Chicago Panel Diagnoses Causes Of Consolidation In Medical Property
A distinguished panel of six commercial real estate experts took the stage in Chicago last week to share perspectives on the radically changing property market for health care.
Assembled at Bisnow’s 4th Annual Chicago Healthcare Real Estate event was a collection of operators, brokers, designers and developers of medical space, including Loyola University Health System’s Director of Real Estate Mike Becker, who kicked things off with an answer about what’s driving consolidation in the space.
“Size drives leverage and size drives scale,” said Becker. “It’s very important to a lot of folks acquiring space [that they get] to that significant size. The reality is that $130 billion has been pulled out of Medicare/Medicaid reimbursements, commercial payers have cut reimbursements significantly, so the larger you are, the more ability you have to negotiate buying power and larger reimbursements. Also, the play today is access to capital, and health care is still a bricks and mortar business…access to capital is easier and flows more freely if your size is more significant.”
John Wilson, President of healthcare property advisors HSA Primecare, added that consolidation was a confluence of three major trends: “Demographics, regulation and technology. In demographics, you have baby boomers, an estimate of 10,000 a day turning 65. So there’s ongoing pressure to the systems. With regulation, of course front and center is the Affordable Care Act, which is not only bringing the newly insured to the health care industry, it’s also shifting payment method from a fee based method to a value-based method, which is really driven by quality of care outcome. And then of course, technology – more and more procedures are moving to outpatient settings.”
Watch The Source for more coverage of the Bisnow Chicago Health Care Real Estate event.