The mounting pressures on hospitals and corresponding real estate solutions were addressed at the Massachusetts Hospital Association’s annual Healthcare Construction Conference last Friday. I served as moderator for a panel of my Jones Lang LaSalle colleagues, and clients titled Unlocking the Strategic Potential of Hospital Real Estate.
Industry expert Managing Director Richard Taylor kicked things off in the MHA’s new Conference Center with an outlook for hospitals 2012 and beyond. With margins between 0-2%, reimbursement (payments) sinking lower, and the uncertain future of the Patient Protection and Affordable Care Act overlaying all of this, the pressures on hospital administrators are palpable. Real estate significantly impacts a hospital’s balance sheet, and will play an important “non-clinical” role in higher efficiencies going forward.
Richard reviewed a six-step strategy for cost optimization beginning with a through audit of a hospital’s entire real estate portfolio. In a recent third party study that we commissioned through the Bloom Group, it was found that only 18% of hospital assets across the country are strategically managed. This, although strategically managed real estate has a four times greater likelihood to result in improved performance and higher margins.
Panelist and Capital Markets specialist Mindy Berman pointed out that demand for outpatient facilities is increasing, and that the financial market for this investment class is skyrocketing. By the year 2020, she expects it will represent 30% of the market. The key factor sustaining this and medical office growth is the need for institutions to add convenient, local and inexpensive locations to deliver higher percentages of appropriate care away from the major medical centers.