Todd Lillibridge, chairman and CEO of Lillibridge Healthcare Services, was the keynote speaker at the InterFace Medical Office, held yesterday in Atlanta. Lillibridge spoke about the effect of healthcare reform on medical facilities, and the overall recovery of the office market post-recession.

“All hospitals and healthcare systems are preparing [for the effects of reform], but they don’t know what they are preparing for,” said Lillibridge. “They must take out the enormous cost structures that they have.”

To do that, Lillibridge said, they need to redistribute their facilities and medical office space. New hospital construction with 200 to 400 beds will be a thing of the past, giving way to smaller hospitals with 60 to 80 beds that are surrounded by outpatient and acute care facilities.

Occupancy in the medical office sector is facing short-term challenges from the consolidation among hospital systems. Physicians, also pressured with lowering costs, are looking for lower rents. With technology improving, some older medical office buildings are also becoming physically obsolete. Long term, there is huge growth ahead for the medical office sector, said Lillibridge. Cancer centers and cardiac centers are among the fastest growing areas of healthcare, and most are located in facilities adjacent to or near major hospitals rather than in them.

Outpatient centers, on the whole, are predicted to grow by 30 percent over the next 10 years. Healthcare reform will also bring an expected 30 million new people into hospital systems. As such, there will be a new level of caregivers, such as physician’s assistants, who will need medical office space.

As such, Lillibridge forecasted new supply of medical office buildings will increase by 10 to 15 percent over the next 10 years. The need for an additional 116,000 physicians in the United States will compound that, creating the demand for 100 million square feet of medical office space.

— Randall Shearin

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