Our Health Care Real Estate Briefing is your comprehensive summary of weekly health care real estate highlights happening across the nation.

Last week, the American Hospital Association released a report on the impact of COVID-19 on hospitals’ operating margins. The cost of staffing, drugs and supplies have had a significant impact on hospital margins. Legislators in South Carolina continue to debate whether their Certificate of Need (“CON”) law should be repealed or amended. The current proposal preserves the CON law but adds a number of amendments that make it easier for hospitals to expand. In other news, several reports were released on ambulatory surgery centers (“ASCs”). Newmark released a report with ASC data and Banner Health announced an investment in a company that manages and develops ASCs. Finally, skilled nursing facility (“SNF”) REITs reported mixed occupancy and financial data. The good news is that SNF occupancy is up from January, although a number of SNF operators continue to struggle. This has caused the SNF REITs to renegotiate leases and sell off underperforming assets.

1. The American Hospital Association published a report on the financial impact of COVID-19 on hospitals, including: 33% of hospitals are operating on negative margins, hospital employment is down 100K employees from pre-pandemic levels, labor costs are up 19% (labor costs account for 50% of hospitals’ total expenses), 38% of nursing labor costs are being spent on visiting nurses (up from 4% pre-pandemic), drug expenses are up 36% on a per-patient basis and medical supply expenses are up 20%.

2. South Carolina’s legislature is now considering an amendment (as opposed to a repeal) of its CON law. The current proposal would (a) allow hospitals with fewer than 50 beds to expand into counties that don’t have a hospital, (b) allow hospitals that operate at 75% capacity to expand, (c) invalidate non-compete clauses between providers, (d) allow hospitals and ASCs to relocate within the same community and (e) require ASCs to provide care to Medicare/Medicaid patients and to provide charity care per the Center Square.

3. The state of Delaware proposed legislation that would require SNF and senior housing employees to receive flu vaccinations as a condition of employment. About 17 states have similar legislation per McKnight’s Long-Term Care News.

4. Newmark‘s Healthcare Capital Markets team released a report on ASCs. There are 5200 CMS certified ASCs in the U.S. and 40% of all surgical procedures are performed in ASCs, 90% of ASCs have physician ownership, the cost of performing a procedure in an ASC is $15 per minute (hospital care costs $40 per minute), average ASC rents are $30 to $40 per sf and ASCs sell for an average cap rate of 5% to 6%.

5. Banner Health announced plans to invest in Atlas Healthcare Partners. Atlas manages and develops ASCs and Banner has 26 ASCs in AZ, CO and WY. Banner plans to double the number of ASCs in its network to 50 by 2025 per Healthcare Dive: Healthcare and Health IT News.

6. According to data from Penske Truck Leasing, the top moving destinations for 2021 were Houston, Las Vegas, Phoenix, Charlotte and Denver.

7. A report by the Lown Institute found that most non-profit hospital systems received more in federal and state tax benefits than they provided via charity care and community benefit. Some hospital trade groups question the data according to Fierce Healthcare.

8. LifePoint Health is looking for a Senior Manager in their Real Estate Department. A link to the opportunity can be found here.

9. Omega Healthcare Investors reported SNF occupancy at 77% (up 300 bps). Omega sold 22 underperforming SNFs for more than $300M, although 14% of its contracted rents are being restructured and 12% of its rents are unpaid in Q1 per Skilled Nursing News.

10. CareTrust REIT plans to sell or repurpose 32 ALs and SNFs. Several facilities will be repurposed into substance abuse facilities per Senior Housing News.