What do healthcare and retail have in common, besides being industries in flux?
Attributes that benefit the other, to start, as partnerships between the two industries are increasing, allowing a visit to a community shopping center to become a one-stop shop for clothes, flu shots, groceries and strep tests. Healthcare providers nationwide are actively expanding into “convenience care” as healthcare consumers increasingly expect greater availability and a better experience when seeking care. This expansion into the retail environment is defining a new shopping center that addresses the busy lifestyles of the millennial family. So, now patients can satisfy their family’s shopping needs while they wait for their appointments or drop into the café next door afterward.
Fairly basic, low acuity, healthcare services, such as eye care, dentistry, and vaccines at chain drugstores have been available in retail locations for some time. But those services are expanding into the former bookstores and into new attached or freestanding structures to include oncology, specialty care and management of chronic diseases, like diabetes, asthma, hypertension and cholesterol. In Massachusetts, for example, the Dana-Farber Cancer Institute is opening a 34,000-square-foot outpatient facility in an open-air shopping center. And, in California, The Shops at Mission Viejo will soon include the 104,500-square-foot Leonard Institute for Cancer Prevention, Treatment and Wellness.
The healthcare industry is evolving into a value-based model. Patients are seen, treated, and marketed to as customers as cost-containment measures are migrating expensive inpatient acute care to more cost effective off-campus outpatient facilities. And while the number of healthcare retail clinics has grown by almost 50 percent in the last three years alone, only 10 percent of US shopping centers have a healthcare related tenant. That means that there are opportunities for property owners to fill space with stable, long-term tenants, and for healthcare providers to deliver care where their patients live and shop.
Healthcare consumers need to shop around
While the Affordable Care Act created more than 20 million new healthcare consumers, many are faced with deductibles and out-of-pocket expenses that are higher than ever before – a 23 percent jump since 2007, according to the Kaiser Family Foundation. These consumers are adapting a customer mindset, comparing costs and looking for value as they make healthcare related buying decisions.
According to a survey by NRC Health, 80 percent of patients indicated that they would change healthcare providers based on convenience factors, alone, and retail spaces are well-positioned to give them what they want. Retail centers are generally located near large population centers, have longer hours of operation than a typical doctor’s office, and they give healthcare tenants the ability to accommodate walk-ins. In fact, according to the National Institute of Health, since the first retail health clinic opened in 2000, 44 percent of patient visits have taken place when physician offices are typically closed. Proximity to a large patient base seeking a wide range of medical services benefits clinicians, retailers and patients, alike.
Health systems that have adapted to deliver on convenience care include Evanston, Illinois based NorthShore HealthSystem (NorthShore); Denver, Colorado based DaVita; and Seattle Children’s Hospital.
NorthShore recently expanded their immediate care locations. Many are storefronts throughout the Chicago area, but some are in strip malls selected for visibility, accessibility and the promise of increased foot traffic from the surrounding neighborhoods.
DaVita, which is the largest provider of kidney care services in the United States, serves patients at more than 2,600 outpatient dialysis centers, many of them in retail spaces. Like NorthShore, the availability of parking and easy access by car and public transportation factors into their decision-making around locations, plus rents are often more favorable than in traditional medical office buildings.
Seattle Children’s Hospital’s recent renovation of a former big box store in a mall in Federal Way, Washington has driven customer traffic for the mall outside of regular dining and shopping hours. The clinic also requires fewer parking spaces than a retail tenant.
There are plenty of benefits for shopping center owners, too, as healthcare tenants tend to sign longer leases, usually 10 to 15 years, as opposed to the typical five-year leases for retailers. Healthcare organization also tend to be willing to invest in the high cost of buildout, relocation of staff and clinicians, and updating specialized equipment because they have a real interest in being seen as part of the local community. Taken altogether, healthcare tenants are more able to provide owners of retail spaces with greater financial stability and security than traditional retail tenants.
Stats, facts, and numbers add up
According to Accenture, the number of medical clinics in retail spaces had grown from 351 in 2006 to approximately 2,800 by the end of 2017. To-date, only about 12,000 of the 116,000 shopping centers in the US include a healthcare tenant. Extrapolating those figures out, the number of healthcare tenants could as much as double by 2022.
This migration is also supported by demographics.
The higher-acuity healthcare services long provided by hospitals will increase to meet the needs of baby boomers. They are aging and dealing with the accompanying health issues. And that number is only going to rise. According to the Population Reference Bureau, the number of people 65-and-older is projected to more than double, from 46 million today to over 98 million by 2060, and the 65-and-older age group’s share of the total population will rise to nearly 24 percent from 15 percent. People in this age group spend, on average, five times more on medical expenses annually than other healthcare consumers. Also notable among this age group is not only a preference, but a real need, for physical convenience that will rise in proportion to their decreasing physical mobility.
Younger patients bring opportunity, too. Whatever their habits around consumption and shopping, millennials have demonstrated significant brand loyalty, and that should be of note to owners when it comes to selecting healthcare tenants. Health decisions tend to be “sticky” – i.e., once this demographic connects to a system, they tend to remain connected when it comes to the majority of their healthcare needs. Changing providers, in addition to incurring costs, also introduces a circumstance to which they, in particular, are demonstratively adverse: inconvenience.
And, finally, women. They are responsible for making nearly 80 percent of all healthcare decisions for themselves and their families. That includes not only their children, but their spouses and, increasingly, aging parents. They are part of a rising demographic called the “sandwich generation.” Nearly 50 percent of adults in their 40s and 50s have a parent over 65 while, at the same time, raising a child or supporting an adult child. That’s someone who wants, if not needs, a one-stop shop.
While the development of this logical and mutually beneficial alliance has been significant, and despite the further potential it represents, growth overall has been somewhat slow. A mere 2 percent of all primary care encounters in the US take place in a retail environment. With health systems changing their focus to become more consumer oriented, and statistics, and demographics that support this intersection of retail and healthcare, it still represents unrealized opportunity. That’s why smart owners and systems would be wise to take notice – and sign a lease.
Chad Pinnell is the Managing Director of JLL’s Healthcare Solutions group.See the latest posts on our homepage