Healthcare Focus: Seniors, Decentralization

SAN DIEGO-The major trends in healthcare that will impact healthcare real estate are the aging population and decentralization of healthcare away from hospitals and out into the community, say speakers at last week's panel “Health Care Consolidation and Decentralization: Land Use Perspectives on the Development of Wellness Facilities” during the ULI Spring Meeting here. These two macro trends will have a bearing on the types of healthcare facilities that will be built and where they will exist.

Moderator David Waite, a partner with Cox Castle & Nicholson LLP, said that the fact that the 65-plus generation will expand by 35% in the next 10 years means healthcare for seniors will account for a significant portion of the care being given, especially since half of healthcare expenditures in the average person's lifetime occur after age 65. In addition, the Affordable Care Act is making health insurance available to an additional 30 million people who were previously uninsured, necessitating an additional 91,500 physicians by the year 2020. This will mean more healthcare space to house them.

Jonathan Winer, senior managing director and chief investment officer for Seavest Healthcare Properties, cited a study by Gary Shilling called “The Outlook for Healthcare,” which points out that in an effort to control costs and keep patients out of expensive hospitals as much as possible, the healthcare industry is moving toward more preventative procedures and wellness care. Also, more physicians will be employed by hospitals and there will be fewer independent practices.

When Waite asked, “Where will physicians work and how?” Eric Fischer, managing director for Trammell Crow Co., said that most “triage” work will be done at medical office buildings and retail-based clinics such as those set up in WalMart and CVS. Specialists will be housed in outpatient pavilions where they have access to technology, shared ideas and resources. Smaller, satellite facilities will be set up closer to patients. “The decentralized model is bringing providers closer to patients, and then centralizing specialized care will take place in hospitals,” Fischer explained.

Michael Piette, president of KIRCO Health Partners, added that “hospitals want developers to share in the risk of real estate” in order to help control costs and provide exactly what the industry needs. Vincent Cozzi, chief investment officer with Ventas and Lillibridge Healthcare Services Inc., called the trend “investing with hospitals rather than investing in real estate.”

Fischer also said that developers and healthcare real estate operators will be more vested in the design and look of their facilities because patients will be surveyed for feedback on these issues. “The impressions that patients have about their facilities does matter. They want to feel like 'I've made the right choice' in my healthcare provider.' ”