Contact Us
News

Medical Billing Codes Incentivizing Suburban Real Estate Expansion

In the complicated world of America’s healthcare system, medical billing codes and reimbursements have an outsized effect on the strategy of the country’s largest healthcare providers. A shift toward prevention and wellness has hospital systems extending their reach into the suburbs to keep patients out of the hospital. 

Houston Methodist
Houston Methodist West campus

“The reimbursements over the next 20 years will change to value and wellness-based billing,” JLL Senior Vice President of Healthcare Project Management Daina Pitzenberger said.

With more than 30 years in the healthcare construction and development business, she has had a front-row seat to the changing trends.

“The buildings these systems need are in the community. Outpatients services are the trend; that’s the way to prevent chronic illness.” 

Houston, home to the largest collection of hospital systems in the country, is the front line of that change — the hub-and-spoke model has proliferated through its many suburbs. Once dominated by the Texas Medical Center, a dense collection of over 60 medical institutions in Houston’s inner core, the Bayou City’s healthcare real estate market has lately been driven by the suburbs. 

In The Woodlands, Memorial Hermann is launching a $250M expansion project to add a new eight-floor tower after completing a $25M expansion in Cypress. Nearby, Houston Methodist is planning its own $240M expansion, adding a 100-bed tower. This year, MD Anderson Cancer Center opened its West Houston Outpatient Center. UTMB opened a new Clear Lake campus in the former Bay Area Regional Hospital. 

Medical Billing Codes Incentivizing Suburban Real Estate Expansion
JLL Senior Vice President of Healthcare Project Management Daina Pitzenberger and JLL Healthcare Lead Chris Wadley

Physicians, doctors and hospitals used to be reimbursed based on volume and productivity, resulting in a fee-for-service practice in the industry. Value-based care offers incentives to change physician behavior by approaching care holistically, being reimbursed and earning bonuses based on the quality and efficiency of care provided. 

“The hospitals are being incentivized to keep patients out of the hospital. They need to be flexible to respond to the ever-changing reimbursement needs,” JLL Healthcare Lead Chris Wadley said. “As procedures evolve, you’re able to do a lot more outside of the hospital setting. The trends have been around for a while, but the way the payers are paying is changing.”

Value-based care is centered around a team approach to a patient's health. By clustering teams of outpatient facilities near smaller hospitals in local communities, hospital systems can coordinate and communicate care between physicians more easily, leveraging the incentives provided to them by value-based reimbursement. That is why outpatient clinics are more important to hospital systems than ever before. For decades, healthcare real estate has been built around the hub-and-spoke model, with the hospital at the center. Ambulatory and outpatient care, the spokes in the model, are now the focus for many systems. 

Memorial Hermann
Memorial Hermann West Houston

“With community-based hospitals adding outpatient expansions in all sectors of the city, we were hoping it would decrease the size of hospitals but we haven't seen that at all. We’re seeing growth in both inpatients and outpatients,” Wadley said. 

Baby boomers aging over 65 is fueling healthcare real estate expansion in nearly every sector, keeping the healthcare real estate sector robust. Houston’s reputation as a healthcare hub will continue to attract attention as the metro pioneers new forms of healthcare access in its local communities. 

“In Houston, we’re the tip of the spear with our healthcare practice nationally,” Wadley said.