their employees.”

Bierly said the ACA provides an opportunity for employers to assist their employees in becoming educated consumers.

“With the possibility of moving to a consumer driven health plan, employees will have more skin in the game and, by necessity, find the need to understand the cost and quality of services they need,” she said. “It is all about working smart and staying in the know. Employers must be engaged in what the market demands from a recruiting and retention standpoint while creating a responsible, healthy workforce.”

To make sure they are ready for the arrival of the ACA, Stelnik said business owners should do these things:

* Understand if your business has a grandfathered health plan.
* Know how your business is classified under the ACA. For example, businesses with 51 or more full-time employees will have to pay a penalty if they do not offer employees health insurance. Small businesses with fewer than 25 full-time employees may be eligible for tax credits to assist with cost of insurance.
* Balance the decision to offer health insurance by weighing corporate finances, culture and the best interests of your employees.
* Begin looking into unique, new offerings specific to small businesses. Companies like BCBSAZ is tailoring plans to meet the needs of small businesses.

“For some businesses, a number of employees may be eligible for subsidies through the ACA, lessening the employer’s responsibility to offer health insurance,” Stelnik said. “Employers might also see improved employee satisfaction and quality of life as a result of the increased access to healthcare.”

Ultimately, experts said the ACA may drive small businesses in Arizona to new levels of success and innovation.

“Currently, many people who would like to start businesses do not do so because they cannot obtain affordable insurance in the private market and must rely on employer-provided coverage,” Pettibone said. “If those budding entrepreneurs can obtain subsidized coverage on the individual insurance marketplace, they might be more likely to take career risks and start new businesses. It’s thus possible that the Affordable Care Act will enable more people to pursue entrepreneurial activity and create more small businesses.”


On average, small businesses pay about 18 percent more than large firms for the same health insurance policy because they lack the purchasing power that larger employers have. The Affordable Care Act provides tax credits and gives small businesses the ability to shop for insurance in the new Health Insurance Marketplace, which should help close the cost gap.
1. If you have up to 25 employees, pay average annual wages below $50,000, and provide health insurance, you may qualify for a small business tax credit of up to 35 percent (up to 25 percent for nonprofits) to offset the cost of your insurance.
2. Under the health care law, employer-based plans that provide health insurance to retirees ages 55-64 can now get financial help through the Early Retiree Reinsurance Program. This program is designed to lower the cost of premiums for all employees and reduce employer health costs.
3. Starting in 2014, the small business tax credit goes up to 50 percent (up to 35 percent for nonprofits) for qualifying businesses.
4. In 2014, small businesses with generally fewer than 100 employees can shop in the Health Insurance Marketplace, which gives you power similar to what large businesses have to get better choices and lower prices. Open enrollment begins on October 1, 2013.
5. Employers with fewer than 50 employees are exempt from new employer responsibility policies. They don’t have to pay an assessment if their employees get tax credits through an Exchange.


Steptoe hosts Construction Industry Tax Seminar

Contractors, developers, construction managers, and homebuilders are invited to attend Steptoe & Johnson’s 10th Annual Construction Industry Tax Seminar co-sponsored by the AzBusiness Magazine. Steptoe’s tax lawyers will bring participants an annual update on the latest developments in Arizona’s sales and property taxation.

The seminar will take place September 27, 2013 and the Arizona Biltmore Resort.
The program will focus on new legislation, which if passed and signed by the Governor, will turn the sales taxation of contracting upside down–from taxing the prime contractor to taxing the sale of building materials, except for road and bridge construction where the prime contractor will still be taxed (H.B. 2111). In addition, seminar leaders will bring you up to date on legislation (already signed by the Governor) that does away with the “permanent attachment” test under the exemption for installing exempt machinery and equipment (H.B. 2535).

Speakers include Pat Derdenger, Dawn Gabel, Frank Crociata and Ben Gardner, all members of Steptoe’s Tax Group in Phoenix. Steptoe’s tax lawyers bring to clients decades of consulting, transactional, and advocacy experience in all substantive areas of federal and state taxation.

The luncheon speaker will be Hon. John Shadegg, partner in Steptoe’s Phoenix office and former US Congressman. He will give his perspective on the Affordable Care Act and how it will impact Arizona businesses.

For more information, call 602-257-7708. Register online at www.steptoe.com.

Bierly (5).jpg

Delay on ACA mandates was unavoidable

With the announcement from the Obama administration regarding the delay of the Affordable Care Act’s employer mandates, business owners took a slight sigh of relief heading into the Fourth of July weekend.  In the announcement made on the U.S. Treasury’s website, the “concerns about the complexities” was cited as a reason for delay.  A vast number of businesses do not have the resources, or the understanding of the intricacies of the guidance, to meet the deadline of 2014.

