There are still many unknowns in terms of the impact that the Affordable Care Act of 2010 will have on healthcare reform. But medical real estate has bounced back and is now approaching pre-recession levels.

The consensus is that hospitals will continue to employ or joint venture with private practitioners as they have over the past several years. This trend has helped hospitals increase admissions and allowed physicians to focus more on their patients rather than operating their private practice while reimbursements continue to decline. 

This trend has and will continue to impact healthcare real estate. An increasing number of real estate transactions are executed on the hospital’s balance sheet since more and more physicians are employees of a hospital. This has been a positive for this sector since the creditworthiness of the physician has been replaced with the financial strength of the hospital. In addition, as physicians become more comfortable with this shift from private practice to employee they are signing longer term leases. This tends to lower long-term vacancy and increase valuations of medical assets.

The long-term impact of healthcare reform remains an unknown. Reimbursement and compensation remain key concerns. This will continue to put pressure on physicians and hospitals to be more efficient and look for ways to cut expenses. This will surely impact medical real estate in the long-term and how providers view their real estate needs.

By Rob Schick, rschick@revelunderwood.com

Think Strategy not just Growth – while growing a business is beneficial in many ways including potential cost savings/economies of scale, more profit, ability to enter new markets, attract better staff think about how to get there versus just the end goal. In other words make sure you are putting in place all the strategies such as solid marketing plan, quality staff, product delivery systems etc needed as a base to grow your business. Focus on the process and the growth will stem from that rather than picking an arbitrary end number and just hoping to get there.