Has Outpatient Healthcare Delivery Changed Healthcare Real Estate Strategies?

Last Updated on February 9, 2023 by Morgan Beard

Healthcare has long been a dynamic industry, and new treatments and technologies emerge on the scene with such frequency that it’s hard to keep up. Now, healthcare systems face yet another incredibly pivotal transition, this one accelerated by the COVID-19 pandemic: the unavoidable evolution of healthcare real estate.

Healthcare spaces have to meet new facets of the patient journey. As populations and behaviors shift, these systems will need to reach patients through new and different methods. During the pandemic, for example, telehealth technology went from a “nice-to-have” feature to a necessity used to increase medical access, efficiency, and engagement.

In order for healthcare organizations to remain nimble and meet the ever-changing demands of patients, healthcare real estate will need to keep up with the technological advancements of the present — and also anticipate what’s to come. Widespread digital transformation is upon us, and the healthcare vertical must be ready to support such a change in outpatient care.

The Changing Face of Outpatient Healthcare Delivery

For years, medical professionals worked to provide sufficient care for patients outside of the office. Telehealth technology has changed all of that and has become their first line of defense, ushering in the age of virtual healthcare delivery. Social distancing and logistical requirements resulted in a spike of telehealth appointments of about 32% of office or outpatient visits in April 2020. This has evened out to now encompass about 13% to 17% of appointments conducted via telehealth across specialties.

Telemedicine provides greater flexibility and convenience for patients and medical professionals alike. It also opens up additional revenue streams for healthcare providers, as they can see more patients without having to invest heavily in new equipment or infrastructure. With the increased adoption of telehealth solutions, a massive shift is clearly taking place in healthcare delivery.

However, telehealth technology isn’t the only advancement changing the face of outpatient care. Other trends are impacting both healthcare and real estate associated with care delivery, including:

Neighborhood outpatient services: Throughout the U.S., outpatient services are steadily growing. According to a study by Deloitte, the aggregate share of outpatient services in total hospital revenue has grown from 28% in 1994 to nearly half (47%) in 2016. The trend will continue to grow as more and more people realize how convenient it can be to get quality care right down the street — rather than driving to a large hospital campus. One report anticipates that the outpatient market will scale at a compound annual growth rate of 8% from 2021 to 2023, eventually reaching a total of $5,401.9 billion.

Mobile health clinic pop-ups: Mobile healthcare service pop-ups can now be found across many urban areas in the country. Part of this is naturally due to the pandemic, as some healthcare organizations offer free COVID-19 testing and vaccinations to anyone in the vicinity. But these mobile health clinics also remove certain barriers to healthcare access, providing services such as blood pressure checks, flu shots, mental health appointments, general checkups, and so on to underserved populations. These off-campus healthcare real estate solutions enable people in at-risk communities to seek the care they need. Chances are good that this value-based transition will likely be here to stay, as mobile vans, pop-up stations, and drive-thrus can improve the success and efficacy of the healthcare industry.

Tech-driven transformation of healthcare real estate: From the introduction of telemedicine to virtual reality, there are many new avenues for doctors and patients looking to better communicate about health and well-being. Healthcare real estate is no different. With the rise of digital health, many healthcare organizations are investing in new technologies that leverage the power and reach of data analytics to not only make healthcare more accessible, but to also arrive at strategic healthcare real estate investments. In-patient care isn’t going anywhere. The same can be said for emergency and interventional services. Healthcare organizations must use every technological means available to ensure the value of real estate assets performs as needed to help the bottom line.

In the coming months and years, other trends will inevitably crop up, and it’s important for healthcare organizations to prepare — especially when it comes to real estate. Settling into a space that might no longer be able to accommodate the needs of patients and medical professionals in the future can spell disaster operationally and financially. Cooler heads will always prevail.

The Changing Need for Real Estate in the Healthcare Vertical

As technology continues to change outpatient healthcare delivery, healthcare organizations must pay greater attention to their real estate holdings. Otherwise, they could end up squandering opportunities — either that, or lose out to others in the real estate market.

An independent advisor might be key to making healthcare real estate decisions in the future. For one, real estate advisors are experts in the field, with experience developing real estate portfolio strategies based on the structure and size of an operation as well as the desired outcomes of an organization. They can also establish an objective framework for identifying and evaluating opportunities. No longer are leaders left relying on gut feelings. Instead, they can be more strategic with their financial resource allocation. What’s needed operationally? Are the financial channels there to justify such a purchase, sale, or commercial real estate agreement? More importantly, does the real estate portfolio align with the organization’s operational and financial goals?

Although healthcare real estate has grown to more than $1.2 trillion in value, real estate can still be a risky proposition for healthcare organizations. Clinics, hospitals, and other healthcare facilities are no longer working in the traditional healthcare delivery model. They must now rethink their footprint to accommodate the increased demand for outpatient care services — and provide these services safely, efficiently, and with all the conveniences people have come to expect from any other business.

