AHLA's Speaking of Health Law
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AHLA's Speaking of Health Law
Insights From Health Care System Real Estate Counsel
Real estate is an essential element of health care. Goran Musinovic, Vice President, Realty Trust Group, hosts a conversation with four in-house counsel who offer insights into their health systems’ real estate operations. They discuss:
- The role of real estate and its impact on organizational decision making.
- How the real estate function is staffed and engaging with outside counsel for assistance.
- Challenges related to portfolio management and how compliance relates to the real estate function.
- Interactions with other departments and fostering a culture of collaboration and communication.
- How to measure success as it relates to the real estate function.
Goran’s panel includes Kelly Adams, Corporate Counsel, SCL Health, Kelly Anderson, Associate General Counsel, Baptist Healthcare System, Linda Bielik, System Director and Senior Counsel, CommonSpirit Health, and Mark Wright, Senior Counsel, University of Rochester.
Listen to Goran’s other conversations with health care system real estate directors and health care system real estate compliance officers.
Sponsored by Realty Trust Group.
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Support for A H L A comes from Realty Trust Group, a real estate advisory and services firm offering a full spectrum of real estate services, including advisory, development, transactions, operations, and compliance. Since 1998, RTG has helped health systems, physician groups, and property owners navigate the rapidly changing industry with growth strategies that gain market leadership and enhanced patient and physician experiences For better delivery of care. For more information, visit realty trusts group.com.
Speaker 2:Uh, welcome today's podcast. My name's Goma Sich. I'm a vice president and attorney at Realty Trusts Group, and I serve as the leader of RT G's real estate compliance service line. Today, I have the privilege of serving as the moderator for our STEAM panel, but before I introduced if and start the conversation, I wanna take a second and talk about healthcare. Real estate. Real estate is an essential element of healthcare. It is the place where healthcare services are delivered to patients, but beyond serving is a place to put patients and doctors when used effectively. Real estate allows providers to improve access to care, improve the patient and physician experiences, enter new markets, provide new services, gain market share, reduce costs, and generate significant revenues. It's always worth remembering that real estate often accounts for up to 30% of health systems assets on a balance sheet, and hospitals own approximately 75% of nation's medical office buildings. In contrast, other types of real estate. However, healthcare real estate is heavily regulated. Stark Law, the Anti-Kickback statute, the False Claims Act, and a myriad of other healthcare statutes and regulations create a complex regulatory environment in which healthcare providers must operate daily. A course of action that may be perfectly acceptable in any other type of real estate transaction could in the context of healthcare, real estate, result in serious regulatory violations and expose healthcare providers to significant liability, which can wipe out years of profitable business ventures. Given its large percentage of health systems, total assets, and its business and legal implications, real estate touches multiple departments and health systems, including real estate and property management departments, legal and compliance departments, accounting and audit departments, and the C-Suite, just to name a few, whenever RTGS engaged by health systems to help them improve their real estate functions. A common problem we find is that many of the aforementioned departments work in silos. Simply put, they fail to communicate with each other, and because they do not know what their respective responsibilities, goals, objectives, and challenges are, they did not operate as a strong cohesive team, which in turn has negative consequences on the real estate function. The goal of this podcast series is to help provide insights to our listeners about the respective responsibilities, goals, objectives, and challenges of the departments involved in real estate, with hope that this will help facilitate the communication between the various departments touching real estate in their organizations. In this first part of three podcast series, we're going to gain valuable insights from health systems in-House Real Estate Council. So without further ado, let's begin by introducing you to today's panel. We're joined by superstar panel of four in-house lawyers who work for some of the premier health systems across the United States. Kelly Adams, who serves as corporate council at SCL Health in Colorado. Kelly Anderson, who serves as the Associate General Counsel and Baptist Healthcare System in Kentucky. Linda Beek, who serves as system director and Senior Council for Real Estate at Common Spirit Health in Arizona. And Mark Wright, who serves as senior council at University of Rochester in New York. Welcome, and thank you all for taking the time to share your expertise with us. Um, to begin, let's go around to Horn, um, and have each of you tell us a little bit more about yourselves and your roles and your respective organizations. Kelly Adams, let's start with you.
Speaker 3:Sure. Thanks so much for having me. Um, my name's Kelly Adams, um, in-house council for SEL L Health, which is a Catholic health system headquartered in Broomfield, Colorado. We have eight hospitals and over a hundred clinics throughout Colorado and Montana. And my role in the organization is to, um, provide legal support on a wide range of transactional and regulatory matters, um, including real estate, um, including physician practice acquisitions, and, um, also on our joint ventures.
Speaker 2:Kelly Anderson, what about you?
Speaker 4:Great, thank you. Go. My name is Kelly Anderson, as Gorin said, I'm such a John Council for Baptist Healthcare System. We have eight acute care hospital, actually nine acute care hospitals. We just acquired one, um, across the commonwealth of Kentucky and in southern Indiana, um, along with a myriad of employed physicians that, um, have offices across, um, Kentucky, Indiana, Illinois, Tennessee, um, which keep us quite busy. I am responsible for providing legal support to three of our acute care hospitals. And then I also, on a system-wide level provide, um, support for our pharmacy operations, which includes three 40 B. Um, I provide, uh, all of our hospitals regulatory compliance, uh, legal support, and then I tend to be the go-to attorney in the legal department for, um, legal reimbursement questions. Real estate, um, is obviously a component and an element, um, of my work in covering the three acute care hospitals in my market. And right now, uh, across our system, uh, real estate is probably, um, a bit heavier volume, um, in the market that I serve. Thanks. Go.
