How the Affordable Care Act has affected healthcare real estate development

Many healthcare systems are repurposing existing facilities rather than building new

By Kurt Hutter/ Special to Healthcare Facilities Today

Although the ACA was signed into law in March 23, 2010, it’s hard to say when we first saw the impact in the healthcare development and construction industry. When the law came about when we were just beginning to come out of a deep recession, trends toward consumer based healthcare services were already shifting, and the retired baby boomer population continued to grow. All of these factors, put together with the ACA, have spurred healthcare development and construction. So far we’ve seen three shifts in healthcare delivery; focusing on the outpatient model, repurposing existing real estate, and designing with space efficiency in mind. 

The outpatient model 

The ACA is slowly creating a shift from fee for service to population health reimbursement, and with the influx of millions of newly insured, the old healthcare infrastructure has to change.  Technology has made complex procedures routine thereby pushing more services into outpatient settings.  The current reimbursement model favors hospital based services over private practices.  Consumers are demanding convenience; they simply don’t want to put up with the hassle of navigating a hospital campus for routine services yet still demand the highest quality of care.  From a facilities perspective, Inpatient facilities cost more to construct and operate than outpatient facilities. Putting this all together, tremendous growth of new construction is underway to enable healthcare systems to capture market share through well located and efficient outpatient facilities in a highly competitive market, utilize a growing set of employed physicians, and to satisfy consumer demands. 

Repurposing existing real estate 

Many healthcare systems are repurposing existing facilities rather than building new.  Frequently existing healthcare facilities are already located in strategic locations, or in some cases, existing non-healthcare buildings in desired locations can be successfully converted to healthcare.  While this may cause short term operational issues, it does reduce cost to the system. An additional benefit to repurposing an existing building is speed to market, which in the current competitive healthcare market is a major advantage to healthcare systems implementing their new strategies.  Typically, repurposing an existing facility only requires interior and MEP renovations, which can reduce build time from 12 months for ground up outpatient facility construction to 3 to 6 months. 

Designing with space efficiency in mind 

Most new projects are being designed to reduce square footage AND improve operational efficiency and flexibility.  Obviously less square footage is a good thing for cost but long term savings also comes from improved operations.  In today’s post ACA healthcare market cross utilization of space among different specialties is required as a full spectrum of services are being delivered in smaller outpatient facilities.  Standardization of clinical space across specialties is essential.  Furthermore, efficient design provides opportunities for increased care coordination, team communication, and patient throughput, which ultimately results in higher patient satisfaction. 

 Kurt Hutter, Executive Vice President at Anchor Health Properties.



December 10, 2015

Topic Area: Project Management

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