Healthcare Boom Headaches
The future of OC healthcare real estate in a nutshell: More opportunities because of the aging population bulge, but more challenges. We got the specifics at Bisnow’s third annual Orange County Healthcare Real Estate Summit late last week at the Balboa Bay Resort. Thanks to sponsor Allen Matkins for the videos.
Allen Matkins partner Fernando Villa moderated the healthcare systems panel, which detailed just how strange these days are for healthcare, with a aging population of intensive healthcare consumers that grows by the day, but less money with which to pay for their care; and that's just for starters. Baby Boomers may be graying, but younger Millennials are also changing the way healthcare is delivered, which changes the industry's real estate needs.
Forget the impending Baby Boomer impact on healthcare. It's already here, says St. Joseph Health director of design and construction Chuck Coryell. The Boomers are retiring at a clip of about 11,000 a day. “There’s an expectation, and an entitlement mentality,” Chuck says. “There’s an entitlement to healthcare, and we’re trying to figure out from a strategic standpoint, how big is our lifeboat?” (Senior citizens do like to take cruises, so it better be big.) Video.
Chuck says Millennials have a different mindset about healthcare—especially about how they acquire it. Two or three younger generations are going to be used to walking into existing retail space, such as MinuteClinics or Walmart Clinics, to take care of the majority of their ongoing healthcare. For an organization like St. Joseph Health, the question is whether to compete in that space. (Nobody is suggesting the reverse: Walmart offering major surgery.) Video.
Hoag Memorial Hospital Presbyterian SVP-real estate Sanford Smith says the system in its current construct is unsustainable. Considering that the Boomers are aging into their consumptive years, “we simply can’t continue to deliver care the way we have been... That’s the economic driver that’s causing the industry to re-examine itself.” The rationalization of portfolios will be a key lever in reducing cost. Video.
Kaiser Permanente VP corporate real estate Michael Huaco says the challenge for healthcare systems is to find new revenue sources and capital sources, and that eventually, as consolidation continues, there may only be as few as 20 or 30 healthcare systems nationwide. (Collecting all your favorite hospital system trading cards will get easier.) In this video, Newmark Grubb Knight Frank executive managing director Garth Hogan discusses the challenges of developing continuum-of-care properties, even as reimbursements are going down. Video.