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Hammes President & COO details trends in healthcare real estate

BROOKFIELD, Wis., March 1, 2016Chris Kay, President & COO of Brookfield-based Hammes Company, the nation’s leading healthcare real estate advisory and development company, offered up the trends to watch for in 2016 as the industry continues to undergo major changes and hospitals work toward goals of providing wider access to quality care within their delivery networks. 

“As we continue to see a push towards more robust outpatient services located off the main campus, it is clear that the network of the future is here,” said Kay.

“With the onset of tele-health consults, health-related apps and the use of smartphones as diagnostic tools, 2016 looks to be the year that many Americans, faced with higher deductibles, manage medical expenses with new tools and services rolled out by their insurance companies, healthcare providers, banks and other new entrants. This will be the year that shift-by-shift, visit-by-visit, clinicians learn to work in new ways, which will include the incorporation of insights gleaned from patient-driven data into their treatment plan."

The healthcare industry should see the following trends in 2016:
  • Higher-acuity care will increasingly move to medical office buildings. Medical office buildings offering higher-acuity care are an attractive solution because they cost less to build, operate and maintain than hospitals and inpatient facilities, for both physical and regulatory reasons. 
  • Freestanding emergency departments (FEDs) will be used in new ways. Freestanding EDs have been primarily owned and operated by hospitals, and were often the first facility built on a site that would ultimately grow into a larger campus. Now, mainstream providers are partnering on FEDs with specialized for-profit ED operators.
  • Partnering will increase. In addition to FED partnerships, health systems and physician groups are increasingly willing to partner with both for-profit and non-profit companies specializing in operating a wide range of facilities. The case for hospital-driven monetization will keep getting stronger. 
  • Repurposing will expand. Repurposing, or adaptive reuse, will become an even more prevalent strategy. Repurposing enables health systems to quickly and cost-effectively go to market than if they were to build a new facility. 
  • Compliance will become even more vital. While Stark and the Anti-Kickback Statute (AKS) have been on the books for more than two decades, they have become more stringent due to health reform and other legislation, and they are being enforced more than ever. Health providers are now required to self-report to the Centers for Medicare & Medicaid Services (CMS) with any violations of these laws. 
Healthcare is going global 
American healthcare systems, including some of the world’s leading academic medical centers, are playing a pivotal role in the evolution of global healthcare by training international clinicians and researchers, and providing advanced care through clinical affiliations. International patient referrals are becoming an important component of their business planning. The industry is developing new initiatives to maintain a global presence and an international revenue stream.

Investing in healthcare real estate 
The healthcare property market in 2016 will see continued change. There are a number of interwoven aspects that will create opportunities for savvy investors who can step out in front of trends: 

1. Technology will continue to change the healthcare real estate landscape in numerous ways - from the way people shop and work, to the way they receive medical treatment.   

2. Urbanization trends will continue as baby boomers and millennials seek enhanced access to jobs and other amenities. Even suburban communities are taking on more of an urban form, with mixed-use development and public transportation options. 

3. Interest rates will be on the rise as the Federal Reserve’s move in December demonstrated. A number of factors are keeping rates low for now, and little indication exists that the first rate increase will push cap rates dramatically higher. 

4. International
capital flows into real estate assets will continue - and increase. The U.S. property market is the most stable and transparent in the world, making it an easy investment choice.

5. Retail will continue to shift - including mixed (virtual/physical) spaces and entertainment-themed spaces, which will force investors to get creative with how they integrate prime retail with healthcare.  

6. Healthcare property markets should see a short-term lift due to a combination of improving tenant fundamentals and lower operating costs. 

7. Medical office demand is not likely to see an immediate impact on lower energy costs, but lower operational expenses will make occupancy less expensive.

8. Medical retail - community clinics located in retail environments are reporting above-average and better-than-expected performance. Retail properties, including strategically located shopping centers, should benefit.

9. Adaptive reuse of big box and industrial space - owners of industrial and big-box retail will benefit from demand by health systems to convert big box and industrial to distribution and telecommunications facilities for their growing delivery networks.  

“One of the most important assets that Hammes Company’s real estate service offerings bring to our healthcare clients is our understanding of healthcare operations and our unmatched expertise in capital planning - having advised for many of the leading healthcare systems and physician groups around the country,” said Kay. 

“Within our offerings, we provide flexible solutions which are tailored for each our clients based on their unique market, facility, financial and strategic objectives. We are certain to consider any and all strategic imperatives and trends directed by the industry.”