Speaker 2:Alright, thanks, Kelly. Linda,
Speaker 5:Thanks. Go. My name is Linda Beek. I'm a senior, uh, system director and senior Council of real Estate at Common Spirit. Common Spirit is the largest Catholic healthcare company in the United States. We have, uh, we're present in 21 states. We have over 140 hospitals, um, and with that over 700 care locations and thousands and thousands of doctors and, uh, over 150,000 employees. So we have lots going on here. Um, my primary job is to partner with my client, which is National Real Estate Services, to, as you said in your introduction, is really to make sure that we're delivering, um, the appropriate real estate, uh, for the mission to, to, to further the mission of our company, which is to provide healthcare to everybody. Um, so part of that, my jo my job is to oversee, um, our extensive lease portfolio. We have over 4,000 leases in our portfolio, as well as, uh, partner with real estate and leadership on physician acquisitions, other types of, uh, system acquisitions. Um, I, I work on, uh, just plain old acquisition disposition of real estate. And again, putting together, um, a a program to make sure that our, our leases run smoothly and, um, have a, a good quality control and standardization to them, um, to keep everything running, uh, in tiptop shape, I guess.<laugh>.
Speaker 2:That's great. Yeah. So sounds like a lot of work, uh, that you got got on your plate. Um, mark,
Speaker 5:I don't do it by myself. I can't, I can't take that credit. There's a couple of us, but, uh, yeah.
Speaker 2:Mark, what about you?
Speaker 6:Yeah, thanks for having me. Uh, Mark Wright from the University of Rochester, and, and I am, uh, senior Council for Real Estate across the, uh, the university. And so, which includes, uh, and the majority of what I do is for the University of Rochester Medical Center and affiliated hospitals. Uh, the medical center is, is the largest medical, uh, medical system really in, in our part of, uh, upstate New York, which includes Rochester and Finger Lakes and, and is gradually creeping towards Buffalo and Syracuse, if you know your map, your New York map. Um, and, uh, and so, you know, there's a fair amount of acquisition activity, uh, that gets real estate support. But, you know, a lot of, a lot of what I do is, is bread and butter, you know, real estate leasing, uh, and, you know, the portfolio not nearly as large as Linda's, but a a portfolio of, of ongoing leases that need to be amended and updated and, and, and that sort of thing. We've done a couple of larger transactions recently, including the, um, the acquisition of a substantial portion of a, a distressed, uh, shopping mall in the area, um, to, uh, to turn to, to transform that into, uh, an ambulatory orthopedics campus, which is very exciting and really challenging, challenging from a, from a real estate perspective. Um, so that's, uh, that's enough about me.
Speaker 2:Sure. Well, I appreciate that. Um, so as, as we kinda, uh, try to, you know, get a, get a little more understanding, I think with, you know, the, the way the real estate function, um, is, is structured within, within your olds, um, organization. Mark, we can, we can continue with you, but, um, in, in terms of the real estate function, you know, who's sort of running the day-to-day matters, is that something that, uh, your organization has fully internalized? Is it the outsource? Is is it a combination of both? If you can just kind of give us some insights as to, as to how you go about, uh, you know, staffing them function.
Speaker 6:Sure. Yeah. Uh, we're a combination of both. Uh, you know, three years ago I probably spent 50 or 60% of my time on real estate. And, uh, and that has grown with the, the level and sophistication of the transactions too. I, my boss told me a few months ago, I don't have time to do anything but real estate right now and related construction and facilities, uh, matters that go along with that. Um, and, and we, we have outside council, um, that we use and bring in. Um, but I try to stay involved in every, in every matter, you know, so I'm, I'm at times a significant part of what I do is managing outside council and, and working with them. Uh, and you know, in that regard, it's obviously important to have a, a great relationship with that council and, and, uh, try to keep them from going too far, uh, uh, into a project and, and there's efficiency to using the same council.
Speaker 2:Sure. And, and as far as the, the, the real estate personnel themselves go, like, is, is there an internal real estate director, um, you know, I guess some of the boots on the ground or is that, or is that outsourced, uh, to a third party firm?
Speaker 6:Uh, we do have a real estate services group, uh, as well as, uh, a facilities group. Um, and one of the challenges that we have is they, they have not until, uh, until recently, and I'm not even sure it's right to say recently, they don't report up in the same, in to the same leadership, uh, exactly. And so we sort of have these, these two silos, if you will. You talked about silos. Yeah. Um, but, uh, but there is a, a, a relatively small real estate group. And as our portfolio has grown, one of the challenges that we face is that, you know, the real estate personnel, my clients, uh, haven't grown with it in the sense that there's just not enough people<laugh> to, uh, stand up outsourcing, uh, you know, to a variety of consultants. Sure. You know, a number of the, a lot of the transactional work.
Speaker 2:So what has been the impact of, um, you know, a a as, as the real estate portfolio has grown and, you know, there, there are limited resources, like, I guess, you know, just from, you know, the, your, your everyday responsibilities, your everyday job. How does, how has that impacted, uh, uh, the real estate function that, that, that, that rapid growth, for the lack of a better word?
