Despite making up just 30% of the U.S. populace, the largest consumers of healthcare services are those 55 and older. What does this mean? The United States will need more healthcare facilities. Many, if not all, of these facilities will be outpatient buildings. They will treat patients away from sprawling hospitals.
Jay Johnson, the U.S. practice leader in healthcare at JLL, spoke to us recently about the increasing demand for outpatient healthcare facilities. Johnson stated that the demand for outpatient healthcare facilities is not slowing down and that this will lead to major changes for developers, medical groups, and hospital systems.
Jay Johnson: Given the growing demand for them, is the country equipped with enough outpatient medical facilities to meet the growing demand? The short answer is no. We will continue to see growth in the types and locations of outpatient facilities.
Johnson: There are two main reasons for the increasing demand for these facilities. One, the population is growing and getting older. Outpatient treatment is a better option for patients because they have good health results. These outpatient settings are preferred by patients. These are the reasons I expect to continue to see an increase in these facilities.
However, there are other forces that can counteract this trend. The largest is the rise of telehealth and home-health. Can patients be able to consult with their doctors remotely to take care of their medical issues? That was a huge advantage during COVID. Since COVID, the popularity of that has fallen. Behavioral health is an exception. Telehealth seems to be a good option in this space. Telehealth could reduce the need for outpatient facilities.
Johnson: Do you think telehealth can reduce the demand for outpatient services? Johnson: I have spoken to health systems and groups who don’t believe that telehealth can dramatically alter their outpatient needs. Demand for outpatient facilities will continue rising due to the aging population and changing preferences of patients.
JLL conducted a survey last year focusing on patient consumer trends. These trends were analyzed for the six months ending in 2021. We published the results in 2022. More than 4,000 people had a healthcare encounter in the six-month period. Telehealth had an impact, but 74% of respondents reported that they had received healthcare at a physical place. This was also during two COVID spikes. People still went to the hospital for physical visits. 62% of respondents said they had received only care in a physical setting.
Johnson: What do patients think about the outpatient care model? We also asked them about their opinions on the convenience of that type of care. Approximately 70% of respondents said that convenience was important to them. 35% of respondents considered location extremely important. To get to hospitals, people must drive longer distances. Parking can make it very difficult. It can be difficult to find your way around the hospital campus. It can be difficult to navigate the campus’ maze. Outpatient care is easier to access and more convenient for patients. It is easier to park. Once they are inside, it is easier to navigate.
Johnson: Hospital campuses will continue to provide the majority of the care. Hospitals will not disappear. Outpatient facilities are moving further away from hospital campuses and into the communities where patients live. This is a trend that will not change. This has led to an increase in the quality of care at hospital campuses. The hospital will continue to provide the highest quality care.
In terms of how they finance their businesses, the outpatient care component is very important to hospitals. Hospitals need to think carefully about whether they allow their competitors to take over outpatient care or if they are able to provide it themselves. They could lose or damage their revenue streams if they only focus on inpatient care of higher severity. Hospitals must provide outpatient care if they want to be able to pay their bills and run their business.
You can see that the facilities on a hospital campus are some of the most expensive real property in the entire healthcare system. The infrastructure is extremely resilient to natural disasters. They also have redundant utilities supplies. These buildings are often multi-story. These facilities are the most expensive. This is why outpatient facilities are becoming more popular. It is possible to deliver care at a lower cost. This is attractive to both patients and employers.
Outpatient facilities are not suitable for all types of care. These facilities offer superior care. Patients will experience better health outcomes. They are more convenient, less expensive, and produce better results. This is hard to argue with.
Johnson: There has been a doctor’s office in the area for a long time. They continue to increase in number. There are more ambulatory and outpatient surgery centers. Although they can perform surgeries, they don’t have the same acuity as hospitals. These services have increased in number. There are many companies that specialize in this type of service.
There are two types of urgent care clinics: minute clinics and immediate care clinics. These clinics have a retail feel and a type of retail strategy. These are often found in retail environments such as strip malls. There are many walk-up clinics you can visit for minor medical issues like the flu. There are many freestanding emergency rooms. They have a doctor available at all times, which is a big difference from urgent care clinics. They can deal with more severe emergencies. They may be able to take care of certain issues that you might not have been able to get treatment at a hospital emergency department.
Johnson: Many of these facilities will be located in former retail spaces. This country has seen retail expansions at various times. Too many new locations have been built. The supply exceeded the demand. The problem has been exacerbated by tech changes such as Amazon’s move to online retail. There are many under-utilized stores across the country. It’s ripe for other uses, such as healthcare. These spaces are often conveniently located for consumers. They offer lots of parking. They are easy to find and have excellent signage.
Johnson: Healthcare users face challenges when it comes to converting retail space into healthcare space. This is because of the way that retail landlords lease their space. It is important to find a landlord who is open to new ideas. This is becoming more common. Sometimes, retail landlords may feel that other uses can decrease the overall value of a shopping center or facility. They must make a decision about this trade-off. What amount of vacant space can they bear before considering other uses?
Johnson: Do patients who visit retail locations for healthcare have the time to shop before or after they go? Are they going to the supermarket and then to the clinic? The International Council of Shopping Centers has done some research on this. There are multi-purpose trips that can be made. When they travel to healthcare, they do more than one thing. They also do other errands at the same retail center.