The Reconstruction Of U.S. Healthcare Has Just Begun

A combination of technological change and the introduction of the Affordable Care Act, along with many efforts to control escalating costs, have already remade how U.S. healthcare professionals deliver care to patients, but these forces are not finished transforming the market. 

"It's really time for us to reimagine how we do healthcare," Sinai Health System CEO Karen Teitelbaum said at Bisnow’s National Healthcare Series: Midwest Real Estate Summit Sept. 24.

A complex set of factors are increasing overall demand for care, including the aging of the U.S. population, the epidemic of opioid abuse and greater demand for mental health services, among other factors, according to Teitelbaum.

But simultaneously, other developments are decreasing the need for care at large, centralized hospitals.

For one thing, new technologies such as telemedicine, which allows physicians or other professionals to remotely consult patients on many needs without the inconvenience of in-person visits, have gotten more popular. And the search for lower costs has led to the proliferation of an array of outpatient clinics, which provide both specialty and basic care to patients closer to home. 

That has led to a lot of empty hospital beds, even as the total amount of care provided has increased across the board.

"We know there is excess capacity," Illinois Health and Hospital Association CEO A.J. Wilhelmi said.  

He estimates that one-third of the beds in some hospitals are typically unoccupied. That means developers, providers and other stakeholders should start thinking about how to repurpose many of these buildings, even as the construction of off-site care facilities continues.     

That won't be an easy task, Skender Director of Healthcare Design Jenny Han said. The watchword for any healthcare effort is affordability, and that puts a lot of pressure on builders. To have any chance of combating rising construction costs, and completing the redevelopment of the U.S. healthcare system, the methods of construction have to change.

"We are an archaic industry," she said.

By using factory-produced modular components, Skender intends to drastically reduce costs. It also plans to do all of the architecture, design and manufacturing in-house, a more efficient process than the traditional methods of construction, which typically involve an assortment of firms working in silos.

"I look forward to the day [modular construction] is no longer the shiny new object," Han said. 

Even if cost-effective methods of construction can be found, the changes up ahead could be gut-wrenching for many. 

In 2016, after deciding it could no longer sustain operations, Wilhelmi said, Springfield, Illinois-based Hospital Sisters Health System closed the nearly 130-year-old St. Mary's Hospital in Streator, Illinois. 

Last year, however, Peoria, Illinois-based OSF HealthCare showed what the future may look like for many communities that lose such institutions. It launched a $30M renovation of St. Mary's, an effort that demolished a portion and transformed the remainder into an outpatient center with a 24/7 emergency center. Other long-term needs can be met by St. Elizabeth Medical Center in nearby Ottawa, Wilhelmi said.   

Teitelbaum's Sinai Health System, located on Chicago's West Side, largely serves a low- to moderate-income population, and like many providers these days, has to carefully watch its funds.

"We don't have a lot of money to invest in big, beautiful buildings," she said.

Instead, it plans on making strategic investments that divert patients into less-expensive care settings. Earlier this summer, it opened a $6.5M Crisis Stabilization Unit at Holy Cross Hospital for patients experiencing mental health crises.    

"Mental health has never been a big moneymaker, these are patients that no one is running after," she said. 

But a pilot program launched in 2015 found that 70% of its 5,000 patients were stabilized without emergency room visits or hospitalization. Instead, they received lower-level care in their own communities, and also avoided incarceration.

Still, Teitelbaum knows the future of health systems like Sinai won't be easy.

"There aren't many healthcare CEOs that would push me down the stairs to get my job."