Speaker 6:Um, you know, a a lot of it is, is just there's a lot of time pressure on what we do, so that instead of having the ability to sit back and look at, you know, how we deliver projects on a, on a sort of global basis and, and make sure we're doing it the most efficiently, you know, there's, there's, you know, the cardiac group needs to open, you know, the newest lease facility and it needs to be opened by this date. And, and, you know, we're chasing deadlines. And so, um, we're trying to, to, uh, step back more. We have a new director of facilities who, uh, is helping us to take a more strategic look because our portfolio is now so big that, that there's can be some real benefits to, um, you know, thinking more strategically. Um, sure. But in the, in the short term, it, it's just a, a race to the finish a lot of days.
Speaker 2:Yeah. What about you, Linda, when you hear that, is that, is that, is that something that you see as well, um, in your organization, some of those challenges?
Speaker 5:Yeah, absolutely. Um, you know, while we have 140 hospitals, oftentimes you can imagine that it's tough to, in, you know, we, we try to have a company policy, and we do have a company policy across the entire system, but when it's your hospital and you have this clinic that has to open, it's very personal, right? And so you do, while you try to look at everything as a whole across the system, there are always emergencies popping up. Um, and I'm always on the phone with hospital presidents trying to get their deals done. Um, we're, uh, we are fortunate here at Common Spirit that we have a pretty, um, vast national real estate services group that's headed up by, um, system senior vice president, and he has really three verticals under him to handle real estate services. We have a planning design and construction arm of national real estate services and also a, uh, facilities and energy management. Uh, because we're so large, we can really take advantage of our size on things like energy and water. And, um, we, we try to, we try to maximize those, uh, because of that. Um, so all of that sort of rolls up under my little group of, there's three attorneys here at, uh, at, uh, at Common Spirit that, that service national real estate services, and we kind of try to split it up so that, um, we can focus on each of those verticals. Um, but yeah, so we, we do have a combination. Again, we have a vast internal department, but we can't do everything. Um, so there are things like property management, um, that might be, um, third party or, you know, obviously we have outside counsel working with us and the legal team to help provide the volume of work that we have to provide.
Speaker 2:Sure. And just given such a large portfolio, I mean, do you, you, when you, when you decide, you know, which legal council, which law firms to select, do you kinda have them, you know, working a specific geographic region or, or any, any sort of insight that you can share in terms of selecting outside council to, uh, assist you with some of those, uh, functions?
Speaker 5:Sure. So one of the keys, at least to what I do is process and standardization. Um, and so we really need to keep, we have obviously, like I'm, I'm sure my colleagues do, uh, on this panel, have forms and templates that we like to use and try to insist upon to keep that, um, standardization. It's important for our lease management function. We have a large lease management department, and it obviously makes their job a lot easier if we have a consistent batch of leases and they know, you know, what the parameters are when they operate under each of those. So from a council selection, we try to, uh, we work with, um, variety of, well, we work with a few firms, but we have a firm that we work with primarily that has a national reach, um, and they have enough capacity to really give us a good team to work across the country. Um, and so we try to keep, even for my sanity, we try to keep most of the work in one place so that I have one counterpart, um, that is responsible to report to me. Um, and, um, again, we're working, our, our merger was about two years ago that created Common Spirit Health and, and it's taken some time to combine all the portfolios and to have'em running under the same process. So we're just about there, but it's, it's, it's still taking time to sort of convert all that and turn it into sort of a common Spirit product. Uh, and so we're, we're pretty knee deep in that right now, so even more important to have, uh, sort of consistent representation, um, and not have to retrain different firms to do what we need them to do.
Speaker 2:Sure. That's great. Uh, Kelly Anderson, um, when, when you hear, uh, uh, mark and Linda, you know, talk, talk about, you know, the, the real estate function, how it's staffed both in terms of, you know, outside legal council as, as well as, um, you know, real estate, uh, resources, uh, with your organization. Is it, is it similar or
Speaker 4:It it is, obviously Baptist Health has nine hospitals, um, so not quite the portfolio that Linda and Common Spirit, um, have. Uh, but we have been in growth mode for several years, so we've seen, um, not only acquisitions, uh, in deals of physician groups, but we've acquired a few hospitals, um, which, you know, people don't think about, uh, the real estate when they're doing a hospital acquisition, but the real estate frankly, can be, um,<laugh> really difficult in a hospital transaction if it has been structured correctly, or, um, sometimes you go into small communities, um, where there's lots of great relationships, but maybe the real estate, um, wasn't set up, you know, precisely how you'd like to have it set up. We, you know, we've seen that before. Um, in terms of managing our real estate portfolio, I will say, you know, our strategy has been to own our own real estate primarily, rather than, um, having a large, uh, lease portfolio or working through real estate investment trusts. Um, and so that, you know, does create the need for, um, a large infrastructure to manage the real estate portfolio. We do have one real estate exec who reports to, um, someone who's over facilities across the system who ultimately reports to our system, c o o. And then that real estate exec has three different individuals, um, who are divided amongst our regions in order to provide management of our real estate portfolio. They handle, for the most part, we've really been trying to consolidate real estate over the last few years, uh, because historically our hospital operators, uh, managed their, uh, lease portfolio, whether it be, um, a lease with a physician group, or at least for an employed physician group. And we're trying to transition that under the umbrella of our real estate group. So there's more, uh, centralization and standardization. Um, like Linda, we do use standardized forms, so all of our leases are standardized, and we have created our own leases for each, um, suite that we lease to third parties. Um, and then we also have a standardized, uh, purchase service agreement that we use for real estate acquisitions. But what I will say about that is no two real estate acquisitions are the same, and every single time that PSA changes, no matter how much I want it to stay the same, it, it does not happen. Um, you know, in terms of the legal services, we have three attorneys who, uh, support our hospital operations, and we're primarily involved in providing, uh, legal support for our real estate operations. Um, right now, as I mentioned earlier, my market, uh, seems to be on fire with real estate acquisitions. You know, I'm, frankly, I'm kind of surprised in the middle of a pandemic that that has seemed to pick up. Um, but I think in terms of global healthcare, we're really in a perfect storm because what we're seeing is a, a big shift of services from out of the hospital and into, um, more outpatient settings. And so as a result of that, um, we're seeing hospital systems expand their footprint. You know, it's no longer, you just see the h on the side of the highway and you pull off and there's a hospital building, but rather you're seeing ASCs pop up, outpatient, uh, departments, freestanding emergency centers, urgent cares, uh, primary care centers, rural health centers. And so you're seeing a lot more expansion into the communities that you serve. Um, and, and our real estate function is really to serve our mission to provide access to patients within our community. And so we're, uh, strategically looking at all of those access points and our c communities to see where there are gaps. Um, and frankly, we wanna put real estate, for instance, right off the interstate. We want people to see it. We don't want people to get lost on the way to our building. We wanna make it easy to find, um, and to see, because when you have a child who needs care and it's urgent, you, you know, you wanna get there fast and easy.
