By Ethan Garner, CCIM, senior vice president & regional lead, JLL
As consumers rapidly adapt to technology, the footprint of the standard clinic is likely to adapt with it.
Almost all clinics are requiring online check-in right now, and some are even requiring patients to wait in their cars until they are ready to be seen in an exam room.
The waiting room has suddenly become an unnecessary place to store chairs and magazines. Contactless check-in and check-out procedures will affect the design of the administrative areas. It’s possible these functions could be reduced dramatically in size or removed entirely and outsourced.
Ethan Garner, JLL
We believe we speak for nearly every consumer of healthcare when we say that there is hope on the horizon in terms of not having to fill out 100 forms every time you step foot in an office. Healthcare providers are understandably preoccupied with managing this crisis, fighting rising costs and curbing declining revenues. These trends will all be worth watching as they unfold over the next six to 12 months and as providers look to leverage technology to reverse that trend in a big way.
If providers can increase the profit centers within the clinic — the exam rooms — and reduce the footprint of the costly administrative areas, practices that have been seeing declining revenues due to continuous cuts to reimbursements may see their fortunes change.
Legislation governing reimbursements for virtual visits was relaxed during the early days of the pandemic. This had previously served as a barrier to expansion of online services. There is optimism that this pricing model or a similar one that better compensates providers for virtual care has arrived for the foreseeable future. At the same time, efficiencies born of necessity have accelerated change in the delivery model, potentially for good.
So, what is this “next evolution?” If we take a look around, we may find we’re actually experiencing it even faster than ever before.
Technology, More Efficiencies
Telehealth has undoubtedly been a fantastic short-term success and could prove to be one of the silver linings of this public health crisis. We anticipate continued success in this rapidly evolving healthcare delivery model. Telehealth casts a larger net into the patient population and provides greater access and convenience for patients to be seen. But it definitely has its limitations.
In the telehealth system, only a fraction of the overall care can be provided remotely. In theory, if you have more patients being seen with greater frequency, more problems requiring in-person treatment will be discovered, and demand for outpatient medical space may increase.
The expansion of treatment could be further bolstered by increased healthcare insurance coverage. Insurance coverage for telehealth has increased during the pandemic, and due to the success of its implementation, we expect that coverage to last and extend to additional segments of the population.
Consider also that compared to outpatient settings, it costs three to four times as much to deliver a hospital-grade facility that can offer many of the same procedures. That cost — or conversely the savings — are passed through to the insurer and ultimately the patient. Site-of-care provisions stipulate that if the same treatment can be administered in a lower-cost setting, then a patient should receive the treatment in that setting. This trend will continue as demand for these services increases.
Accessibility, Location
Accessibility and visibility have become very important factors for healthcare providers that are looking to provide care in a targeted marketplace where demand or insufficient supply of specialists exists.
Signage, high-traffic visibility, demographics and other qualitative retail metrics are playing a huge role in the rising importance of these variables. More and more outpatient procedures can be performed in lower-cost ambulatory settings in the communities they serve due to advances in practice methodology and technology and changes in what procedures and in what settings insurers and centers for Medicare & Medicaid Services (CMS) will reimburse. This is occurring so much so that the shift to outpatient almost seems like a cliché in the industry.
Certain specialized uses will always need to be on or close to the campuses they serve. Certain providers — oncologists, for example — have trended heavily away from the on-campus model in favor of more localized care.
Driving 30 minutes, parking on the fifth floor of the parking garage, taking two elevators and navigating the labyrinth of a massive hospital to sit for three hours of chemotherapy that could just as easily be administered at a location five minutes from the patient’s home in a single-story, surface-parked facility has providers expanding in favor of smaller, localized locations that foster convenience.
To be sure, general practitioners are still the primary portal into the system for more advanced care. But providers of specialized care have gotten extremely aggressive with marketing both directly to the consumer and to referral sources, which has played a huge role on the expansion of choices for patients for more advanced electives.
It could be argued that this trend improves outcomes as well, if you consider the amount of stress that it reduces for the patient. At the end of the day, the real estate will continue to evolve around a model that is more consumer-driven and patient-friendly.
Investor Interest To Rise
Historically, steady demand and resiliency have been the forces that have established and maintained medical office product as a strong investment opportunity. The median age of the baby boomer is approximately 65 years old. The greatest consumption of healthcare for any patient occurs post-65 and accelerates after 75. There is a tidal wave of demand — a “silver tsunami” — headed our way.
While it’s true that people are more likely to delay a procedure when the economy sours, healthcare is still something that people cannot go without. For example, June rental collections rates declined by almost 40 percent for shopping centers, but only by 5 percent for medical office buildings.
This doesn’t mean that investing in healthcare assets is risk-free, however. Legislative change, albeit slow, can have a dramatic effect on provider strategy. Unforeseen changes in technology and reimbursements can also have costly effects.
We’ve noticed more providers displaying a shifting preference to owning their own buildings as a means of controlling costs. Investing on a campus where there isn’t a shared philosophy and understanding between landlord and provider can be a perilous proposition.
The bottom line is that just like any other asset class in real estate, understanding local market dynamics, system strategy and provider politics in healthcare are critical to making shrewd investment decisions.