CHICAGO—The changing demographic makeup of the US has historically been the key driver of the health care industry. The aging of the US population, or “silver tsunami,” for example, will require much greater investment in facilities for senior citizens. But health care professionals, and the real estate practitioners who serve them, also have to confront the reality of the Affordable Care Act and begin working together to understand the changes now afoot.
“In some ways it's the perfect storm,'' says John Wilson, the president HSA PrimeCare, a division of Chicago-based HSA Commercial, since the new health law will bring in millions of new customers just when providers also need to plan for that silver tsunami. “This could put a lot of pressure on the delivery of care.”
“We met with about two dozen CEOs and senior executives of health care providers in the first six months of the year,” he adds, and these providers all seem to be asking, “'how will we get closer to the patient?'”
Seniors, of course, use more services than other customers, but the newly-insured may also use more than the average since they typically have not had much access to healthcare.
“If you went from having no insurance and using the emergency room to fully-covered, the thinking is, you're going to be more inclined to see a specialist,” says Jacob Gehl, managing director and founding partner of Blueprint Healthcare Real Estate Advisors, a Chicago-based firm. "And hospitals are a very expensive place to deliver health care. So we have to come up with a cheaper way of doing what we're doing.”
Therefore, rather than crowd these millions of new patients into hospitals or traditional medical office buildings, healthcare companies will probably just create more convenient settings. For example, providers can acquire sites, perhaps in retail centers with ample parking, of less than 15,000-square-feet for satellite offices and outpatient centers that can do things like minor surgery.
And the new healthcare law will begin transforming how providers get paid, from payments based on the volume of services provided to the health outcomes achieved. Therefore, providers will increasingly desire to keep patients under one roof rather than lose control over their care by sending them elsewhere for special services. This means that to complement the smaller satellite offices, providers will also need new or refurbished centers, some with several hundred thousand square-feet, where they can align many services at once. “Academic medical centers were using this method for years,” Wilson says.
“I think this means we're going to see a lot of consolidation,” adds Gehl, both among physician groups and smaller health systems as they all search for increased efficiency and the partners that can provide additional services. This movement should have a big impact on how investors look at the healthcare real estate market. When a group of physicians sells their practice to a big player like Advocate Health Care, for example, “the real estate market goes, 'wow, we just went from having a couple of doctors to an investment-grade tenant.'”
Wilson expects each of their clients to take a different approach to the new healthcare landscape. “The challenge for us is to understand all of the nuances and all the different regulations and what affordable health care means to the provider.”
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Brian J. Rogal
Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.
