Healthcare Reform and CRE

by CoyDavidson on July 1, 2012

We’ll Need More Medical Space and More Doctors

Physicians, Hospital Systems and Healthcare landlords anxiously awaited the Supreme Court ruling last Thursday which upheld the cornerstone of the Obama administration’s health-care law. In a 5-4 vote, the Supreme Court upheld the controversial individual mandate, saying the measure, requiring health-care insurance, was justified as a congressional taxing power.

We have already begun to see the commentary on the ruling’s impact on the healthcare real estate market and we will no doubt begin to see additional analysis in the weeks to come. So far most of the commentary has been of the opinion that the Supreme Court’s ruling is good for the real estate market based on the premise that the legislation will bring more individuals into the healthcare system thus driving additional demand for healthcare facilities and medical office space.

Build It and They Will Come? … Not so Fast!

Opinions vary widely on the merits and impact on businesses of the far-reaching legislation, with detractors on both sides of the partisan aisle (albeit for differing reasons). The impact on the real estate market is frankly unknown at this point and is more complex than the simple premise that more individuals in the healthcare system equates to more demand for medical office space and facilities.

While increased demand for healthcare space is likely, as one Senior Hospital Executive explained to me, “We know there will be downward pressure on reimbursements, and we have to be able to forecast revenues before we can justify making significant capital expenditure, and then there is the issue of finding new doctors.”

The law is also widely believed to create the need for more primary care physicians. However, according to the American Academy of Family Physicians, the number of primary care doctors has dropped 51.8 percent since 1997. Primary care doctors typically earn less than specialists and fewer medical students are choosing primary care as a career path.

Some projections indicate by extending health insurance to 32 million more Americans, there won’t be enough doctors to see them. In fact, the anticipated shortfall of primary-care providers is 29,800 by 2015.

I am currently working on numerous healthcare related assignments, the increased demand for medical space is likely, but how much or how fast remains to be seen. The one thing that seems certain is the increase in the time spent in the physician’s waiting room.

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