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Latest Stimulus To Boost Obamacare And Healthcare Properties With It

After the Affordable Care Act was signed into law 11 years ago, healthcare real estate experts predicted that it would boost demand for medical office buildings, clinics and hospitals.

The more people who were insured, the reasoning went, the more demand there would be for healthcare services and the more space that would be needed. On the whole, that forecast has been correct.


Earlier this month, President Joe Biden signed the American Rescue Plan into law, which included provisions for an overhaul of the ACA that would expand coverage even further. If the history of the ACA in the 2010s is a guide, the demand for healthcare real estate will receive another boost.

But the outlook isn't quite that simple. The rise of telemedicine during the coronavirus pandemic complicates the picture, adding a new wrinkle of uncertainty to the prospect of higher demand for healthcare properties.

"It's clear now that after the Affordable Care Act passed, more people started using the healthcare system, and more often, because their access had increased," Ryan Cos. Senior Vice President and Sector Leader for Healthcare Mike McMahan said. "They now had insurance. The new law is going to turn up the dial further."

When the ACA was signed into law in 2010, 15.6% of Americans had no health insurance, according to a KFF analysis of Census Bureau data, or 46.9 million. By 2016, that total had dropped to 8.6% of Americans, or 27 million, meaning that almost 20 million people had health insurance who didn't previously. By 2019, the total of uninsured Americans had risen to 9.2%, or 29.3 million, still considerably fewer than before the ACA.

That growth meant that hospitals and healthcare systems had to make sure they had the facilities for the increased demand, McMahan said. Ultimately the new stimulus will do something similar, but perhaps not on the same scale.

During the 2010s, the demand for medical office buildings rose, according to Cushman & Wakefield data. From 2009 to 2019, MOB occupancy was up by about 16%, or 160M SF nationwide. That is a higher percentage of occupancy growth than the national office market, whose occupancy rose a little less than 12% over the same period.

The American Rescue Plan expands eligibility for ACA premium subsidies for people already enrolled in Obamacare health plans, and government outreach to get more people enrolled. The law also creates temporary premium subsidies for COBRA continuation coverage and other changes that subsidize healthcare coverage under the ACA.

In addition to providing heightened subsidies, the legislation will also encourage more states to expand Medicaid, said Joe Shull, Flagship Healthcare Properties partner and executive vice president, property management.

"The logical extension of these provisions suggests more insured patients utilizing healthcare services," Shull said. "As healthcare services continue to be increasingly delivered in outpatient settings, the incremental increase in insured patients will result in higher outpatient volumes."

Moreover, the Centers for Medicare and Medicaid Services predicts that U.S. healthcare spending will rise by about $268B per year from 2019 to 2027, or almost twice as much annually as the previous decade, to nearly $6 trillion by 2027.

Part of that growth will be because healthcare inflation consistently outpaces the wider inflation rate, but the growth will also be spurred by growth in insurance access, and as baby boomers continue to age from private insurance into Medicare.


The Congressional Budget Office estimates that the expanded eligibility under the American Rescue Plan will result in about 1.7 million more people getting insurance through the ACA marketplace by 2023.

These additional insured individuals will drive increased healthcare visits and the need for additional medical office space, but also more healthcare providers, Colliers International Executive Vice President and Healthcare Fellow Julie Johnson said.

"Many of these individuals might not have a primary care doctor, if they didn't have prior health insurance, and they might seek immediate healthcare through locations such as urgent care centers or a hospital emergency rooms," Johnson said. "But the overall impact of the stimulus bill should be an increase across the full spectrum of healthcare real estate due to the large volume of newly insured patients."  

Yet it is difficult to predict exactly how much new space will be needed because of that growth, for a number of reasons.

"Following the passage of the Affordable Care Act and its expansion of health insurance coverage, we saw some increased demand for healthcare real estate, but there’s no clear formula that translates health insurance coverage to a required amount of new square footage," Cushman & Wakefield Managing Director, Healthcare Advisory Practice Lorie Damon said.

Thus it is challenging to determine how much expanded coverage will translate into increased demand for space, especially because the provisions to expand coverage are temporary, Damon said. The funding to cover the additional subsidies outlined in the bill is only allocated for two years.

"Even so, other factors also have contributed to increased demand for medical office space since the initial passage of the ACA, and we expect that those will continue as well," Damon said.

Notably, she said, the aging of the U.S. population and increased demand for healthcare services across age groups will continue. Also, aging healthcare assets will need to be replaced, and there will be a continued shift from inpatient to outpatient care delivery, which has accelerated during the pandemic and is expected to continue apace, post-pandemic.

Another wild card is the future of telemedicine. In theory, increased use of telemedicine might depress demand for physical medical facilities, though that dynamic isn't at all clear yet, since healthcare remains very much a hands-on service.

"Potentially offsetting this favorable impact is the likely increase in telehealth events while the pandemic influences decisions to limit personal contact," Shull said. "But we believe telehealth has been additive to the outpatient healthcare real estate environment."

The ACA also tightened reimbursement rules for healthcare providers, putting pressure on them to use their space more efficiently. One way they have done so in the last decade has been decentralization, as major hospital systems opened up in greater numbers in locations away from the largest acute-care hospitals, which themselves have been shrinking in numbers.

Healthcare design also changed in the wake of the ACA, and will probably change further in the coming decade as demand increases and healthcare providers will need to be even more efficient in how they provide their services. 

The increase in patient volume over the last decade has been a factor in design decisions, HOK Regional Leader of Healthcare Hunvey Chen said. For wellness and checkups, the challenge is how to design outpatient facilities to be more efficient and flexible, which might in some cases mean less space.

"Our projects have gotten a lot more complex in recent years, and our clients want to make sure that they're building exactly the right thing," Chen said. "Before it was, we need this many beds in this type of hospital. Now the questions are, are we building the right spaces?

"Some of our clients are looking at shared exam rooms, for example," she said. "Let's say the facility includes an eye clinic and maybe an OB-GYN clinic and other types of specialty clinics. They can share exam rooms, which can be designed to be flexible enough for those purposes."