By: Robert Smith,CCIM, SIOR,
President Lockard Companies
Five Star ER Round Rock, TX
For the all the controversy surrounding the Affordable Care Act (ACA) — aka Obamacare — one thing is certain: the law will have the greatest impact on health care since the creation of Medicare. And, like the ACA or not, it could spur a massive building boom in health care real estate.
The medical industry is reviewing its current facilities to determine how to address the changes in care that the ACA will bring. Health Facilities Management magazine’s 2014 Hospital Construction Survey showed 51 percent of respondents were considering changes to their existing facilities or campus design in response to the ACA.
Among the types of facilities being considered for future development according to the survey, the most cited were emergency departments, medical office buildings, outpatient facilities in neighborhood settings and primary care clinics in neighborhoods.
So why will the ACA have such an impact? In a nutshell, the law will change the way physicians practice medicine. Medical care will have to emphasize value over volume to comply with the law. They will have to do this despite 1). a secondary emphasis of the law on lowering costs; and 2). a much higher volume of patients. Thus, the facilities they use will have to change as well.
With more people having health insurance coverage, more facilities are needed. The law added 16.4 million people to the ranks of the insured, as of March 2015, and that number is expected to double and perhaps triple in the next several years.
The industry is already witnessing this evolution. Hospital systems are purchasing physician practices and strategically locating them around the community where demand is greatest. Others are building more outpatient clinics to reduce emergency care wait times, or modifying their emergency departments to deal with patient flow and volume.
One of the biggest impacts caused by the ACA is the focus on cutting costs. To meet this requirement, health care systems are looking to move care away from expensive hospital settings and more to satellite offices. The trend of moving care away from inpatient to outpatient will continue as a result. This will require the building of ambulatory facilities and medical office buildings designed to deliver cost-effective care. Organizations will be building new offices, occupying existing space — especially vacant retail buildings — and modifying clinics to provide expanded service such as lab work, imaging and outpatient surgery.
Health care systems are discovering that neighborhood medical office buildings that bridge the gap between standard clinic care and acute care offered by hospitals cost less to build, operating and maintain than hospitals and inpatient facilities. Part of the ACA is the directive to replace paper medical records with electronic information. Information technology is becoming so predominant in health care that many existing facilities are becoming obsolete. New health care real estate, on the other hand, will need to be sufficiently wired for advanced network access.
Another likely change being predicted is physicians giving up their private practices and merging with other doctors or hospital groups to create economies of scale. This could create a need for medical centers that can house these combined practices. These economies of scale, larger facilities, combined care access, and various specialists located in one facility may also help with patient satisfaction rates which is partially used as a guide to reimbursement ratios for Medicare payments.
Combined with the aging demographics of the country, the medical profession, because of the ACA will undergo a massive change in where and how it delivers treatment. As such, the need for new and modified real estate will be in demand for the foreseeable future.