Speaker 2:Yeah, no, for sure. Yeah, I think that's sort of, uh, you know, you, you, you wanna centralize the real estate function and, you know, standardize the processes, but you also, you kind of seeing more of a decentralization of making sure that you have the right building, providing the proper services in the, in the correct area. Um, Kelly Adams, is that what you see as well, um, uh, in your part of the country and your, your health system?
Speaker 3:Yeah, I mean, like others, uh, we've really been in, in growth mode, and our system has as a whole been expanding. And as a result, our real estate portfolio has been too, and there, you know, have certainly been some real challenges in terms of making certain, we have the adequate resources and expertise allocated towards our real estate transactions, um, towards our portfolio management and even towards management of our facilities. Um, and so, you know, we've got sort of a hybrid model, I would say, where we have a pretty lean internal team. We have a, a real estate executive. Um, he's not just over real estate, though he is over supply chain as well. Um, we have a, a small planning construction team, um, myself and a, a legal analyst. And then we also contract with a third party vendor, um, to provide, uh, facility and property management services, brokerage services, lease admin services, um, and to also provide some strategic input, um, both in the context of, you know, our new development work and some of our existing, um, assets. And so, you know, I I, I too have struggled a little bit in terms of my role in, in, in providing legal support, but also really helping guide, um, how real estate, the real estate function, um, works in our, in our, um, group. When I, when I first started the organization, there really was a lack of standardization. And so when I came in, I was tasked with putting in place a lot of, um, policies, procedures, templates, um, to kind of help, um, create that standardization that, uh, both Linda and Kelly were talking about. So, um, you know, echo a lot of their thoughts in terms of how, uh, trying to get things into place that help things run a little bit smoother in the organization, um, and partnering with our, our business partners to, to make sure we're strategically aligned, um, in terms of our real estate and what our operations are.
Speaker 2:Sure. Yeah. And sort of another common theme that, you know, pretty much all of you said is, is that, you know, you all have been in acquisition mode and, and growth mode, and, you know, there's all this real estate coming. Uh, so, so when those decisions are being made, you know, when, when, when you're acquiring, do you, is is sort of the, is, do you, do you see that, or do you view real estate as sort of a, a, a central, you know, component or, or one of the essential elements to the decision to, you know, acquire a hospital or expand? Or is it just one of those things that, you know, there are other reasons for, you know, this deciding to acquire, uh, a facility, uh, or, or expanding into a new market, and then sort of the real estate, you know, kind of becomes the afterthought? Or, or, or you, you guys are finding in a situation where, okay, uh, we've got all this extra real estate. Now what do, what do we do with it? I, I guess how to make the question more concise? Uh, when do you know from, from what you've seen, when those decisions are made to go into growth mode, how, you know, what role does real estate play, um, in, in that decision?
Speaker 3:Um, for SEL health, I would say really it starts as an operational strategy. And so that's developed in terms of what markets, um, we want to be in or expand to. And then real, the real estate is really pulled in more on the, on the backend, I would say, um, and, and, and use to help sort of identify properties or specific areas for development mm-hmm.<affirmative>. Um, so that's, that's usually how it has functioned here. Um, I've been working with our team to try to get, uh, get in a little bit earlier because I think there's certainly opportunity, um, to evaluate real estate relative to organizational strategy, um, earlier on. Um, so, you know, if, if I can sort of leverage, um, our, our real estate support to be aligned with our goals and sort of bring that, I think that brings more value to the organization and some of the, um, endeavors that we're looking at.
Speaker 2:Sure. Mark, I see you smiling over there.<laugh>, uh,
Speaker 6:Kelly Kelly is so polite. I, I, at least in, in my experience, you know, the, they turn to real estate about three weeks before they think they wanna complete the acquisition, you know, and they say, oh, by the way, we wanna buy this practice. They have seven leases in seven different places, and they own this building. And, and by the way, you know, half of the half of the doctors in the practice own the building and, uh, you know, can you let us know if there are any issues? Right? And, and so, and then, you know, real estate gets blamed for the fact that the deal didn't close for three more months when in fact it wasn't going to anyway, you know? But, um, but in my experience, the idea, and by the way, I mean, I did similar transactions at, at Eastman Kodak Company for years, and it was the same thing there too. I mean, it's not unique to the healthcare industry, um, but, uh, but real estate can, can be a, a bit of the, uh, you know, the poor stepchild coming along at the end. Yeah. And, uh, and, and you know, there, there are times when, you know, there's a real estate problem that might actually, um, you know, have an impact on the transaction. Um, usually it's just a matter of figuring out, you know, what you need to do short term and long term, which may mean maybe to get out of that lease space and, and find another one, or consolidate. Um, but there's, there's a lot involved as Kelly suggested.
