Healthcare Real Estate Experts Discuss the Why and Where of Outpatient Facilities

The cost for healthcare in the US is $4.6T annually, or $9k per capita; healthcare spending represents 18% of the nation’s GDP; the Affordable Care Act created 32 million new patients; and with Baby Boomers aging, 20% of the US population is now aged 65 or older, which is adding stress to the healthcare system.

All of these things are affecting healthcare real estate and shifting care from inpatient to outpatient facilities, noted Allen Matkins partner Fernando Villa (picture at right with Hoag Memorial Hospital Presbyterian SVP Sanford Smith), who moderated the healthcare user panel at Bisnow’s 5th Annual Healthcare Forum: The Future of Hospital Expansion, MOB’s and Outpatient Facilities last week. 

Sanford said that hospitals are, indeed, undergoing a transformation. “We’re at version 1.0 and looking at every aspect of business to determine if it’s sustainable. Value in healthcare is a new concept; outcome vs. cost is changing the dynamics of every hospital in the nation.” The healthcare industry is moving toward 2.0, as providers and insurers merge and consolidate, he added, noting that going forward, “size will matter,” because it provides cost advantages. 

Sanford said that high deductible health plans are driving the “retail-ization” of healthcare by forcing consumers to shoulder more responsibility for the cost of their care. As a result, they are shopping around for the best value, so hospitals are building medical bases in shopping centers to make care both cost efficient and convenient. “We really don’t understand Millennials well,” he added,” but what we do know is that they don’t want to wait an hour to see the doctor.” 

CBRE SoCal healthcare practice leader Bryan Lewitt concurred, saying hospitals are establishing off-campus facilities as a cost-cutting measure. “They can provide care more cost effectively in outpatient facilities,” he said, noting that it's 58% more expensive to treat a patient in the hospital ER than in an urgent care facility. Additionally, hospitals need to increase revenue and are opening ambulatory care facilities in new neighborhoods to acquire more patients and are targeting Millennials. “Millennials have no loyalty to a doctor, they just want convenience,” he said.

Bryan suggested, however, that selecting a location for an outpatient facility can be daunting, because there a number of factors that make a location good or bad, like access, parking, demographics. He noted that CBRE developed proprietary software to analyze locations. The program overlays location demographics with data from CMS and OSHPD (California Office of Statewide Health Planning & Development) to create heat maps that match the client’s criteria. In planning a facility, he advised minimizing office space and maximizing space in clinical areas.

“We’ve learning a lot from the retail industry,” Bryan continued. “Patients are now savvy consumers of healthcare. People don’t want to go to a healthcare campus if a facility in the community is more convenient. Bryan said Downtown LA is wide open, noting that residential is booming, that there's lots of Millennials. But he stressed that providers entering this market, “need to dive in all the way. Sites have to be there 10 years or it doesn’t pencil.”