2022 Healthcare and Medical Office Perspective
Key themes impacting healthcare systems and medical office owners and operators
- Amber Schiada
The pandemic, its aftermath and current macroeconomic conditions have created a perfect storm of challenges for the healthcare industry. Costs are increasing, reimbursements are decreasing and the labor shortage is worsening. These challenges, compounded by disruption in the industry, further compress razor-thin hospital margins, leaving healthcare systems under increasing pressure to cut costs.
Despite these pressures, healthcare is a vital industry that continues to expand, as does its leased square footage. Medical office buildings have seen relentless demand and remain one of the most resilient commercial real estate property types. Investors have come to view the sector as a critical alternative asset class. This year’s healthcare real estate perspective looks at several key themes impacting healthcare systems and medical office owners and operators:
1. Margin pressures are driving health systems to cut costs through creative real estate strategies
Health system margins face higher cost pressures and CFOs cite labor challenges, supply chain issues, inflation, capital costs and ongoing shifts in the payor mix among their headaches. Since real estate accounts for more than 40% of a health system’s balance sheet, strategic decisions and innovative technology can help the bottom line.
2. Disruption is mounting and creating more choices for patients and competition for traditional health systems
Healthcare providers are increasingly competing in an industry disrupted by technology, outside investors, and changing consumer behavior. Patients have more choices and access to care than ever before.
3. Systemness is an increasingly favored strategy to consolidate and manage costs while expanding patient access, particularly in new markets
If achieved, systemness makes the interconnected parts of an organization operate as a whole, increasing patient access by providing the best care at the lowest cost to the most patients possible.
4. Medical office building demand remains high, providing investors with stability amid volatility in traditional commercial real estate classes
In 2021 and 2022, absorption outpaced new deliveries driving occupancy above 90%. Medical office real estate remains in high demand by investors due to tenants’ creditworthiness and fundamentals that were less disrupted by the pandemic than the commercial sector.
To learn more about how real estate can be a lever to increase patient access (and market share), reduce costs, increase patient satisfaction, and build a stronger culture that permeates through an entire integrated healthcare delivery system, download the full report.