Why Healthcare Insurers Are Entering the Services Market

Healthcare insurers are entering the healthcare business. Recently, insurers have entered the vertical by offering services directly, and some are even buying lab facilities and moving into dialysis. JLL southwest region market director Peter Belisle explored the trend on a recent podcast with Bryan Lewitt and Chris Isola, healthcare brokerage professionals at the firm.

Belisle asked the duo what is diving the trend on the JLL Way Podcast Series. “They want to capture it so that they can control the costs,” explained Lewitt. “One of the major healthcare providers in Southern California is capturing all different aspects of healthcare so that they can control the costs. They have the three legs of the stool: they have the hospitals, the physician groups and they are an insurance company. They are an $80 billion revenue company and they are non-profit.”

The trend is a move toward even more industry control from insurers. There has also been significant consolidation of insurance company, and California recently saw the effects of consolidation. “Southern California was one of the last markets in the country to consolidate,” says Lewitt. “As of five or six years ago, we had 45 independent hospitals. We are down to 16 now, and the ones that are alone feel very naked and they can’t scale costs. That is going to impact the real estate.”

Insurer moves aren’t the only significant changes happening the healthcare industry. The market is wrought with changes, all of which are driving industry growth. “The biggest change in healthcare has been the consumerization of healthcare. They want to be close to their houses, lower co-pays, free parking,” says Isola. “Their skin is also in the game a little more with the reduction of reimbursements. That has really changed the real estate dynamics.”

Providers are also dominating the real estate around their campus to drive market control. “So much of healthcare has been dependent on reimbursements, and that really drives where the major systems and providers are going to deploy their resources,” says Isola. “One of the things that they have found it that while being off campus can improve the access to care, it is not profitable. So, we have seen a retrenching around the campus. In in-fill markets, like Southern California, finding the space off campus can be a real challenge in any kind of sizable range. Often times, the hospitals control a good chunk of the real estate around their campuses.”