Daniel E. Straus Discusses Trends Affecting Healthcare Real Estate

Posted on: March 5, 2018

The healthcare industry is ever-changing. As patients’ needs evolve and lawmakers pass new legislation each year, the medical industry is continuously affected by outside factors. Businesses, such as CareOne, are dedicated to providing medical care and other health-related services need to be able to adapt to the changing conditions to ensure the success and survival of their respective companies or organizations. Before businesses can adapt, healthcare providers must stay up to date on current trends. Below Daniel E. Straus, founder of CareOne, sheds light on five trends currently affecting healthcare real estate:

Architecture plans and sketch of house project

1. The Growing Popularity of Convenient Micro-Hospitals

In a white paper recently published this year, executives Keith Konkoli and Jared Stark of Duke Realty, a leader in the commercial real estate market, revealed that there was a notable growth in the development of micro-hospitals in the healthcare real estate industry in 2016. They believe that this trend will continue in the coming years.

As the name suggests, micro-hospitals are much smaller than typical hospitals. They are much easier to navigate and maintain because of their size. However, despite the limited space, micro-hospitals are capable of providing the same type of healthcare services that larger hospitals and medical facilities offer. Micro-hospitals also provide patients with convenience and accessibility since they are usually located in neighborhood settings and smaller communities—right in the places where people live and work.

For those who are considering developing micro-hospitals, Konkoli and Stark suggest using the services of third-party firms or in-house staff. According to them, enlisting the assistance of experts can help in understanding the key differences and similarities between micro and traditional hospitals, and more importantly, learning how to overcome the potential challenges of creating an alternative hospital model.

2. The Development of Rehab Hospitals

With the Patient Protection and Affordable Care Act (PPACA), hospitals can be penalized for above-average rates of readmission for various “preventable” conditions covered by Medicare. Patients who receive post-acute or home care are less likely to return and be readmitted to acute care hospitals. Because of this, there are a growing number of hospitals that are planning to offer or currently offer extensive and high-quality post-acute rehab services to avoid penalties.

For hospitals and healthcare providers who are planning to develop rehab hospitals, Konkoli and Stark recommend finding an experienced business partner who has a background in operating rehab hospitals. Partnering with these individuals will enable hospitals to ensure post-discharge patient care quality, speed to market, cost efficiency, and name recognition or branding.

3. Facility Expansions

According to Konkoli and Stark, healthcare business professionals would prefer to expand existing facilities rather than building new hospitals from scratch. Although many consider constructing new hospitals or building new replacement facilities as the best way to ensure the fulfillment of long-term goals, several industry think tanks believe that developing expansions is a much better alternative.

Expanding an existing facility is usually less expensive than building a new hospital. Additionally, the process of developing and expanding the current building allows hospital systems to provide their patients with new services much more quickly than if a new building was constructed. Expansions are also more practical because they allow hospitals and healthcare providers to stay in a location where there’s already an established demand for both old and new healthcare services.

4. Changing views on site selection and challenges with “site neutrality.”

Today’s hospitals and healthcare facilities are mostly geared towards providing patients with a broader range of services by using less expensive, higher quality, and more efficient methods. Today, off-campus, multispecialty outpatient facilities located near residential and commercial areas are growing in popularity. More and more healthcare providers are therefore focusing on retail and commercial real estate. They are developing a better understanding of how successful retail establishments work to identify the best location for their medical facilities.

One of the most important issues affecting the process of choosing healthcare real estate is “site neutrality,” as stated by Konkoli and Stark. According to them, site neutrality affects the reimbursement rates of hospital-affiliated, off-campus facilities. Neutrality can have a significant effect on these facilities because it can significantly reduce Medicare reimbursements for health systems and hospitals that have plans to either acquire physician practices or build new off-campus hospital outpatient departments (HOPD) that are more than 250 yards from their main hospital campus.

5. Application of Best Practices from other Industries

In recent years, hospitals and healthcare providers have begun to adopt and utilize the best practices used by other industries to reduce failure and error rates. Today, an increasing number of healthcare providers are looking for “high-reliability organizations” (HROs) with systems and processes that can be used in a hospital setting.

HROs are institutions that have a track record of making fewer mistakes amid stressful, fast-paced, or risky work environments when compared to other businesses working in the same field or industry. Many hospitals and healthcare institutions are working to transform themselves into HRO’s. For instance, there are some hospitals that have seen significant improvements in their daily operations and have experienced reduced failure rates after adopting comprehensive checklists used by airline companies.

Adaptability is one of the hallmarks of a successful business, regardless of the industry. By developing a keen understanding of the trends affecting healthcare real estate and then acting accordingly, hospitals and healthcare providers can ensure the success of their business and more importantly, better fulfill the needs of their patients.

Stay tuned for more insider tips from Daniel E. Straus, founder of CareOne, on trends in healthcare real estate!