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Real Estate Has Never Been More Important To Healthcare

As the shape of the healthcare industry changes, healthcare companies’ real estate needs are changing—and growing—along with it. Come hear how developers can meet those needs at Bisnow’s 2016 Philadelphia Healthcare Leadership Forum on Friday, April 22, at 7:30am at the Ritz-Carlton.


Although the healthcare industry is notoriously resistant to change, certain external factors are demanding providers adapt to the demographic shifts among their consumer base—and those adaptations require new spaces. That’s good news for developers, according to Kurt Hutter (above) of Anchor Health Properties.

The prevailing winds in healthcare are blowing towards decentralization, says Kurt. “The trend has already shifted away from a lot of inpatient volume and services on a hospital campus, and most healthcare systems want to branch out and create satellite facilities—so they need new and different real estate.”


Part of this trend is due to the Affordable Care Act, which has changed the reimbursement model for insurance companies and care providers, forcing strategic change in how healthcare is delivered. The ACA, according to Kurt, is “pushing healthcare systems into rethinking the old hospital campus approach towards a hub-and-spoke model.”

In place of those campuses has been a demand for specialized care facilities, or buildings with multiple specialties in one that are in more accessible locations and better integrated into communities. For immediate needs, younger patients (who are covered at their highest rates in years, thanks to the ACA) are increasingly more inclined to visit urgent care centers rather than emergency rooms—again, a newer type of property that fits closer with retail-sized spaces than large hospital buildings.

As urgent care centers proliferate, their client bases will grow as well, according to Michael Goldenberg of Health Realty Advisors (snapped below at a Bisnow event in 2012). He predicts, “eventually, there’ll be a greater penetration into the older market as well because more elderly people will have urgent care experiences.”


Whether because of the ACA or because the way people view their healthcare options has changed, provider networks are no longer in a position to dictate where their patients go. There are just too many options and too much competition for the old model.

“Where this whole thing is heading is called ‘population health,’” Michael continues, “which means that [providers] are going to have a geography that they dominate, and in that geography, they’re going to get paid to take care of patients.”

Even though the demand for new properties is significant, Kurt and Michael agree that hospitals haven’t caught up—they’re simply not equipped to make proactive moves in the real estate markets. Some of that can be chalked up to the relatively onerous process of developing medical facilities, which have more specific demands and more strict regulations than other property types, but a lot of that is also due to companies’ resistance to change.

Still, those same providers are realizing that to adapt to this shift in demands, they need more real estate, and they need expertise to develop and manage it. Property values are increasing steadily, and developers with expertise in healthcare stand to benefit greatly. The environment is more competitive than ever before.

In a hospital-dominated healthcare economy, other than world-class institutions, community-based hospitals were largely content to have their own geographic areas of operation, according to Kurt.

Now, as everyone looks to buy up space to adapt to the changing model of care, they may prefer the “population health” model that Michael describes, but are competing for territory—especially in the Northeast. Here, Kurt says, “the only way to increase market share is to take it from somebody else.”

One of the ways that competition can manifest itself is in the acquisition and development of urgent care facilities. For a growing section of the population, it’s their first stop in diagnostic treatment, and when more tests or treatment are needed after that stop, the urgent care center’s referrals can determine where a patient goes.

For providers, connections with (or ownership of) urgent care centers can keep patients in their network—or poach them from others.

“If you wanted to create competition and use urgent care as a weapon, you take it out of your service area and put it in a competitor’s service area,” Michael theorizes. “That way, you can pick off patients and send them to your network.

“In terms of defense, let’s say you invested in 300 primary care physicians for your network, so you have a market in which you control the primary care. You bring urgent care facilities in so no one disrupts this primary care network that you’ve spent a fortune creating.”

It may sound adversarial, but in such a time as this—when demands are changing and growing faster than healthcare providers can adapt—developers stand to benefit from increased competition by assisting provider networks in their push for expansion.

You can learn even more about this trend at Bisnow’s 2016 Philadelphia Healthcare Leadership Forum on Friday, April 22, at 7:30am at the Ritz-Carlton. Sign up here.