Tag Archives: Randy McGrane

Phoenix Children's Hospital

The effect of mergers on healthcare real estate

Healthcare in America is changing and bringing real estate with it. Healthcare networks are growing their market shares, and healthcare mergers and acquisitions have been on the rise in the first half of 2014, according to an August report by Berkery Noyes. Deal volume increased during that time by 18 percent, to the tune of $5.45B, according to the report. This is something Arizona has a front row seat to. In July 2013, Tenant Healthcare bought Vanguard Health Systems, which operates Abrazo Health Care, the second largest health care delivery system in Arizona. Last October, Scottsdale Healthcare and John C. Lincoln Health Network finalized its system-wide affiliation. In August, Banner Health announced it acquisition of University of Arizona’s medical facilities and programs. Scottsdale-based Healthcare Trust of America, Inc. (HTA) acquired six medical office buildings (MOBs), outside of Arizona, from ProMed Properties for $200M, the largest MOB acquisition of the first half of 2014.

“Most medical real estate in the Valley has been built around a hospital trying to draw patients into their beds,” says Ensemble Real Estate CEO Randy McGrane. “They’ve invested capital into them, and that’s how they get a return.” However, that idea, catalyzed by the Affordable Care Act, technological advances and general market conditions, is becoming outdated, says McGrane. It’s more profitable for networks to have out-patient care spread within communities, away from the hospital and closer to patients. This is evidenced by the dozens of ambulatory care facilities Banner Health has constructed throughout regions.

“Health systems and physician groups have been forced to compete for market share in the pursuit of volume and reduced overhead expenses,” says HTA’s Executive Vice President, CFO, Treasurer and Secretary Robert Milligan. “From a medical office perspective, this has resulted in tenants that are better credits, looking for larger blocks of space and focused on key locations that will help their practices generate volume. Locations that can offer these features have and will continue to benefit from this consolidation trend.”

As a result, there are more off-campus development happening. The one exception, McGrane notes, may be one at Banner Estrella, for which the medical network recently placed and RFP. Existing on-campus buildings, therefore, are suffering vacancies higher than 25 percent in some cases. Highest and best use for these buildings over time, McGrane says, includes facilities that support a hospital’s known specialties or encourage post-acute care and rehabs, which are more cost-effective to invest in, given the reimbursement systems established by the ACA.

“It’s a painful change,” McGrane says. “Ultimately, it will end up being a better system…We have so much clinical advancement, but we haven’t developed the underlying system to go with it.”

“The great thing about these larger tenants is that they are focused primarily on driving volume into their practices,” Milligan says. “This means that they are focused on office space that allows the physician to utilize the infrastructure of a hospital or surgery center and also provides for an efficient patient experience. Cost, while important, is becoming a secondary factor. We are actively investing in our buildings to attract these larger tenants who will be the long term providers of healthcare in this country.”

Randy McGrane, Ensemble managing director, delivers prizes to Phoenix Children’s Hospital patients during Medical BINGO last week. Ensemble donated $52,000 to the hospital.

Ensemble donation helps bring smiles to children

Phoenix Children’s Hospital recently received a donation that is bringing entertainment options and more smiles to patients of all ages. A $52,000 donation from Ensemble Real Estate Solutions, a Phoenix-based full-service healthcare real estate firm, provided an update to the Hospital’s CATV network. This upgrade allows for high definition content being delivered directly to the patient rooms, including 12 new channels being broadcast to children’s rooms in the Hospital’s new tower. It’s also enabling Child Life to broadcast live television from the Child Life Zone studio, directly into sick kids’ rooms and waiting areas.

With video games, movies, arts and crafts and air hockey, the Child Life Zone is a place where patients go to hang out and just be kids. Now, with help from Ensemble, the Child Life Zone has an even greater reach, as patients who can’t leave their rooms can still be part of the fun and excitement by watching high definition TV in their rooms. This technology helps keep patients distracted with fun activities while going through the healing process.

As of April 16, the Child Life Zone is now “live” with interactive games and concerts. On the go-live date, CCTV Medical BINGO was broadcast live for the first time from the Zone to patients in the playrooms and in their hospital rooms. If a patient in their room wins at Medical BINGO, a Child Life Specialist will bring a prize to the patient’s room. Ensemble managing director, Randy McGrane, was on hand to deliver prizes during Medical BINGO last week.

“Ensemble has been a valued business partner with Phoenix Children’s Hospital for many years, while also being a generous supporter of the hospital through many philanthropic donations,” said Steve Schnall, the Hospital’s Senior Vice President and Chief Development Officer. “We are so thankful to Ensemble for their ongoing support and are grateful for their generosity.”

The recent donation was a direct result of unused contingency funds set aside for Ensemble’s development of the Phoenix Children’s Southwest Valley Center, a specialty and urgent care center, completed last year. The $14.7 million Avondale clinic features 27 patient rooms, two treatment rooms, X-Ray, ultrasound, three infusion bays and on-site lab services.

“We’re proud of our work with Phoenix Children’s Hospital and the 35,355 square feet developed on their behalf for the Phoenix Children’s Southwest Valley Center. This particular donation was rewarding because it embodied Ensemble’s philosophy of working together. The entire Southwest Center development team worked together to bring the project in under budget because they knew excess funds would go to PCH and we all love this Hospital. Today, to see the tangible impact is particularly gratifying. It’s bringing joy and smiles to patients and their families,” said McGrane. “Seeing the kids’ faces as they play Medical BINGO and watch high definition TV is a rewarding investment for sure!”