Speaker 2:What do you think is the reason that it's, it's sort of at the back of everyone's mind. I mean, it sounds like it's, it's a common, uh, throughout, like, what is it, are the business leaders just not like they, you know, they just view real estate as, you know, a place to, to, to, to put, you know, patients and doctors and don't view it as, as something that should be part of the, you know, overall strategy for your organization? Or, or, or what do you think causes it?
Speaker 6:You
Speaker 2:Can say,
Speaker 6:I, I think there's an element of that. Everybody thinks they understand real estate, right? Because we all drive into parking lots and, and go into buildings. And, and I, I think there's a, there's a feeling of people who don't work in the real estate industry that, oh, it's, you know, it's just a lease. You know, it's, it's just, it's just this building, you know, what, what could go wrong? You know? And, and so I think it gets taken for granted a little bit,
Speaker 2:Linda, your organization was, uh, successful, you know, recently sort of joining with another organization. I mean, we, you know, you, we only need to check the news where, you know, one moment you hear about two, you know, organizations coming together. And then, you know, something sort of, uh, falls apart at that, at, at the last minute, that, that happens more often than not. Um, but, you know, when y'all were going through that transaction, you know, what was real estate? Uh, I, I guess what considerations did, did real estate play into, into the, the decision?
Speaker 5:Well, that's interesting,<laugh>, um, you know, it was such a large transaction, um, and the real estate, you know, I think I've heard this and, and it's nice to hear that my, my, uh, experiences are not unique<laugh>. Um, and that it seems to be a similar, uh, theme across organizations and not just healthcare organizations, but yeah, the real estate oftentimes is sort of, you know, while, while each of these entities in their own right could be deemed large real estate companies, right? We're all dedicated to healthcare, and we have our mission as healthcare. So I think it's, you know, our companies are a little reticent to sort of acknowledge the fact that they are real estate holding companies and of very large portfolios in some instances. Um, uh, and they do, they view the real estate as they should, as, as a means to the mission. And it's not, you know, the mission. It's a means to, to, to carry out the mission. Um, so to that vein, when we were, when we were embarking on the combination of companies, the real estate wasn't gonna hold it up. It, you know, to, to Mark's point, it was how do we, how do we, uh, solve for problems as we go along because we are going to combine and we are going to become common spirit health, and how do we do that? And frankly, a lot of, uh, you know, there was some due diligence, but a lot of that, that work is happening now because combination ha uh, was effective in February of 2019. Um, but we were under two different systems and, and not just real estate, other systems throughout the company. As we move along, you know, we are, we are combining those systems and putting in, uh, best practices across the company and real estate included and sort of, uh, developing new practices, procedures for real estate and other, and other, um, other departments. Um, and now we're sort of dealing with the real estate and how do we want it to look, and how do we fix things that we feel like need to be fixed? Um, or how do we, you know, just what's the standard moving forward? And so, um, but we do, we see it, uh, you know, like, again, I echo my colleagues, it's, you get a transaction. My goal is always to be brought in early and often is what we say bring us in early and often. Cuz we can only, we never wanna hold up your transaction is what we tell our, our stakeholders. We do not wanna be the reason why you have to delay clothes. And if you bring me in early, I promise you I won't delay your closing<laugh>. It's a big promise to make. But I think, um, oftentimes they start to realize if they, if you can get there, they start to realize, you know what, this is better. And they realize that given the number of real estate professionals we have both on the, on the legal and on the, um, on the corporate side, we actually have value to add and we can actually make your transaction better. Um, and the more you work with'em and the more you're open to working with them and the more creative you can be and innovative you can be and nimble you can be. We're finding that they are turning to us more often earlier and often, which is, which is good for everybody.
Speaker 2:Yeah. So, yeah, Linda, it sou, it sounds like you're, you're sort of, uh, making an effort to talk to the, to the right people. Let them know that that, that you're there, that you're there to help, and are, it, it, it seems, it sounds like you're open keeping the lines of communication open with the various business leaders and that that's helpful, uh, in terms of just your everyday job.
Speaker 5:Yeah, no, absolutely. We have a, we have a, uh, i i, we have a line in our little, we call ourselves, well, we don't, we were given the name the Ricoh, which for all the lawyers in the here can, can laugh at that. It stands for the Real Estate Center of Excellence. We were given that name as part of the legal department. Uh, so we like to joke that we're the Ricoh, uh, but our motto in the Ricoh is, hi, we're from, from corporate, how can we help<laugh>? And we sort of try not to laugh every time we say it, but we, we do try to sort of live that motto of saying, you know, I, I don't want anyone to feel like, you know, I'm sitting here in Arizona or in California or wherever, you know, sort of the corporate system folks sit and I have to go to Arkansas and talk to hospital president and say, this is how you're gonna do it, or what, wherever, whatever state I'm in. And they, you know, they sort of feel like they have their own way, their own ideas, um, and we want them to know we're here to partner. We're not here just to say, this is how it's gonna be. Um, that's not our goal at all. Our goal is to come in and, and understand the, the str the strategy and the goals and to really add value, um, and show them that we can, our goal is never to stop a transaction, right? As lo that's a general philosophy of lawyers. We don't wanna be the reason the deal doesn't happen, uh, but we wanna be in there early enough so that we can make sure the deal does happen and happens smoothly and happens, you know, to our best advantage.
