Healthcare Real Estate Needs to Consolidate...Fast
Real estate has a critical place in shaping the decentralized future of healthcare facilities and must partner with healthcare systems struggling to provide care in their rapidly changing industry, according to our speakers at Bisnow’s first-ever Denver Healthcare Real Estate Summit on Thursday.
Our speakers emphasize that there’s only one thing certain about healthcare: it’s changing fast. Pressure is coming from the Affordable Care Act, the necessity to deliver care with tightening fiscal constraints, and the demands of an aging population. Healthcare systems are responding in many ways, but the drive for consolidation is one universal initiative. So is the push for community healthcare facilities that promote population health management: a less centralized (and less expensive) healthcare system with generally better outcomes.
Children’s Hospital Colorado CTO Andrew Blackmon, our opening speaker, says that the healthcare industry’s in uncharted waters, with uncertainty even about the near term. Rapidly improving technologies will shape the future of the industry in profound but not always predictable ways, he says. In the very near future, for instance, sophisticated alert systems tied to facility-wide communications will enable hospitals to get the right providers in the right room at the right time. Medical records will travel seamlessly among healthcare systems. Telemedicine will become increasing sophisticated and important.
NexCore Group SVP Tim Oliver and Catholic Health Initiatives national director Courtney Hanfland. Consolidation is underway, with large systems absorbing smaller ones and physicians joining systems in greater numbers, our speakers explained. Hospital systems are consolidating like banks did, with various permutations, including affiliations and JVs of nonprofits and for-profits. It’s a matter of necessity: they have to leverage size and scale and delivery models, especially in competitive markets. For real estate companies specializing in healthcare properties, consolidation will mean a smaller pool of clients, but each client will be larger.
Health Care REIT SVP Mike Noto and H+L Architecture principal Steve Carr. The squeeze on reimbursements and the pressure to produce better outcomes with less money means that healthcare systems need to work with real estate developers to stretch their capital budgets. As partners, they need to determine the best development strategies, which increasingly means healthcare provided by standalone urgent care and clinics in locations convenient to patients. Real estate companies need to contribute expertise in site selection and entitlements to get deals done. Also, health systems and developers need to figure out the way to develop facilities that reduce the cost of occupancy, which is difficult considering the expensive pace of technological change.
Milestone Project Management Rocky Mountain regional manager David Peterson, who moderated, and CBRE SVP Chris Bodnar. Much of the change ahead for healthcare facilities, the speakers agree, will involve replacement and redesign of existing facilities, as the industry is forced to move away from a fee-for-service model toward community-based population health management. Obsolete product will be divested, and services will be repositioned in a less centralized way. The goal now is for large hospitals to specialize in seriously ill patients, with less acute care provided by community facilities.