The administration underestimated the financial burden that the reporting requirements would place on employers, insurers and the entities receiving those reports. Furthermore the Health and Human Services, the DOL and the IRS have been unable to effectively manage or provide realistic, timely guidance for employers.  The business community has been voicing their discontentment for quite some time and, as the 2014 deadline looms closer, those voices become louder.

There are several factors at work that made this delay unavoidable. The federal government did not anticipate the number of states that would opt for a federally run exchange.  By adding the employer mandates and tracking requirements on top of implementing the exchanges, it all became too much of burden under the proposed timeline.  This does shift the focus from the employers to the individual mandate but with this huge concession it leaves room to wonder what else will be delayed.  The announcement also referenced streamlining the reporting and alleviating requirements for employer groups that meet compliance standards.

Many employer groups have invested dearly in trying to prepare their businesses to meet the convoluted guidance that has been released thus far and, although relieved for the extension and hope of simpler requirements, this delay can add to the frustration caused by the legislation and the far-reaching implications. The lack of final guidelines has left many employers to guess what to do next and puts vendors, who are developing technology to assist businesses, in a position to make assumptions that could be costly and create unnecessary work for employers.  This reprieve gives everyone – including policy makers – an opportunity to take a much-needed step back.

The question remains how this will ultimately affect the life span of reform and the impact on the Obama administration, and what the inadvertent consequences will be from this decision.  It is difficult to say if this will be a win or lose.  On one hand, they are counting on favor from business owners due to the sympathetic, “careful, thoughtful” ear they have given them regarding implementation of the requirements.

Others will argue that this is the beginning of the end and will give critics new ammunition to attack the legislation, picking it apart piece by piece.  In light of this development it will be interesting to see what the final guidance will reveal and the national reaction to such an announcement.  The Administration will continue to communicate the need for reform as it is the cornerstone of Obama’s presidential legacy but, more than likely, this delay will fuel criticism that is already strong for the repeal of reform.  Some unintentional results could include employers not expanding coverage to employees not currently benefit eligible but also may keep employees’ hours from being cut.

Some employers, in order to avoid penalties, were cutting a majority of their hourly employees to below 30 hours a week.  At 30 hours a week, an employee is considered full time under the mandate and penalties can be assessed on those employees.  This also stands to have a bearing on Medicaid expansion, and sheds doubt on the assurances that have continued to flow from the White House that everything is on track, a statement made as recently as June.  And one cannot help but raise questions about the timing as it relates to mid-term elections.


Shay Bierly is the director of client services for MJ Insurance and its Employee Benefits division in Phoenix.


Obamacare penalty delayed for big businesses

Obama, delay, penalties, large employers, Affordable Care Act

The Obama administration has announced a one-year delay on penalties against large employers who fail to offer workers insurance coverage under the Affordable Care Act.

Although the administration said the decision was the result of “careful, thoughtful” consideration, opponents of the federal health-care law said it reflects general disarray in the program.

“We have heard concerns about the complexity of the requirements and the need for more time to implement them effectively,” Mark J. Mazur, assistant treasury secretary for tax policy, wrote in a blog posted on the department’s website Tuesday.

“We recognize that the vast majority of businesses that will need to do this reporting already provide health insurance to their workers, and we want to make sure it is easy for others to do so. We have listened to your feedback. And we are taking action.”

In response to the announcement, U.S. Rep. Jim Bridenstine, a Republican representing Oklahoma’s 1st District, tweeted “Yet another admission by Dems that Obamacare is unworkable.”

The tax penalties of $2,000 per uninsured employee after the first 30 employees are now set to go into effect Jan. 1, 2015.

Tax Consequences

Steptoe hosts Construction Industry Tax Seminar

Contractors, developers, construction managers, and homebuilders are invited to attend Steptoe & Johnson’s 10th Annual Construction Industry Tax Seminar co-sponsored by the AzBusiness Magazine. Steptoe’s tax lawyers will bring participants an annual update on the latest developments in Arizona’s sales and property taxation.

The seminar will take place June 13, 2013 and the Arizona Biltmore Resort.

The program will focus on new legislation, which if passed and signed by the Governor in the coming weeks, will turn the sales taxation of contracting upside down–from taxing the prime contractor to taxing the sale of building materials, except for road and bridge construction where the prime contractor will still be taxed (H.B. 2111). In addition, seminar leaders will bring you up to date on legislation (already signed by the Governor) that does away with the “permanent attachment” test under the exemption for installing exempt machinery and equipment (H.B. 2535).