Speaker 2:Yeah. Kelly Anderson, do you get called, you know, early enough, uh, with, with some of these acquisition transactions? Um, or, or is is it all, is it also one of those things where you get pulled in last minute,
Speaker 4:Uh, for real estate? No, they, they called a legal department very early. Uh, fortunately, I I will say though, when we're looking at, you know, physician acquisitions or other acquisitions of hospitals and other facilities, real estate's kind of an, an afterthought, I guess. Um, we've gotten better as we've, um, grown and increased the volume of our acquisitions and bringing real estate in earlier, but real estate in those scenarios that it's never gonna kill the deal, you know? Um, but it is important to start the real estate due diligence very early. Um, because we've, we've ran into title issues, we've ran into environmental issues that ultimately haven't, um, again stopped the deal, but they take a while to resolve. And so we need to work parallel with the operations team, uh, to transition, uh, an organization that we're acquiring so that we can make sure that we deal with those, um, real estate underlying real estate issues effectively. Um, Gorin you mentioned operating in silos, and I wanted to go back to that a little bit because, um, you know, real estate has an impact on a lot of other areas too. Um, for instance, reimbursement. So are we located in an off-campus facility? Are we acquiring an off-campus facility? Do we intend to build that as a hospital service? Can we get the ops reimbursement if we acquired that facility that is off the campus? And so, um, really if you're looking at a real estate transaction, oh yeah, it's off the interstate and it looks great because it has high visibility to highway traffic, well, how will we get reimbursed in that particular, uh, facility depending on what services that we're providing there? So we have to have the real estate team talking to the finance people, talking to the ops people, um, talking to the legal people. And a lot of times lawyers kind of bring everybody together. You know, we're the ones that say, Hey, did you think about, um, the fact that this facility might not be good because of X, Y, Z? Um, you know, so real estate, you know, while it normally doesn't, uh, kill the deal, so to speak, it has a lot of impact on the deal, and it's important to bring all the people in at the right time.
Speaker 2:Sure. So, so how do Kelly Anderson, how, how do you, is there anything that, that your department, you know, does to kind of help keep those lines of communication open? I mean, are there regularly scheduled meetings that you all have or, uh, any any insight you can share to kind of, uh, you know, help the listeners, you know, understand how, what they can do to, to kind of help make sure there's communication between the different departments?
Speaker 4:Well, first, first I think Baptist Health, uh, may or may not be unique in that we have a terrific culture and people work really well together. And so, uh, that's not something that, you know, you can fix overnight. Um, but we have incredibly great culture and we have individuals who are very collaborative. Um, and our, our, you know, our C F O, um, is, is very good. And, uh, he wants to be involved and he takes an interest and he's kind to people when they come to him. Um, so all of those factors, I think help and, and frankly, the real estate person, he wants as many people involved as possible. And so, you know, training that person who holds kind of the key, uh, to make sure that they're communicating early to all of the right stakeholders, I think is very important. Uh, fortunately, uh, uh, our real estate executive does do that. Um, and I think that holds it together. And then the lawyers as well, you know, we, our philosophy and, and my philosophy is you can't over communicate. Um, and that might be annoying to some of our operators, you know? Um, but, uh, you'll never be able to accuse me of not, uh, of keeping something secret<laugh>. Yeah.
Speaker 2:That's great. Yeah. Culture's culture is so important. It's great to hear that, you know, within your organization, it, it, it, it sounds like people are wanting to, to work together and are interviewing each other as, uh, uh, allies. Uh, Kelly Adams, you, you had mentioned that, you know, got, you got the, the legal aspect of the job, but you also get, uh, pulled in in operations as well. Um, how, how do you know, what do y'all do within your organization to kinda keep the lines of, of communication open between the different departments?
Speaker 3:Yeah, I mean, we have some pretty, um, set scheduling in terms of me regular meetings with different departments. And, you know, I think a really large component of mitigating risk and preventing non-compliance in the real estate function in our organization is, and really in any organization probably involves, you know, training and coordinating across our various departments. Um, and as Kelly said, I think as lawyers, we often do get put into that role. We're, we're sort of being that connector and making sure everybody's on the same page and communicating about the various issues. Um, so I work really closely with our compliance team. I work with our accounting team, um, and with, um, our third party vendor who actually administers a lot of the agreements to ensure that, you know, things are running smoothly and, and that we have, um, proper structure in place, um, to keep, to keep our portfolio compliant, um, and to just to make sure folks are pulled in at the right, at the right junctures.
