June 6, 2013
REITs and the Affordable Care Act
Yet another good sign for the senior housing industry has been reported; senior housing and medical office buildings (MOBs) are “poised to continue their upward trend,” reports Senior Housing News. This is a result of “the demographics and improving economies,” according to Debra Cafaro, chairman and CEO of Ventas, Inc., in an interview conducted with REIT.com.
Real estate investment trusts (REITs) in particular are enjoying this upward trend. Cafaro spoke this week about the benefits of being a REIT, which offers a flexible business model for her company.
“One of the great aspects of the health care REIT model is that we are able to flexibly allocate capital into different sub-sectors at different parts of the cycle, and that has been a way to create value for shareholders,” Cafaro said during the interview. “Our effort is really to allocate the capital where we see either valuations increasing for multiple expansion and/or valuations increasing because the cash flow is increasing.”
As a result of policy change, demographics, and improving economics, senior housing and medical office buildings, two industries Ventas allocates capital to, will continue to see signs of growth. Health care reform has also impacted the way development is moving forward, for both the good and the bad.
“The positives certainly are that with the 79 million baby boomers that will be coming in the system and will become Medicare-eligible starting in 2011, they will use our medical offices. In addition, there is a policy drive to treat patients in the lowest-cost, most clinically appropriate setting. We do believe that benefits office and skilled nursing,” Cafaro said.
One downside to new healthcare policy, and in particular Obama’s Affordable Care Act (ACA), for Cafaro’s company is that their health care provider tenants in the skilled nursing business will be “subject to pay for performance,” and as a result, “growth in their reimbursements has been muted.”
On the other hand, policy changes stemming from the Affordable Care Act present many benefits to seniors themselves. For example, eight states are participating in the Balancing Incentives Program, which gives States new incentives to make home and community-based services more accessible to older Americans and people with disabilities, according to the U.S. Government’s healthcare page.
Additionally: 47 community-based organizations are partnering with hospitals around the country through the new Community-Based Care Transition Program to help Medicare beneficiaries as they leave the hospital so they can successfully transition back to their home or the setting that best suits their needs, according to the government’s website.
“Thanks to the Affordable Care Act,” they write, “more seniors and individuals with disabilities will be able to transition from institutional settings back into their homes and communities.”
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