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These 4 Issues Could Have Lasting Impacts On Bay Area Healthcare Real Estate

Hospitals continue to move procedures out of the inpatient care model, leading to increased demand for outpatient clinics in the Bay Area and beyond, but several other trends could have even more widespread impacts on Bay Area healthcare real estate.

One Workplace Vice President of Construction Ryan Ware, DPR Construction healthcare core market leader George Hurley and Buchalter shareholder Mary Rose

“Nationally, we are busy as heck on building new hospitals and clinics. Every community is looking to build new product,” DPR Construction healthcare core market leader George Hurley said during Bisnow’s The State of San Francisco Health event Wednesday at The Fairmont Hotel. “Every facet of the business is in demand. It’s a good time to be a designer or contractor in healthcare.”

There is a growing trend to move beds out of a centralized location, which is why the industry is adding smaller hospitals within communities, he said.

During the event, a crowd of over 300 people heard healthcare panelists discuss the state of healthcare in San Francisco, the impact homelessness is having on healthcare providers and how healthcare policy is impacting the way healthcare is being provided in hospitals and outpatient facilities.   

In addition to high demand for care and new healthcare facilities, four issues are impacting how healthcare systems are approaching their real estate needs:

1. Telehealth And Technology

Adventist Health Vice President and General Counsel Meredith Jobe, One Workplace Vice President of Construction Ryan Ware, DPR Construction healthcare core market leader George Hurley, UCSF Vice President of Major Capital Construction Projects Stuart Eckblad and Buchalter shareholder Mary Rose

Even with the rise of telehealth, panelists agreed there would still need to be hospitals and healthcare facilities. More of these facilities have been integrating more technology and telehealth into their care models instead of using technology to replace face-to-face care.

Telehealth machines are allowing patients to sit and have their blood pressure and other analyses done while they talk to a remote physician without the patient needing to travel to an office, Adventist Health Vice President and General Counsel Meredith Jobe said. Adventist Health has been looking into using telehealth more.

He said technology is being incorporated into urgent care models. Some urgent care offices offer apps where patients can check wait times and arrive when they can get care right away.

UCSF is considering using telehealth at its new hospital on Parnassus. When physicians tell their patients they will be right back, the patients can still communicate with their physicians while they wait, UCSF Vice President of Major Capital Construction Projects Stuart Eckblad said.

2. New Care Models

UCSF Vice President of Major Capital Construction Projects Stuart Eckblad

In addition to integrating more technology and telehealth, hospitals are pushing more procedures, even ones that once required an overnight stay, into outpatient facilities. With advancements in hip replacement surgery, stand-alone orthopedic surgery centers are now forthcoming, Hurley said. These facilities will allow someone to come in and get a hip replaced and be home that night, Hurley said.

UCSF is in the process of building its Precision Cancer Medicine Building in Mission Bay, which will provide an integrated healthcare model to patients. Instead of patients traveling to each specialist within their care team, the doctors will come to the patients at the building, Eckblad said.

Patients can go through everything they need in one building, such as receiving infusions, imaging and going over food prep, he said. Construction began in 2017 and the roughly 180K SF building is expected to open to patients in 2019.

3. Juggling The Needs Of Baby Boomers And Others

At Bisnow's The State of San Francisco Healthcare event held at The Fairmont in San Francisco

While new care models continue to be adopted, the varying needs of different generations could alter care models further. While baby boomers are expected to have an impact on the demand for care, hospitals also are struggling with how to address the needs of younger generations that have different healthcare needs.

Whereas baby boomers have notoriously needed a lot of care, Gen Xers in their 40s and 50s tend to be content with the level of care they have, and millennials would rather not visit a doctor or go to a hospital, Hurley said.

“How do you design to that if you’re looking at just one facility? How do you just deal with that?” Hurley said. “Programmatically it is a huge challenge.”

Since UCSF provides quaternary care, which is a highly specialized level of care often focused on new procedures and specific disease treatment, the challenge has been how to deal with millennials who only need occasional primary care and then provide this high level of extensive and extended care, Eckblad said.

One way may be through adding flexible room design. The industry is researching ways to not just convert rooms for different patients, but also to change the use of that room, Eckblad said.

4. Mandated Seismic Upgrades

Adventist Health Vice President and General Counsel Meredith Jobe

While Bay Area hospitals grapple with caring for different patient needs, they also are wrapping their heads around how to comply with California’s fast-approaching seismic retrofit deadlines. These requirements have rolling deadlines of 2020 and 2030 where certain building codes and parameters must be met to maintain operations. Otherwise, the hospital will need to close. These retrofits are extremely expensive and cost systems billions of dollars to implement.

Hospitals need to figure out whether they will upsize, downsize or rearrange existing facilities or create new buildings, Jobe said. Adventist Health has spent potentially $2B in the last 10 years on seismic retrofits and new builds, and Jobe expects another $500M to $1B to be spent in the next 10 years for retrofits.

Another issue with implementing this many retrofits and hospital projects is competition for steel and concrete to rebuild these hospitals, he said. At Adventist Health’s sister system, Loma Linda in Southern California, the hospital is now competing with football teams building large stadiums and using similar materials.

“If all these hospitals do get retrofitted between now and 2030, it will have an amazing effect on the construction industry,” Jobe said.