Speaker 2:Yeah. Compliance obviously is important here and dear to my heart, but, uh, Linda, with, when, when you look at the size of the portfolio that you all have, uh, how, how do you all help make sure all those, uh, arrangements, uh, are are compliant
Speaker 5:Process<laugh>? Uh, we are, we are nerds for process in our department. And, um, you know, we, we, we early on decided that this is a bright line process and we are not going to run different processes for different types of transactions. Um, and, you know, I was not a healthcare, uh, real estate attorney, um, always, I, I practiced re regular old dirt laws. We stay on the East Coast<laugh> before I came here. Um, and, and sort of learned the healthcare, real estate part of it. And I remember when I started and I read the, the Stark Law, um, to get ready for my interview at then Dignity Health. And I said, what's the magic to this? This doesn't seem that hard. Yeah, it's gotta be in writing, okay, all<laugh> because they're always in writing and it has to stay where, what the space is and all. And I was sort of scratching my head at that point, uh, because I didn't really get like, what's the, there's no magic to this. Um, and obviously all of us here on this call understand that that's far too simplistic<laugh>, and that there is a lot of magic to it, and there is a lot of, um, you know, monitoring and making sure things are right and making sure you have appropriate documentation and things are done timely. Um, and, and there is, there's a lot of moving pieces. So there was a decision made, um, that we are just gonna run this as a bright line. We are also a nonprofit organization, so we have, um, a duty really to be good stewards of our assets. And so, uh, from any standpoint, physician, non-physician, we wanna be a good steward. So our deals are always gonna be market. We treat all of our transactions the same. Um, and that is really sort of the key to make, it's one of the regulatory keys to our process of, I am not going to engage in a discussion ahead of time. Is, or is this a direct compensation arrangement, an indirect compensation arrangement? Is it only a stark issue or is it only a kickback issue? Or do I only, we don't do that. Uh, we have a process. Your lease is going to comply with the process. And in complying with the process, we, we spit out regulatory compliant arrangements. Um, and so that is really the key. And that's not to say, you know, on a transaction where there's a lot of other things going on, and it's not real estate that we don't have to stop and, and, and, you know, engage in some of those analysis on the front end, but for the lion share of what we do, it complies with a process. Um, and that process is compliant with the law. And if, if the lease complies, then it complies with the law, and that's sort of how we, um, you know, run a machine for lack of a better term, to make sure that what's the product that's coming out on the other end, um, won't be problematic to us in the future.
Speaker 2:Sure. Uh, that's, that, that's great advice. Um, you know, mark, the way we view compliance, you know, we kind of separate into two buckets. There's transactional compliance, there's operational compliance, you know, transactional compliance, I mean, structured the arrangement correctly and compliance with the applicable laws, and then operational compliances. Are you administering that arrangement, um, you know, in a, in compliance with the agreed upon, um, uh, terms? Uh, so when, you know, what do you see as being more difficult? Is, is, is it the structure those arrangements, you know, correctly? Is, is, is that where most of the work goes? Or, or, or do you see there being more challenges in really administering those arrangements once they've been entered into in a compliant manner?
Speaker 6:Um, well, my first confession in our confessions, uh,<laugh> session is that, uh, that I, like Linda, you know, was a traditional third lawyer. And, uh, and I, I may still be catching up on, on, you know, the healthcare regulatory side of, of what we do. Um, and so I, I am glad to be in a department that has, uh, 14 other lawyers, several of whom, uh, no stark and kick in a kickback and so forth much better than I do. Um, and so, um, you know, from my perspective, a lot of it, uh, boils down to, uh, you know, following, you know, following the process of setting up the transaction. And, but I'm much less involved in, uh, you know, in looking at the, the operational side once, uh, once things are put in place.
Speaker 2:Sure. What about you, Kelly Anderson? Are you, um, do you get involved in the operational, um, side as well as the, um, transactional when setting these arrangements up to be compliant?
Speaker 4:I guess goren, what, what do you mean by operational? How we're gonna operate within a, a, a space or
Speaker 2:Like, for example, if it's a lease, you know, and you've got a rent escalator, uh, just making sure that the rent has actually been escalated and, and, and the proper amount of the lease is, you know,
Speaker 4:Being No
Speaker 2:Things like that. Yeah.
Speaker 4:No, no, no, no. Uh, the legal department does not, you know, our strategy is, uh, like our, um, like Linda and Mark, we also have a process in place. Uh, we have standardized forms, we have fair market value opinions that have to be executed upfront. Uh, we have a committee of our boards that approve all compensation arrangements with physicians or, uh, potential and invested, we're interested, um, individuals. And, um, we execute, uh, arrangements and accordance with those, uh, policies and procedures. And then at the back end, you know, compliance periodically as part of their work plan would audit and monitor compliance with the agreement itself, um, that it's really operations, uh, role to, you know, operate the agreement in accordance with its terms.
Speaker 2:Sure. That makes sense. Kelly Adams?
Speaker 3:Yeah, I was gonna say, I think my role is a little bit different from what I'm hearing. I get pulled in a lot of times, um, when issues are identified like, oh, they're using a different space than what, you know, the lease was for. And so no matter, even if, I feel like we've done a really good job in terms of setting the process upfront, um, so that it's, you know, standardized and we've got our fair market value rates, we've got a floor plan, you know, we've kicked all the boxes. Um, I think during the life cycle of the arrangement, oftentimes issues come up, whether they are billing issues, um, I get pulled into that a lot. You know, we didn't escalate rent, um, you know, we haven't been billing through operating expenses, things like that. So, um, I often get pulled in to do compliance analysis, um, when those issues have occurred, and then figuring out one, you know, a plan, a process to sort of remediate or reconcile payments. And then two, using those specific instances as, um, kind of a case study into, okay, why, why did this happen and how do we fix it? And what better controls and guardrails can we put into place to prevent these issues from popping up again?