Speakers include Pat Derdenger, Dawn Gabel, Frank Crociata and Ben Gardner, all members of Steptoe’s Tax Group in Phoenix. Steptoe’s tax lawyers bring to clients decades of consulting, transactional, and advocacy experience in all substantive areas of federal and state taxation.

The luncheon speaker will be Hon. John Shadegg, partner in Steptoe’s Phoenix office and former US Congressman. He will give his perspective on the Affordable Care Act and how it will impact Arizona businesses.

For more information, call 602-257-7708. Register online at www.steptoe.com.

Health Insurance

Scottsdale Healthcare, John C. Lincoln form affiliation

Scottsdale Healthcare and John C. Lincoln Health Network have endorsed a letter of intent to form a system-wide affiliation to better meet the healthcare needs and thus improve the health of the communities they serve.

The nonbinding agreement between the two non-profit organizations allows both to pursue an exclusive negotiation during a due diligence period in order to create a combined health system. Discussions are anticipated to be complete by July 31.

The new non-profit system, which would be called Scottsdale Lincoln Health Network, would include five hospitals with approximately 10,500 employees, 3,700 affiliated physicians and 3,100 volunteers. Scottsdale Lincoln Health Network would also include an extensive primary care physician network, urgent care centers, clinical research, medical education, an inpatient rehabilitation hospital, an Accountable Care Organization, two foundations and extensive community services.

Both John C. Lincoln and Scottsdale Healthcare have a strong reputation and history of providing high quality care for the residents of Phoenix and greater Scottsdale. The non-profit health systems share similar visions and cultures, and both are Magnet organizations, a national recognition of providing the highest standards of patient care.

“This affiliation will provide resources to further develop the current high quality care in the hospitals and community healthcare facilities, enhance our geographic presence and honor the legacy of each organization. Our shared vision is to become a fully integrated, locally controlled, world-class health system,” said Scottsdale Healthcare President & CEO Tom Sadvary.

John C. Lincoln Health Network and Scottsdale Healthcare are financially strong, operationally successful and committed to meeting local health needs. Both organizations have been developing integrated delivery systems to expand services beyond acute care.

“Each of our organizations is known for quality and collaboration with community partners to promote the well-being of the communities we serve. The combined Scottsdale Lincoln Health Network will allow us to provide more cost effective healthcare and to thrive during this period of rapid change as a result of national and local health reform as we continue to develop a full continuum of  services beyond acute care,” added John C. Lincoln Health Network President & CEO Rhonda Forsyth.

Upon completion of the affiliation agreement, the Scottsdale Lincoln Health Network governance will be focused on their shared vision which includes:

·         More convenient access to acute and preventive care.
·         Increased coordination of medical care.
·         An expanded network of high quality primary care and specialty physicians.
·         Creation of a single electronic health record that can be accessed at all levels of care throughout the affiliated health network.
·         Improved patient outcomes through shared best practices.

“This affiliation will attract top medical talent by providing opportunities for physicians and other providers to lead the transformation of care delivery, and will enhance our leadership role in medical education and clinical research,” said Scottsdale Healthcare Board Chair Steven Wheeler. “Together we can provide a more comprehensive array of services by applying our combined resources to strengthen our clinical capabilities.”

Forsyth added that maintaining Magnet designation of the system hospitals provides a work environment that attracts top talent.

“As major provisions of the Affordable Care Act continue to take effect, we have the opportunity to shape the future of healthcare in the Valley by cost effectively using our respective resources to enhance our impact in the communities we serve,” said Forsyth.

“We want to maximize our ability to improve the health of our community and create more access to care. A more robust health network with primary care physicians, specialists and partnerships with other healthcare organizations will add capabilities for providing patients with a full continuum of coordinated healthcare services,” said John C. Lincoln Health Network Board Chair Frank Pugh.


Impact Of Affordable Care Act On Small Businesses

The intent of the Affordable Care Act is to cover more individuals by making coverage more accessible to everyone, not necessarily to reduce costs. Current studies indicate small employers could pay up to 18 percent more for health insurance coverage than large companies which discourages small business from purchasing coverage today. Overall costs of a company’s administration of reporting requirements and health insurance premiums may increase due to many of the regulations health insurance carriers must meet. Currently small employers are not subject to penalties and this may cause a growing business to pause and weigh the cost of growth from a completely new perspective. Staying small may be more cost effective in regards to the laundry list of compliance requirements and possible cost impact, but forward-thinking business owners will still see opportunities for growth with strategic planning and smart choices when given the possibility to expand.

