LOS ANGELES-Several healthcare providers and insurance companies are beginning to augment existing leases or expand into new properties to accommodate anticipated growth from the Affordable Care Act next year. GlobeSt.com recently reported, that L.A. Care Health Plan added an additional 47,306-square-feet of space at the Garland Center in preparation for the ACA rollout. The former Century City Hospital also signed three leases with healthcare providers UCLA, Cedars-Sinai Medical Center and Select Medical valued at $80 million.
While some are crediting ACA with the need for larger medical space, Jason Clark, managing director of Jones Lang LaSalle's healthcare group, explains, “The ACA really wasn't the catalyst to all of the changes going on in healthcare and healthcare real estate. We were already going down a path that was going to create major evolutionary changes in healthcare.” Some of these changes include an aging population, an increase in healthcare delivery costs and cuts in reimbursements rates.
Overall, healthcare users are learning to look at real estate differently, considering more affordable and efficient real estate options. “There is an assumption because 30 to 40 million people are coming online that we automatically need 30 to 40 million square feet of new space,” he says. “We think it is apples to apples, and it's not. The delivery of care is going to be so different.”
Kaiser is one example Clark notes about different uses of space. The medical provider began buying up former Circuit Cities and retrofitting them to fit its medical needs. “At the end of the day, a building is a building,” Clark adds. “It is all about reducing costs and increasing efficiencies. There is perception that if you are doing medical treatment, you need to be in a medical space, but in actuality, depending on what procedure you are doing, that is not the case.”
Lease expansion is more about finding affordable, low cost space that can meet customer needs, rather than accommodating a larger customer base. With the roll out of ACA, healthcare users will need to start cutting costs, and the resourceful management of real estate is one of the best means of doing so. For this reason, Clark has seen a significant uptick in his consulting activity as healthcare providers look for guidance.
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Kelsi Maree Borland
