Why are Hospitals on the decline?

The way medical care is delivered is facing rapid disruption. It has not escaped the effects that technology has had on reshaping our future. The next 10 years will see radical medical breakthroughs come to market driven by Robotics’, 3D printing, AI, stem cell technology and genome sequencing. All of these will transform and the entire healthcare industry, especially in prevention, diagnosis and therapy.  So the buildings in which these health services are provided will change.

Outpatient facilities or Medical Office Buildings, sometimes called ambulatory care, provide healthcare treatment that does not require an overnight stay in a hospital or medical facility. These facilities also include Ambulatory Surgical Centre’s (ASC) and Urgent Care Clinics.

During the Medical Real Estate Industry Update session from the ReVista medical real estate Investment forum held in February 2019, the data further supports the continue movement from acute facilities, or Hospitals, into outpatient facilities.

Most frequent healthcare specialties in outpatient locations:

The majority of Outpatient Facilities are usually found Off-Campus. (Any facility that is more than 250 yards/228 meters away from a Hospital).

The graph below illustrates this trend to off-campus facilities and clearly shows the shift over the last 7 years. This is driven by healthcare consumers increasingly expecting greater convenience and a better experience when seeking care.

In response, the market is providing buildings in locations that are close to home and easier for patients to access. Outpatient facilities with a range of complementary services many of which were previously only provided in Hospital or inpatient facilities.

The transition to value is a key driver, with healthcare organizations exploring ways to keep populations healthier and control costs by moving care off the traditional hospital campus.

MOB Construction Increasingly Off Campus

Medical Office Construction Starts – Percentage of SF On/Off Campus

Source: Revista

Larger MOBs Driving Inventory Growth

In Place Medical Office Inventory and Average SF per MOB by Year Built; 1980 to Present

Source: Revista

Another shift in the Outpatient facilities is how over the last 10 years the size of the facilities increased from 33,000 sf to 60,000 sf. Even though the amount of facilities built decreased from the pre-recession levels. The main reason for this size increase is due to the increased demand in the size of the spaces taken up by the Physician/Healthcare Practices over the last 10 years, which has almost doubled.

Larger MOBs Driving Inventory Growth

Median Square Feet per Physician/Healthcare Practice; MOBs by Year Built

Source: Revista

JLL reports that further to the demand shift from the Physician/Healthcare Practices, procedures traditionally performed in hospitals, such as certain types of surgery, are increasingly moving to outpatient facilities driven by advances in clinical science, shifting consumer preferences, limited or inefficient space in existing hospitals, and lower costs in the outpatient environment according to the American Hospital Association.

This continuing shift toward delivering healthcare services in an outpatient environment rather than a traditional hospital environment increases the need for additional outpatient facilities and smaller, more specialized and efficient hospitals. Increasingly, hospital admissions are reserved for the critically ill, and less critical patients are treated on an outpatient basis with recuperation in their own homes.

This growing trend toward outpatient care will continue to push healthcare services out of larger, older, inefficient hospitals and into newer, more efficient and conveniently located outpatient facilities and smaller specialized hospitals. The increased specialization within the medical field is also driving demand for medical facilities designed specifically for specialties.




Willie Oelofse
Global Due Diligence Manager at OrbVest








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