Healthcare Shifts Will Alter Space Use
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SCOTTSDALE—The healthcare industry is changing, and it will have significant impacts on the real estate side of the business. Efficiency, flexibility and costs were the major topics of conversation for the 350-plus healthcare professionals and healthcare real estate experts who gathered at the Four Seasons Resort here today for the fifth annual RealShare Medical Office Buildings conference.
The upswing of on-demand healthcare and urgent care services has only just begun, maintained John Shufeldt. To the audience, he added, “It’s a great time to be sitting in the chairs you’re in now." Shufeldt, CEO of MeMD and a successful medical professional and entrepreneur, sat down for a frank keynote discussion with Real Estate Forum editor-in-chief Sule Aygoren Carranza to open the event.
Now that the election is over with, Shufeldt noted, “the future is now certain: healthcare now needs to be consumer-centric.” He pointed out the major trends driving the industry right now, namely, the increased demand for services coupled with downward pressure on costs. “We’re now bringing care out to the community; you may start to see smaller, less-costly facilities that are more accessible” to the public.
Consequently, Shufeldt anticipates an oncoming decline in the prevalence of on-campus medical office buildings, as well as a contraction in hospital facilities. And with reimbursements being squeezed down, healthcare providers will need more efficient space.
Those sentiments were echoed throughout the day by speakers and attendees alike. Mike Brown, executive director of business development for MD Anderson Cancer Center, said his organization has outgrown the usefulness of MOB space. “We’re coming to a point in our evolution where, as our leases expire over the next four to five years, we’re going to start looking at our real estate usage the way ambulatory care centers do.”
That means the focus has to be on reducing costs for, and increasing access to, healthcare. “It means taking care out of a high-cost environment and bringing it into lower-cost community settings, closer to patients’ homes,” he said.
Banner Health’s system director, Craig Jensen, said the group’s moving away from on-campus hospital settings. In fact, he recalled, “over the past three or four years, I’ve had really nothing to do with on-campus development.”
The mantra Banner Health is using, said Jensen is, “ ‘Think like a retailer,’ though that’s a foreign concept to most healthcare providers.” In other words, “Understand your customer. What services do they want? Where do they want them, and what type of delivery do they want?”
Banner Health—which prefers to own and develop its own facilities to better improve control and standardization—is actually utilizing site selection software used by a lot of retailers, he added.
The goal of most health care providers these days, said Ross Caulum, senior director of corporate real estate for Scripps Health, is trying to figure out a quality continuum of care that’s both convenient and affordable to customers.
Technology is a large part of that, though healthcare has been slow to embrace it. “Today’s technology is like yesterday’s stethoscope: doctors reject it at first,” said Caulum. “But the healthcare business is changing.”
Neil Carolan, a principal with Healthcare Real Estate Planning LLC, stated that technology has changed so much that large freestanding hospitals are no longer necessary. What also isn’t necessary, he added, are medical office buildings. “Six years ago, everyone was building MOBs,” he said. “But there’s no need for them now.”
Yet while there’s a need to replace or modernize MOBs, Carolan asserted, there’s an even greater need for basic ambulatory centers and more sophisticated destination ambulatory centers. He warned, “The whole concept of repurposing is going to be a huge issue for years to come, because there’s going to be an excess of space.”
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