HOUSTON—A continuation of the trends that shaped last year, such as more development of outpatient facilities and little change in cap rates or pricing for medical office buildings, should carry over to 2018. Furthermore, there will be strong demand from investors for healthcare properties, particularly now that institutional and foreign investors have set their sights on the healthcare property sector.

These are some of the healthcare market tendencies that Beth Young, Colliers International senior vice president specializing in medical and investment properties, recently discussed in part one of a two-part exclusive. She also shared insight into expansions/contractions and hospital designs.

GlobeSt.com: What are some of the expansions and contractions that are evident throughout the metro?

Young: Demonstrating the importance of providing healthcare in locations close to the consumer, numerous Houston-area hospitals expanded to the outer submarkets including The Woodlands, Katy, Pearland and Cypress. Although Houston health systems are increasing the size of footprints on the Houston landscape with new hospitals in major markets, hospitals are reducing the number of beds while expanding other departments. For example, in 2007, Memorial Hermann (Houston's largest health system during the past 10 years) had 10 acute care hospitals and more than 3,000 licensed beds. At the end of 2017, the system had approximately 50% more hospitals and one-third the number of beds it had 10 years ago. Meanwhile, the population data shows the greater Houston area has increased 20% during that time.

Driven by higher deductibles, better technology and drugs, shrinking reimbursement and patient demand for convenience and lower costs, health systems are incentivized to promote prevention and keep patients with chronic diseases out of the hospital, while providing care throughout Houston's major markets. Expect to see fewer overnight beds and growth in cardiac surgery, operating rooms, ICU beds and health system-sponsored clinics in locations citywide. Some hospitals are using available floors for hospice or rehab space, while others are doing a straight real estate deal, offering the floors for lease. The shift to outpatient care is well underway and accelerating.

GlobeSt.com: What are some of the features of the modern medical center?

Young: Patients throughout Houston will choose where they go for care based on the customer experience. Retail settings near residential communities may include urgent care, freestanding emergency centers, MOBs, imaging centers, ambulatory surgery centers, oncology care, post-acute care facilities and perhaps senior-care properties. Some larger healthcare systems will provide multiple services in one location near homes, ranging from primary care visits, imaging, cardiology, gastroenterology and orthopedics to entertainment and exercise (to keep patients busy while waiting to see doctors) and casual dining options in one building.

Not only do successful hospitals and health systems increase locations, but successful physician groups and specialty services are also following the trend, opening locations in major submarkets around the city. Often, physicians share clinic space with compatible specialists in multiple locations so they can refer business to each other.

GlobeSt.com: How have hospital designs evolved in recent years?

Young: A growing recognition of the need to treat behavioral and mental health (including addiction management) is resulting in a demand to accommodate cognitively impaired patients more effectively and sensitively. In larger hospitals, emergency departments are being reconfigured to reduce risk while ensuring compassion and dignity for these patients. Because they often require longer stays in the emergency department, an emerging design practice is adding features like bathroom showers, storage areas for belongings and decompression space. Occasionally, smaller vacated hospitals are converted into behavioral and mental health treatment facilities and some of these buildings are used for substance abuse clinics for children, teens and adults.

Patients in smaller towns in 19 states are benefiting from micro-hospitals, providing services similar to larger hospitals, but on a smaller footprint, often 15,000 to 50,000 square feet with between five and 15 inpatient beds.

Another hospital trend is learned from the hospitality industry, says Noe Ramirez, a healthcare architect with RS&H Architects. Besides design changes that include a trend toward soothing interiors, immune-compromised patients, like those needing bone-marrow transplants, need a different type of hospital setting for extended care. After the surgery and post-op, these patients are vulnerable to infection and require monitoring for complications, but they don't need full hospital services. So the new design for this time in a patient's stay will feel more like a hotel than a hospital, with a more comfortable interior design including some suite-style rooms and possibly a skilled concierge rather than a nurse.

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Institutional and Foreign Investors Enter Health Arena

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