3 trends disrupting healthcare facilities and real estate
In my last blog post, I elaborated on how a partnership between clinical and facilities staff can help hospitals and health systems to survive and thrive in a challenging industry environment. While the industry continues to grapple with regulatory uncertainty and increasing costs per patient, it has become clear that value-based population health is the future of the industry.
Through this industry shift, mergers and acquisitions (M&A) continue to accelerate, creating mega-sized, nontraditional health systems. On the cusp of yet another major transformation, our industry requires innovative approaches to real estate and facilities. Whether healthcare systems' real estate portfolios and facilities are well-positioned for this change remains a big question mark.
On the cusp of yet another major transformation, our industry requires innovative approaches to real estate and facilities.
Hospitals are sitting on an enormous amount of underutilized real estate following the intense M&A activity over the past several years, but most organizations still haven’t prioritized strategic real estate portfolio planning. In an environment of continued transformation and uncertainty, healthcare organizations are leaving money on the table by not optimizing their facilities management and real estate portfolios. I’m expecting more healthcare organizations to tap experienced corporate real estate (CRE) facilities and consultancy partners to fill this strategic gap.
Three healthcare trends to watch
Major trends are transforming how healthcare organizations deliver—and are reimbursed for—patient care, driving new approaches to real estate and facilities. We all would be wise to stay ahead of these three disruptors shaping the healthcare industry:
Cost-per-patient continues to increase, and operating margins tighten.
While the future of the Affordable Care Act (ACA) is predictably unpredictable, the transition to value-based care will continue as health systems face pressure to reduce costs and improve outcomes. Don't expect this pressure to let up any time soon. Healthcare leaders are accelerating cost reduction as costs rise, margins fall, and uninsured populations increase following the repeal of the individual mandate. That means it's time to consider every opportunity to reduce fixed and operating costs in your real estate portfolio.
Predictable uncertainty surrounds the reimbursement model.
Hospitals traded lower reimbursements for more stability and consistency made possible by insuring a larger portion of the population through the ACA. Now that the individual mandate has been repealed as a part of the Tax Cuts and Jobs Act, we expect care providers will reabsorb financial risk, leaving considerable uncertainty.
Concurrently, while providing a high-quality patient care experience has always been a top ethical priority, it will now be a financial priority, too. That's because the Centers for Medicare and Medicaid Services is connecting a larger portion of reimbursements to Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) scores.
As our nation's population ages, Medicare spending is projected to outpace GDP despite lower growth in Medicare Spending Per Beneficiary. By 2030, 81 million beneficiaries will be in the Medicare program and overall Medicare spending will increase 6 to 7 percent each year—significantly higher than the 4 percent annual increase projected for the GDP.
Hospital-acquired infections remain a persistent problem.
Although our industry is making progress in our fight against healthcare-associated infections (HAI), the Center for Disease Control (CDC) estimates one in 25 hospital patients acquires at least one HAI. The CDC cites the physical environment as fourth on their list of HAI causes. While HAIs from treatment-related causes are actually decreasing, infections resulting from the environment of care may not be. We must consider how we can improve the design, maintenance and management of facilities—from ventilation systems to room décor—to reduce infection risks.
As health systems continue to grapple with these three megatrends, facility management (FM) teams face additional challenges that affect the whole environment of care. Aging infrastructure and the buildings themselves are beginning to fail patients and cause compliance problems, since the “it breaks, we fix it” mentality of some providers has only resulted in stopgap solutions. At the same time, the aging workforce is leading to a shortage of healthcare FM staff. FM partners and young, tech-savvy talent have an opportunity to bring new skillsets and fresh thinking into the industry during its journey to population health through improved healthcare environments.
When we proactively pursue solutions for optimizing underutilized real estate and underperforming facilities management teams, we position the entire healthcare organization to better manage regulatory uncertainty, increasing costs per patient and shifting reimbursement models.