From a real estate perspective, the healthcare landscape is dramatically changing. The massive, monolithic structures that have come to represent the acute care setting are becoming more stratified in smaller buildings across wider swaths of a community. As Medicare policy encourages shorter inpatient hospital stays and drives patients into the post-acute care world, the need for colossal facilities is declining, real estate analysts say.
“There are still some de novo projects moving forward, but they are not the typical general acute care hospital of old,” said Tim Delgado, president of Houston-based Read King Medical Development. “The future of new healthcare facility development will feature more retail-based facilities and ‘community care clinics’ that will house multiple programs, ranging from primary care, urgent and emergency care, physical therapy, imaging centers, outpatient surgery, and other programs that are under one roof with separate treatment areas.”
Because hospitals are losing money on Medicaid and Medicare patients, they are being forced to compete harder than ever to capture market share in the commercially insured population, Delgado said.
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“This fact, combined with the consistent increase in rates of outpatient treatments and decreases in inpatient treatment, are fueling the push into the ‘retail’ sector by offering outpatient clinics and emergency centers in convenient areas designed to attract these commercially insured people,” he said.
The physician factor
The forced migration of patients outside the hospital walls is leading to the empowerment of physicians in the post-acute environment, Delgado says, and as a result “the pursuit and employment of physicians and physician groups will continue to grow. This shift to employment means that providers will need to add new facilities in the areas where these physicians practice.”
Frank Fehribach, director of real estate for Dallas-based VMG Health, agrees that pursuing physicians is the hospital’s biggest challenge in the evolving healthcare environment.
“All hospitals have a pressing need to expand their physician groups to take advantage of the new bundled reimbursement program under the Affordable Care Act and therefore need medical office space to house these new employees,” he said.
Some hospital systems are expanding their campuses – especially in the development of medical office space – but most are rearranging space within existing structures, Fehribach says.
“It would be safe to say that the vast majority of existing hospitals are overbuilt and do not staff the number of patient beds the hospitals were originally designed for, especially if the hospital was built pre-2000,” he said. “Because of the shifting away from inpatient to outpatient and the shortening of inpatient stays, most hospitals are trying to adjust their real estate to this new reality.”
Even so, on-campus building is not dead – development of medical office buildings on hospital property is still common, he says.
No more ‘mega-structures’
To be sure, hospitals are shrinking in size – at least from a brick and mortar standpoint, agrees Frank Williams, senior vice president and senior managing director for Birmingham, Ala.-based Medical Properties Trust.
“The trend may not be fewer beds, but what you’re seeing is that over the long term, the beds are being positioned closer to where people live,” he said. “The number seems to hover between 100 and 125 beds. Although the mega-structures will still exist, we no longer see them as being the bulk of development.”
At nearly 10,000 beds, Medical Properties Trust is behind only HCA and Tenet nationally. And although Williams sees the future of healthcare as going off campus, he says the company still believes that “the hospital will continue to be the central point for healthcare delivery in the United States.”