Driven by advancing technology, increasing competition and pricing pressure, healthcare delivery is rapidly evolving to become more consumer-centric, moving off the hospital campus to an ambulatory setting. With this in mind, there is great opportunity for real estate developers to partner with healthcare providers to deliver facilities that align with these ongoing changes in medical care delivery. In short, the healthcare real estate landscape is being reconstructed to:
- improve patient accessibility and convenience by adding clinics and ambulatory surgery centers in neighborhood locations,
- lower the cost of healthcare by increasing outpatient surgeries and procedures at ambulatory surgery centers, and
- attract employees by creating amenity-rich modern spaces in easily accessible locations.
Convenient Locations for Patients and Employees
Consumer preference for a convenient healthcare experience had large healthcare systems moving toward a “hub-and-spoke” model of care over the past few decades. Under this model, the hospital campus serves as a hub while clinics and ambulatory surgery centers (ASCs) serve as spokes and are developed in locations near patients’ homes. Over the past few years, the pandemic accelerated the need to increase the number of “spokes” for healthcare providers as a large percentage of the population suddenly began working from home and placing an even higher value on convenience. In addition, outpatient centers helped patients feel more comfortable about seeking medical care at smaller facilities as hospitals and emergency rooms were perceived to have a higher risk of exposure to COVID-19.
Selecting sites close to retail increases visibility for the provider while adding convenience for patients. Proximity to a fitness center, daycare or grocer integrates the site of care into a customer’s typical travel pattern, encouraging proactive and preventive care.
The momentum in healthcare real estate development is resulting in creating new outpatient space within busy, visible retail-office corridors to bring healthcare closer to patients at lower costs. However, adaptive reuse of buildings in highly developed areas also offer possibilities for healthcare providers. The Chicago area has seen several vacant grocery and other “big box” retail locations converted into medical space in the past three years.
Outpatient Care Facilities to Meet Demand for Lower Costs
Locating clinics in communities encourages residents to see their doctor more regularly, making it a more convenient, routine part of life. Insurance companies have also shifted their reimbursements to encourage preventive health care and outpatient services to reduce long-term costs.
Edward-Elmhurst Health, one of Illinois’ larger integrated health systems, has been adding clinics to meet these needs. Ryan is the developer, builder, property manager and owner of Edward-Elmhurst Health Center, which recently opened at the southwest corner of Route 53 and 75th Street in Woodridge. At the two-story, 36,100-square-foot health center, residents can see primary care physicians and specialists as well as receive urgent care, behavioral health counseling, physical therapy, laboratory services and diagnostic imaging.
Site Selection, Development in Ideal Locations
Finding large land parcels and building a new facility in an established community can present challenges. However, with some creativity, developers can find the perfect location for healthcare systems close to their customers.
For example, Ryan recently combined two former residential parcels, secured zoning changes and obtained multiple easements in Mequon, Wisconsin, a suburb of Milwaukee, to make way for the Froedtert & the Medical College of Wisconsin Community Hospital, a 17,000-square-foot micro-hospital with eight in-patient beds and seven emergency room beds that opened earlier this year.
Properties formerly slated for retail use can also be ideal for outpatient clinics. For instance, Ryan developed the Edward-Elmhurst Health Center on a lot originally zoned for a corner retail store.
Opportunities in Healthcare Real Estate
Many other factors are driving the development of outpatient facilities as well. The 65-plus population in Illinois is projected to increase 17% by 2030, according to the U.S. Census Bureau. The number of outpatient surgeries continues to rise thanks to advances in surgical techniques, anesthesia and pain management. Same-day surgeries performed at ASCs cost less and have a lower infection rate than having surgery in a hospital, while offering easier parking and access to the facility. As a result, Medicare, Medicaid and insurance companies are eliminating their inpatient-only procedures list and expanding the number of procedures that can be provided at ASCs. Patient growth at ASCs is expected to grow by 25% by 2029, according to Vizient, Inc., a healthcare performance improvement company.
For all these reasons, Ryan is aggressively pursuing deals for healthcare real estate development. It is an attractive, stable segment of commercial real estate, and we look forward to continuing to help make the healthcare experience more modern, holistic and wellness-oriented.
Curt Pascoe is vice president of real estate development for Ryan Companies US, Inc., providing solutions for healthcare systems and provider groups in Wisconsin, Illinois, Michigan, Indiana and Ohio. He advises clients in site selection and acquisitions, permits and approvals, and design and financing.