Contact Shay at Shay.Bierly@mjinsurance.com or at 602-772-3300.

2013 Strategies For Leasing Medical Office Space

The National Healthcare Reform legislation has reformed the way real estate fits into a physician’s business plan. Gone are the days of a single physician hanging his shingle, so to speak. With the Affordable Care Act, formation of Accountable Care Organizations and the high cost of Electronic Medical Records, physicians are looking at their future business plans and carefully considering either joining multi-specialty groups or becoming employees of a hospital system to keep costs efficient and focus on “practicing medicine”. For more time to consider today’s real estate options, many physicians are extending their current leases for one to two years so they are not over committed. Doctors are no longer buying their own office condos or signing ten year leases to cover the costs of higher-end medical office build-out.  Their concern is about efficiency and cost effectiveness, and bottom line capital contribution.

There is a significant difference today in the demand between medical space located on hospital properties and those buildings located “off-campus”. As hospitals purchase medical practices and move them to their central and ancillary sites, the occupancy levels at these third party medical locations have climbed to over 90 percent in some markets. Landlords looking to attract physicians to their “off campus” buildings need to consider (1) large contiguous suites for physician groups, (2) parking of at least 5:1000, (3) rent concessions, excellent signage and (4) a tenant improvement allowance of at least $50 per square foot.

It is a tenant’s market.  If physicians have solidified their business plans to locate or expand in Metro Phoenix, there has not been a better time to do so. In addition to a reduced rental rate, I recommend that physician groups seek at least one month rent abatement per year of term of lease, turnkey medical office build out, extra reserved parking and building signage as basic considerations.

Contact Colleen at colleen.mcpherson@colliers.com, or call 480-655-3304. Visit www.colliers.com.


Regulations knock out production

Picture the slow motion shots of Rocky Balboa getting pummeled by Apollo Creed in the first of that eponymous series of boxing movies and you get the sense of what the economy — manufacturing and otherwise — is up against with regard to federal regulations.

In the course of one day last week, I interacted with people from three completely disparate industries, and the first item on the table of each casual discussion was what the new cost and time commitments would be to meet new federal government regulations.

First up was a customer meeting with a company that supports the oil and gas industry to discuss new traceability requirements put into place since the Gulf oil spill. While we can all agree the BP spill was a horrendous accident, the pendulum appears to have swung way too far the other way as the paperwork requirements for simple machined parts mean we now have to generate a half inch stack of documents that will add 20-25 percent to the cost of the part, which of course the customer does not want to pay, but is required by the government to have.

The second item of the day was a lunch meeting with a health care executive for a charitable event. We quickly became engrossed in the unseen paperwork costs associated with the Affordable Care Act. Their belief is that the added time, money, processes and people added to the system in order to comply with the regulations of the ACA will cause health care rates to jump significantly over the next 3-5 years as it is implemented, based purely on paperwork and systems – not healthcare – needs.

The last event of the day was attending an aerospace and defense supply management conference and dinner. In addition to the obvious talk of defense budgets and sequestration, the supply chain issue of the day was figuring out what to do about the new SEC rule requiring disclosure on the use of conflict minerals. As part of Dodd-Frank, this rule lays out a whole series of regulations on what to do and what must be filed if you used, did not use, knew, did not know, bought, contracted, processed, thought of, or looked at pictures of conflict minerals. Depending on your answer, independent audits may be required. So we’re now faced with not only the prospect of defense budgets being cut, potentially significantly, but now aerospace and defense companies are being asked to add another layer of non-value added work to the process.

Taken individually, each and every one of these mandates or regulations is certainly well meaning and in some cases needed. But when viewed from a cruising altitude, the totality of the regulations to the economy as a whole is stifling, which is especially troubling since we seem to always be a couple of tenths of a percentage point from teetering back into a recession.

As the new House and Senate is seated in DC, they must take stock of not only what effect each rule and regulation has on their particular hot point or constituency, but what it does to the economy as a whole and then truly question if yet another regulation is needed. Hopefully the ending to this movie is more like Rocky II. (Spoiler…Rocky wins.)

Steve Macias is the president of Pivot Manufacturing and the chairman of the Arizona Manufacturers Council. The Arizona Manufacturers Council within the Arizona Chamber of Commerce and Industry is the state affiliate of the National Association of Manufacturers (NAM). For more on manufacturing and NAM, visit http://www.nam.org/.