The potential impact of the Patient Protection and Affordable Care Act on U.S. commercial real estate could infuse the industry with new tenants, as health care providers reach out to the newly insured with—among other models—additional retail clinics and ambulatory care and wellness centers.
As more Americans begin to have access to health insurance, the health care market is poised for some far-reaching changes that will affect real estate development. Under the new legislation, approximately 32 million additional people will be insured, necessitating 64 million square feet (6 million sq m) to meet demand, according to a recent Deloitte white paper.
With medical facilities becoming increasingly central to the U.S. economy and to stabilizing local economic growth, what opportunities exist for the private real estate developer for hospital and medical real estate development?
In another article, we ask five members of ULI’s newest Product Council—Health Care and Life Sciences—to share their views on the potential impact of health care reform, and changing demographics, financing strategies, and delivery models, among other trends, on real estate development. How do hospitals make decisions about how, when, and where to grow; how do they select private sector partners; and what do these buildings mean for the built environment?
Expect large urban medical campuses to keep getting bigger; expect more decentralized models with more freestanding ambulatory care and emergency centers; more medical office facilities located closer to higher population densities; more clinics offering different services in one place; and more need for flexible facilities to accommodate changing programs. Current high vacancy rates in the office and retail sectors are making them ideal candidates to absorb the increased demand for medical space.
As a result of the legislation, walk-in, big-box clinics may emerge as a cheaper alternative to hospitals. Stores such as Wal-Mart are already planning to expand their hospital-connected clinics, says Deloitte. The number of retail clinics is expected to reach 3,200 by 2014, nearly three times the current amount, according to the National Center for Policy Analysis.
High-visibility malls and shopping centers are already being targeted by medical institutions for health education and outreach storefronts. In Bloomington, Minnesota, the Mayo Clinic has committed to occupying space in the Mall of America; in Baltimore, Maryland, the University of Maryland Medical System operates an educational storefront in Arundel Mills.
Demand also will grow for real estate near hospitals for preventive care and health education services, and for ancillary health care–related services, such as insurance claims processing and medical billing. Urban areas, in particular, will experience a higher consumption of medical services given their greater number of uninsured.
As medical facilities continue to have an ever greater influence on the shape of the built environment, understanding their space needs will be imperative for developers to effectively leverage this growth in the near term.