Healthcare Reform to Expand Medical Office Sector

CHICAGO-Demand from newly insured Americans seeking primary care presents an opportunity for medical office developers, according to experts who spoke at the 2010 Medical Office Buildings & Healthcare Facilities Conference.

Nearly 600 healthcare real estate executives attended the conference, which was sponsored by the Building Owners & Managers Association. “As a nation, we have a shortage of primary care providers, and satisfying patient demand that is expected to come is the opportunity for medical office developers and owners,” says Chick Boyle, controller of Universal Health and CFO of Universal Health Realty Income Trust. “The challenge for us will be trying to figure out where and how best to do that.”

Boyle participated in the introductory session, titled “Stress Test: A CFO Roundtable”, along with Jim Doyle, senior vice president and CFO of Elmhurst Memorial Healthcare in Elmhurst, Ill. The panel was moderated by Gordon Soderland, senior vice president of strategic relationships for The DASCO Companies LLC.

Boyle contends that healthcare reform, which will offer healthcare coverage to roughly 30 million Americans, will have a significant impact on medical office buildings. “Now there will be 30 million people who will be going to doctors and medical office buildings who didn’t go there before,” he notes. “Previously, they waited until they had a problem and then they went to the ER. Let’s say that 10 percent of those people will not go to medical office buildings, so we’ll need more capacity.”

Elmhurst Memorial Healthcare, for example, is working with developers to add two 80,000-square-foot medical office buildings to its new campus, according to Doyle. The new campus, along with the new medical office buildings, will be finished in 2011.

It’s unclear at this point where new medical office building inventory needs to be added. “That will be an interesting thing to watch,” Boyle says. “The places were capacity needs to be added are probably not where it has been previously.” Indeed, much of the recent medical office development has occurred in the suburbs; future development for newly insured Americans may need to occur in urban or low-income areas.