Speaker 2:Sure. Yeah, that's great. Yeah. Lessons learned is so important to, you know, making sure that, uh, you know, similar mistakes aren't, are made in the
Speaker 3:Future. Yeah. And I, I came from private practice where, um, you know, I had clients, um, that were national clients who had very structured real estate, um, uh, portfolios and processes. And so it was a little bit of a shock when I came in and realized a lot of that was lacking, um, at our, at my system here. Um, and so it's been a good experience to be able to help sort of facilitate putting those things into place and drawing on experience that I've had, um, from private practice. But, um, I, I actually started my career as a healthcare, um, attorney. I, I worked with a partner who did exclusively healthcare real estate. And so, um, I'm, I, you know, I think oftentimes there's either healthcare attorneys who become healthcare real estate attorneys, or real estate dirt lawyers who become healthcare real estate attorneys. So I think my path has been a little bit unique, but, um, certainly has benefited, uh, my past so far.
Speaker 2:Sure. No, that's great. Uh, so Kelly Adams, how, how would you measure success as it relates to the real estate function? What, what would be, you know, kind of in your ideal world, you would say, okay, this is, you know, if, if we achieve these goals both within, you know, uh, my scope of responsibilities and the real estate function as a whole, um, then, then, then, you know, the goal accomplished, uh, happy with the result?
Speaker 3:Yeah, I mean, as we sort of talked about, I think if I can help facilitate real estate being, you know, really evaluated upfront with the organizational strategy, um, I think that's a big win. I, you know, I, like others have said, real estate's often an afterthought my organization. And if I can sort of get in earlier, um, with various transactions that we're working on, or getting people to think strategically about how we can use our portfolio to benefit the organization, um, then that is certainly a way that I measure, um, success. And then, you know, I think the other, um, piece would be, as we've also talked about, sort of limiting risk for the organization in the context of real estate. And I guess what I mean by that specifically is helping the organization avoid some of the common compliance pitfalls that we've talked about, um, you know, which can trigger anti-kickback or stark issues. Um, so, you know, uh, the more I can get to a level where it sounds like Linda and Kelly and Mark are at, in terms of just having standardized processes, um, for facilitating our agreements and really controls to manage the portfolio and create structure and communication among the various, um, departments, I think that that is where I, um, see as an area that I can be successful in.
Speaker 2:That's great. Kelly Anderson, what about you? How, how would you define, uh, success, um, in the, in the real estate function?
Speaker 4:Well, um, it's real simple, closing a real estate transaction on time and on budget. Um, but beyond that, really, as Kelly said, managing the risk to identify real estate issues and concerns prior to taking title. Um, you know, I remember many, many, many years ago, uh, before we had a policy in place related to our foundations, um, property was donated to us, and it had, um, a gas station on that property many years before, uh, low and beholds, there was a leaky underground storage tank on that property. And so it is the gift that continues to give. So we use that often as an example of this is why you followed the process. You know, let's look at the property before we accept, um, even a donation or, um, a bequest<laugh>, uh, so managing risk and of course closing on time and budget.
Speaker 2:Linda, what about you?
Speaker 5:Yeah, I would echo what Kelly Adams and Kelly Anderson said, it's, you know, from, from a big picture standpoint is, are my clients happy? Do they feel comfortable, uh, to just call, pick up the phone and reach out? And that includes real estate, but also hospital presidents really fostering, um, those relationships with leadership so that they understand that we are here to provide value and we can, and we do. Um, and, and really becoming a trusted advisor where at the very inception they pick up the phone and say, we're gonna do this. What do you think? What should we think about this? What should I be thinking about in advance? Can we even do it with this property? Um, those are, that's wonderful when that happens. Um, and then yeah, once, once we get that trust is actually really executing and providing good service, um, and, and creative service to get, to get to the end goal and, and, and agreed it, part of that is, is reaching out and speaking, I've had to do presentations in front of our foundation boards for the exact reasons that Kelly was just me mentioning, is, you know, the acceptance of donations, you know, be wary of people carrying gifts, is what we always say<laugh>. And, and we've had those horror stories as well. Um, and, you know, we treat all real estate transactions the same regardless of their values. So even if it's a donation, it still has to go through the real estate due diligence process. And we still put a purchase and sale agreement in place, even for no consideration, where we have those periods of time to do our look at it. And, uh, so yeah. So again, just happy clients being involved early and often and, and returning a good quality product that keeps people coming back. Sure,
Speaker 2:Yeah. As the old saying goes is no good deed goes unpunished. Right?
Speaker 5:Exactly. Right.<laugh>,
Speaker 2:Mark, uh, we're gonna conclude with you. What's, uh, you know, what, what, what's, what's the goal for the, the real estate function, uh, from your perspective and for your organization?
Speaker 6:Well, you know, I think it's really a lot of what's already been touched on, you know, managing risk and, uh, and yeah, some days it's just keeping up, right? Uh, uh, but you know, the one other thing that I would add is, um, within our organization, the, the biggest real estate decisions get made by people who aren't real estate people, right? And, and that's typically our cfo, F o. Um, and that a, a few years ago, the most valuable, uh, time that I spent was, uh, was walking around, walking around campus with our cf the person who's not our C F O, I gotta know her very well, uh, personally, she doesn't have time to walk anymore. Um, but, uh, but so, you know, being able to sit down with her and be sort of an interpreter, you know, somebody will come to come to her with, you know, a 40 page lease or some complicated real estate transaction, and she wants to know what's going on, you know? Yeah. And, and so, you know, a lot of times I, I think with, whether it's the board of trustees, facilities committee, or our cfo, f or our president, just being, being able to sit down and explain to them, you know, in a, in a big picture way, in the way that they need to understand it, um, you know, what's happening with a particular location, uh, and, uh, and transaction.
Speaker 2:Well, this has been extremely insightful for me. I really, uh, appreciate all of you, uh, taking the time to, um, share your, uh, expertise in, um, experience with us. And, uh, thank you all.
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