They must also rethink their footprints in light of telehealth technology. A growing number of providers will continue to offer virtual care, and it will likely be of benefit to do the same. Such a move can free up clinic and hospital space and keep a facility competitive in today’s marketplace. The same would be true for outpatient care facilities, which grew in popularity during the pandemic. These healthcare real estate investments provide greater flexibility, as modular spaces can be used for a variety of purposes and specialties. They’re also much more convenient for people not living near large healthcare campuses.

How to Optimize Healthcare Real Estate Strategies

As telehealth technology continues to change healthcare delivery, leaders will need to leverage data analytics tools that provide greater insights into their real estate portfolios. It will also be essential to keep an eye on commercial real estate trends that might influence property decisions going forward. Otherwise, healthcare organizations could fail to identify the risks and potential opportunities that might impact the future of commercial real estate investments.

Real estate optimization might just be the solution; just make sure that any assets align with the organization’s operational, financial, and strategic goals. With that in mind, the following are often the best tactics to ensure greater optimization of healthcare real estate:

1. Consider terminating costly leases.

Both telehealth and mobile health clinics are quickly becoming the norm. As a result, any number of properties in a real estate portfolio might be underutilized, lacking traffic, or even vacant. Review current properties and commercial real estate lease agreements, and consider terminating or divesting the most costly and underperforming of spaces. This decision not only helps reduce unnecessary costs associated with the property, its maintenance, and staffing, but it can also provide the capital liquidity necessary to invest in additional telehealth technology. Besides, mergers and acquisitions within the healthcare industry have increased exponentially over the past decade or so, leaving many organizations with unwanted or wasted commercial real estate office spaces. Now is the time to increase the consolidation efforts of healthcare real estate assets to ensure optimal use of all facilities.

2. Reduce administrative office space.

Gone are the days of large healthcare parks with hospitals, temporary care facilities, emergency centers, and administrative buildings — due in no small part to the expenses required. Administrative buildings in particular come with a large budgetary burden for healthcare organizations. Fortunately, changing workplace trends have made hybrid work models a viable option for many nonclinical workers, allowing facilities to further reduce their real estate costs and provide extra capital to improve telehealth technology solutions. Explore work-from-home options and shared workspaces for employees in finance, legal, marketing, and other back-office departments.

3. Test the satellite model.

With neighborhood outpatient services and mobile health clinics growing in popularity, healthcare organizations are presented with an opportunity: move away from large campuses into smaller satellite locations. These separate facilities can improve healthcare access to different areas in a city or region. They also better accommodate changing trends in workplace flexibility, allowing employees to work at locations closer to their homes. Obviously, assess the neighborhoods a healthcare system serves to determine the best locations for satellite facilities. Oftentimes, locations near major work, residential, or leisure centers are the ideal choices.

4. Integrate telehealth technology solutions with real estate strategies.

Again, COVID-19 has definitely accelerated the use of telehealth technology, and virtual healthcare delivery will likely continue to replace many in-person visits for lower-acuity services. Any upcoming healthcare real estate decisions must account for this by ensuring a space allows doctors to easily connect with patients via telehealth devices and remote monitoring systems to deliver unparalleled experiences.

But the digital transformation is just getting started for the healthcare vertical, and incorporating such technologies into facilities isn’t the only pandemic-related impact on real estate strategies. Adaptation will also be key. Structural and spatial changes will be necessary to allow for social distancing, cleaning, and other safety procedures. After all, high-acuity services will still require in-person care. The same can be said for general accessibility to healthcare for more vulnerable populations.

5. Ensure flexibility for future healthcare delivery.

Healthcare delivery is always changing, making it more important than ever to consider the flexibility and adaptability of sites when arriving at both healthcare and real estate decisions. For one, are there ways to streamline the design and operations of a facility should a practice shift from in-patient to more ambulatory and virtual services? Will the location of the site fill potential market gaps if virtual care continues to grow? Healthcare facilities will want to strike the right balance between in-person and virtual healthcare delivery options. They’ll also want to form strategic provider partnerships to enable this flexibility and adaptability of their services and locations.

Healthcare and real estate are far from strange bedfellows. Healthcare organizations must offer the right services at the right locations to maintain their profitability over the long term. Anyone in the healthcare industry focused on the bottom line should take a long, hard look at their current healthcare real estate portfolio, weigh the value of each property, and determine whether it serves the operational, financial, and healthcare delivery goals of the organization. Finally, they must make a decision on what stays and what goes.

Anticipating the Future of Commercial Real Estate

Healthcare real estate decisions are often just as critical as healthcare delivery to the success of a medical organization. Location alone can grow market share by increasing a facility’s patient base through greater visibility and access to care. It can also ensure scalability should the need arise to expand care services. Technology can take the guesswork out of such decisions, allowing healthcare organizations to better respond to commercial real estate trends and take a more strategic approach to healthcare and real estate.

If you’d like to learn more about Occupier’s healthcare real estate solutions, you can find more information here. Our platform allows healthcare organizations to easily manage their real estate portfolio and collaborate with both real estate and lease accounting teams on nearly every aspect of a given property.