In this series, Healthcare Design asks leading healthcare design professionals, firms, and owners to tell us what’s got their attention and share some ideas on the subject.
Jay Johnson is national director for healthcare at JLL, a real estate services firm (Chicago). Here, he shares his thoughts on anticipated growth in outpatient care and medical office real estate needs and how hospital and health systems can adapt.
1. Healthcare is an undeniable force in the US economy.
Despite economic and political uncertainty in the larger marketplace, healthcare is the dominant player with employment outpacing any other sector—and more growth is on the way, according to JLL’s recent report, “Healthcare Real Estate Outlook: Prognosis for growth.” Healthcare employs more than 13 percent of the workforce and has been responsible for 16.9 percent of all job creation in the last decade. National healthcare spending soared to roughly $3.5 billion in 2017 and is expected to grow to $5.7 trillion by 2026 —reaching a projected 19.7 percent of GDP in 2026.
Such momentum is being driven by population growth as well as a rapidly aging population. By 2060, the U.S. population is expected to swell by another 79 million people, with the amount of people 65 years and up to nearly double and the 85+ segment to nearly triple. This means that, by then, one in four Americans will be over the age of 65, a demographic whose care needs are typically greater than their younger counterparts.
2. More patients mean more treatment space.
Hospital and health systems leaders are actively answering the call to not only treat more patients, but to treat them where they are, too. Over the last few decades, we’ve seen a meaningful shift away from the hospital-centric models of the past to a more diverse network of outpatient medical office buildings (MOB) that make it easier for patients to get the care they need, when they need it. By offering an array of care locations for their patient populations, healthcare organizations can also reserve more expensive treatment environments for patients with acute illnesses or that otherwise require more intensive care.
3. Evolving technology and treatment methods.
Patients tend to appreciate the greater convenience of today’s decentralized, patient-friendly approach to healthcare real estate, while CFOs find value in its lower costs and heightened flexibility, spurring an increase in outpatient visits over the last decade. Advances in healthcare technology and surgical practice are further fueling growth in MOB and other outpatient care facilities. Breakthroughs in procedures like laparoscopy, robotic surgery, and anesthesia are making it simpler for patients to go home sooner than was historically possible. Now, for example, one might undergo laser spine surgery, certain cardiology interventions, or bariatric surgeries as an outpatient.
4. Construction lags demand for MOBs.
Health systems are clamoring for quality MOB space, with occupancy rates hovering around 92 percent for the last few years—compared with just 61 percent in hospitals. New construction for these smaller facilities, which average 40,000 square feet, is in the works across the country, with most of the action in medical hubs like New York, San Francisco, Chicago, Denver, and Phoenix. But overall, construction rates are lagging overall industry growth, putting more pressure on existing quality MOBs. As a result of both rising demand and limited availability, rents reached a new high of $22.89 per square foot in the first quarter of 2019, representing a 1.5 percent year-over-year increase.
5. Adaptability is key.
The future of healthcare policy is uncertain and today’s prize locations may not serve communities as well as, say, 15 years from now. What we do know, however, is that many more patients will make their way through medical office doors in the future. Effective real estate strategy, buoyed by advances in outpatient care strategies, can help health systems adapt to changing patient needs now and into the future.
Interested in sharing your top five? Contact Executive Editor Anne DiNardo at anne.dinardo@emeraldexpo.com for submission guidelines.
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