The Shift to Outpatient Care by Healthcare Providers and Cost Constraints Increases Emphasis on Real Estate
Healthcare providers are dealing with a myriad of challenges in the face of softening admissions, changing consumer expectations about healthcare, tight operating margins, shrinking budgets and shifting policies. While facing these challenges many health systems are looking to expand their access points to capture more patients and drive referrals. This translates into a more distributed real estate footprint with a goal to bring convenient access closer to patients driven by advancements in technology, cost and consumer-driven care.
According to their 2017 State of Cost Transformation in U.S. Hospitals from Kaufman Hall: 96 percent of hospital executives surveyed agreed transforming costs was a “significant” to “very significant” need. However, more than half of organizations haven’t implemented adequate cost reduction goals. Part of the solution is ensuring that patient care is delivered in the most appropriate setting by providing routine care and simple procedures in lower cost ambulatory facilities rather than directing large volumes of outpatient services through high-cost medical centers. Reconfiguring portfolios and service lines will generate an increased amount of real estate activity for healthcare providers.
Care Shifts Away from the Hospital Setting
Outpatient clinics are more important than ever before as they become the primary delivery vehicle for care. The traditional hub and spoke model in healthcare, which puts hospitals at the center of care delivery, is changing to focus more on ambulatory care.
- The total number of outpatient visits has grown by 1.9 percent per year from 1994 to 2014. Over the same time period inpatient admissions declined at an annual rate of 0.64 percent.
- As healthcare delivery continues to shift to an outpatient setting, the volume of new medical office development continues to expand. A total of 35.7 million square feet of medical office buildings (MOBs) and other outpatient projects were started or completed last year, according to a recent survey from Revista.
- According to data from the Advisory Board, 92% of hospital systems are planning new construction or a renovation project for a Ambulatory Surgery Center (ASC), MOB or Urgent Care clinic and 37.8% of hospital systems are planning a new Micro-Hospital or Free Standing Emergency Department.
Care delivery and reimbursement are shifting to a more integrated, streamlined and cost-effective approach and rather than just prioritizing large costly hospital facilities, healthcare systems will allocate more capital to multiple, smaller, lower cost outpatient facilities.
Strategic Goals of Ambulatory Site Expansion
- Patient Access
- New Market Entry
- Market Share Protection
- Care Coordination
- Proper Utilization
Real Estate and the Ambulatory Care Network
The ambulatory network of the future is the hub of a care delivery system and the healthcare system’s real estate footprint of of the future will include regional acute care hospitals paired with a constellation of ambulatory facilities and medical office buildings to include a mix of community-based comprehensive care centers with a mixture of services, micro-hospitals, ambulatory surgery centers, free-standing emergency departments, imaging centers, primary care clinics and urgent care clinics.
Where Should You Expand Your Footprint?
Much has been written about the “retailization” of healthcare, which is driven by a shift in consumer demand among patients. Outpatient migration will continue, as outpatient settings are generally lower in cost and preferred by consumers and as health systems continue developing their outpatient and ambulatory network adding more facilities, their will be an increasing emphasis on making effective real estate decisions, selecting right service line for a particular location or determining the next under served neighborhood to enter. The process of site selection for hospital systems and healthcare providers requires some of the disciplines of retail real estate in the consumer oriented patient era, but also demands a more customized analysis of potential locations to insure the best locations are selected. More locations equates to more risk and selecting a real estate firm or professional experienced in healthcare real estate with latest technology tools will be critical.
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