PHOENIX—The property market in the hospital and health care provider segment faces a series of changes that are designed to provide greater efficiency in delivery of healthcare services. These changes are significant in property terms because of the trend of consolidation.
The already existing national trend of hospitals establishing off-campus outpatient facilities and specialty practices is dovetailing with the business plans and exit strategies of independent practices which are finding profitability declining. Owing to the rising costs of medical care provisioning–driven by everything from very unwieldy and complex billing struggles to the wider economic picture where six out of 10 US doctors reporting patients have difficulty paying for care–entrepreneurial physicians will increasingly see buyout offers from hospitals as attractive way to get out from a lease or to sell a building, says the National Association of Realtors (NAR).
Controlling of costs and maintaining high quality of care means an increase in sharing of developed space. The electrical, plant, IT and environmental requirements of healthcare construction represent costs that need to be leveraged across a greater number of health care practitioners going forward. Beyond that, stringent requirements for information technology updates for medical recordkeeping and the aforementioned billing will continue to be a major driver for the sharing of healthcare delivery facilities meaning labs, waiting rooms, exam rooms and the like. The commercial property strategy that wins is one that finds solutions for sellers and buyers in support of the consolidation trend, according to NAR.
On the sell side, there are exit strategies for doctors looking to cash out of such investments. If the prevailing trend is doctors on the way out of such properties in advance of hospitals and healthcare providers moving to a distributed model driven by cost-sharing, the commercial broker should be ready to provide a key role in the business plans of doctors.
Some healthcare providers favor leasing because allows them to stay flexible and keep options open as the market continues to evolve. Those favoring ownership see it as a more cost effective long-term option. They also feel owning allows them to more easily implement significant building renovations that may be needed.
Providers are following separate strategies regarding consolidation. While 4 out of 10 are actively participating as industry consolidators, others are focused on improving current systems rather than expansion. Despite the need for new types of facilities, many healthcare providers have reduced design and construction activity in recent years in response to both the recession and the new healthcare law. For many, focus has shifted to information technology investments incentivized by the ACA. About a third of providers have moderately or significantly reduced facilities investments due to this shift. Overall, organizations are re-examining spaces and operations to find efficiencies. A good number of healthcare institutions believe specialized facilities (such as MRI centers, cancer centers, urgent care centers, etc.) will grow in prominence. Approximately half also predict a greater emphasis on senior centers. Micro hospitals will receive greater focus from about a third of providers, while very few predict growth for traditional hospitals, according to NAR.
In preparation for the upcoming RealShare HEALTHCARE REAL ESTATE this week, Cleve Haralson, division vice president, development and construction, Kindred Healthcare, tells GlobeSt.com: "With the ever-changing landscape in healthcare, consolidation of systems is becoming more of an opportunity to create a community or regionally based network of providers that will provide a coordinated continuum of services to the population that is willing to be held clinically and fiscally accountable for the clinical outcomes and health status of the population served."
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Lisa Brown
Lisa Brown is an editor for the south and west regions of GlobeSt.com. She has 25-plus years of real estate experience, with a regional PR role at Grubb & Ellis and a national communications position at MMI. Brown also spent 10 years as executive director at NAIOP San Francisco Bay Area chapter, where she led the organization to achieving its first national award honors and recognition on Capitol Hill. She has written extensively on commercial real estate topics and edited numerous pieces on the subject.
