Ahead of Healthcare Real Estate taking place Sept. 27-28 at VEA | Newport Beach Marriott, experts are sounding out the lingering systemic effects of the COVID-19 pandemic and their impact on real estate. Dan Klein, SVP and deputy CIO for Physicians Realty Trust discusses how operating costs increasing for healthcare systems affects their real estate use.
Q: Operating costs are increasing for healthcare systems. How does this affect their real estate use?
A: Costs have risen dramatically over the past three to four years with no cost line item escaping unscathed – from operating costs to facility and construction expenses – though some (such as staffing) have come down from pandemic highs. As a result, some healthcare systems may look into other strategies such as selling core or non-core properties in order to raise capital while others will attempt to reduce operating expenses without disposing assets; however most health facilities are shedding non-core administrative space at an accelerated rate due to rising operational expenditures..
Q: With the pandemic now largely (but not entirely) behind us, what conclusions can we draw about its impact on how healthcare is provided?
A: The coronavirus exposed weaknesses in our system that were previously unknown or overlooked; it became clear that outpatient settings play a critical role when access is limited within hospitals during times of crisis like these – they stepped up where needed most despite facing unprecedented challenges themselves such as supply chain issues and staffing shortages among many others . This has led us all towards greater preparedness moving forward by recognizing just how essential these services truly are even outside of extreme circumstances like those experienced during 2020/2021 .
Q: Are we seeing more healthcare systems consolidate? If so, what implications does this hold for related real estate e.g., redundancy ?
A : Health Systems had been executing strategic plans involving expanding service lines prior but came grinding halt once hit by Covid 19 ; margins already thinned further making growth unattainable , leading many towards consolidation transactions either through third party capital raising funds via asset sales or continuing ownership depending upon individual strategy . It’s expected there will be modest increase in number monetizations resulting from current environment which could lead certain pieces becoming redundant if deemed unnecessary under new structure & operations plan post merger / acquisition etc ..
Q : Venture Capital investment appears be rising again , What areas currently attracting attention ? A : Healthcare always attractive target given wide range permutations available patient care back office administration supply chain etc & private equity long playing lower acuity spaces recently venturing into acute service lines orthopedics cardiology amongst others ; money being raised chase return opportunities likely continue trend going forward ..
