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RWJBarnabas' Ostrowsky: Changes in health care demand real estate creativity

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Barry Ostrowsky of RWJBarnabas Health, talked about the links between the health care and real estate industries.
Barry Ostrowsky of RWJBarnabas Health, talked about the links between the health care and real estate industries. - ()

As a hospital system executive seated before a crowd of real estate experts, Barry Ostrowsky had the opportunity to issue a challenge: Bring your creativity to the health care sector.

“Our industry needs that creativity,” said Ostrowsky, CEO and president of RWJBarnabas Health. “Our industry needs real estate folks who are not simply going to be limited to the conventional development of what heretofore has been a health care venue.”

It was a message that hit home for many of those in attendance last week at a conference hosted by the Rutgers Center for Real Estate, which highlighted the intersection of health care and commercial real estate. The rapidly evolving nature of that relationship was a dominant theme for nearly two dozen experts, as business leaders and professionals from two of the state’s critical industries descended on the Heldrich Hotel and Conference Center in New Brunswick.

Ostrowsky was among 20 panelists who were called on to dissect a hypothetical case study, which centered on a health care system and the implications of its growth plans. When asked about the real estate impact of a potential hospital acquisition, he took the opportunity to note that there is a sea change in how and where health care is being delivered — going beyond the traditional hospitals, medical office buildings, ambulatory centers and clinics.

Health care providers — and their real estate partners — must now focus on reaching the community more directly, Ostrowsky said.

“So when we sit down and look at our strategy, which is based entirely on the people we serve and the families that have people we need to serve, the question is: How can we more effectively relate to those people?” he said. “And locations and destinations and easy access are all part of that strategy and evaluation.”

The RWJBarnabas CEO told the crowd that “we don’t know real estate in our industry the way you know real estate,” so it’s important for both industries to come together on those objectives and understand the new dynamics of health care. Especially important, he said, is understanding the reimbursement system and the cash flow of health care providers — an area that could be changing dramatically — and how that translates into revenue for property owners.

“When we map that out, as we’ve attempted to do, and we look at the reality of what we have — big box assets, typically inflexible locations — how do we migrate from where we are to what we want to be?” he said. “It is going to require group risk, not simply on the health care side, but on the real estate side. And how can we together create the source of an appropriate profit dividend for our real estate partners?

“If we simply develop certain venues that have very limited profit potential without, at the same time or in some appropriate sequence, developing other venues that have greater interest in the real estate community, we’re going to shut out the opportunity to have an effective partnership between two incredibly important industries.”

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