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Report: MOB Sector Boosted By Demand And Capital

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The medical office sector was firing on all cylinders before the arrival of COVID-19, and it appears to be well-positioned for a robust rebound post-pandemic, according to a special report by Marcus & Millichap.

In the third quarter forecast titled Beyond the Health Crisis: National Medical Office Outlook, the company notes that the adaptation of patient care and the ongoing rise in health-care needs will buoy demand for medical office buildings despite the disruption brought on by the coronavirus.

“The medical office sector is being tested as operators navigate new challenges created by COVID-19. Medical office was once perceived to be a more resil­ient asset class during a downturn, but the unique uphill battle faced by health-care providers due to the pandemic has choked revenue streams and considerably shrunk margins,” according to the Marcus & Millichap report.

The national vacancy rate rose to 8.9 percent, marking an increase of 40 basis points from the second quarter of 2019. Project abandonment and delays caused construction activity to drop 1 million square feet year-over-year. Additional projects will be postponed or canceled in the upcoming months; however, this will help stave off any threats of overdevelopment in the sector.

Other fundamentals, such as rental rate trends, serve as indicators of strong performance ahead. Most REITs reported a solid level of rent collections even though many tenants pursued deferrals and rent relief. Additionally, rent growth continued its pre-pandemic upswing, climbing to an average of $25.22 per square foot.

A New Age In Health Care

Well in advance of the appearance of the coronavirus, the U.S. health-care industry had begun to decentralize, providing more medical care in outpatient facilities instead of hospitals.

“Excluding some major surgeries, off-campus properties now offer the highest quality of care and complex procedures, driven by the need to provide equal levels of service across a metro,” according to the Marcus & Millichap report. “New hospital and expansion projects continue to target suburban areas as a demographic shift has caught the attention of health systems, placing more modern facilities and specialized care closer to patients’ homes. As these medical districts expand, the need for nearby outpatient clinics and supportive services generates demand for medical office space.”

Telehealth, via phone or online video, increased dramatically as a result of social distancing, and while experts expect the use of virtual care options to continue to rise in the post-pandemic environment, they do not expect it to result in a reduction in the need for medical office buildings. According to the report, the need for certain in-person visits will remain, as will the need for labs and imaging, all of which will translate into continued demand for medical office accommodations.

Finally, the coronavirus has not changed the fact that the considerable Baby Boomer population continues to age, and it’s doing so in an era when medical technology and advancements are supporting longer lifespans. As Marcus & Millichap notes in the report, the population of citizens aged 65 and older will expand by 30 percent over the next 10 years.

And with age comes more visits to the physician’s office. Individuals in the 55-64 age range make an average of 4 physician visits annually, but the number of yearly visits rises to 5.9 for those in the 65-74 age range and jumps to 7.6 for those 75 and older.

“Despite the short-term costs, the health-care industry will be one of the quickest to bounce back from the pandemic since the care needs of a growing and aging population continue to increase,” Marcus & Millichap asserts in the report. “Medical services are returning as states move through reopening phases, and pent-up demand from postponed procedures and office visits provide a positive outlook.”

Read the full report on Marcus & Millichap’s website.

 

Source: Commercial Property Executive

Acceleration Of Telehealth Adoption Set To Reshape Healthcare Real Estate

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The next time you visit your physician, your appointment may very well be virtual from the comfort of your own home.

Telehealth, or telemedicine, was an emerging part of healthcare delivery long before COVID-19. Now, the pandemic has catapulted the concept into national awareness. Changes in insurance reimbursement have expanded the availability of telehealth, with new implications for healthcare real estate occupiers, owners and investors.

What does “telehealth” mean, exactly? It encompasses electronic, interactive services ranging from a simple phone call or email with a clinician to a virtual exam with a caregiver for the purpose of diagnosis, intervention or ongoing care management. It’s enabled by such platforms as Doxy.me and NextGen Healthcare that make it easy to accept payments or insurance information in conjunction with an appointment.

Despite the convenience and effectiveness of telehealth, and the growth of secure telehealth platforms over the past decades, its pre-pandemic use was limited because of insurer reimbursement restrictions, Health Insurance Portability and Accountability Act (HIPAA) patient data privacy requirements, and practitioner concerns about malpractice.

However, when states began to enact stay-at-home orders in early March in response to the pandemic, telehealth gained new attention among policymakers as a solution to providing healthcare without further jeopardizing patient health. As a result, provisions in the Coronavirus Aid, Relief and Economic Security (CARES) Act lifted restrictions on where, how and with whom Medicare patients can access virtual care.

For the first time ever, there may be a critical mass of patients and practitioners alike able to tap the benefits of telehealth, mostly substituting onsite appointments with simple e-visits. Now, Medicare patients can access telehealth services from their own homes and healthcare providers can deliver service from any healthcare facility. Telehealth visits can take place via any phone with audio/video capabilities, using common consumer platforms such as FaceTime and Skype. Also important, first-time patient visits via telehealth are now eligible for Medicare coverage, too. Any healthcare professionals eligible to bill Medicare for their services can now bill Medicare for telehealth services, too.

From Stopgap Service To Structural Change

The acceleration of telehealth adoption may have been forced out of necessity during the pandemic. However, its use will likely continue to grow even after the pandemic fades.

In the post-pandemic era, the ease, efficiency and convenience of telehealth care will increase patient commitment and retention, and potentially lead to more in-person appointments for follow-up care. Telehealth also improves compliance with prescribed treatment plans, including follow-through on required appointments.

Also critical, telehealth enables patients in even the most remote and underserved locations to access care. And, it may prove to be especially well-suited for remote management of long-term chronic conditions such as allergies, diabetes and multiple sclerosis, and for monitoring such treatments as infusions and pacemakers.

As medical technology continues to advance at a rapid pace, an increasingly sophisticated suite of implantable and wearable devices, or even robotic telemedicine carts, will enhance home monitoring and management capabilities. Healthcare providers who implement this device-enabled “hospital at home” concept can help patients maintain their long-term health safely.

Telehealth’s Impact On Healthcare Real Estate

Clearly, telehealth usage has surged in 2020 to occupy a much more prominent place within the care spectrum than ever before. However, it’s important to keep the trend in perspective. According to FAIR Health’s private healthcare insurance claims data, only 0.17 percent of all services, or less than one-fifth of 1 percent, were provided via telehealth in the first quarter of 2019. In 2020, first quarter usage jumped to about 7.5 percent of services. April and May usage—data is not yet available—is forecasted to be higher than previous months. Thus, while telehealth usage has grown dramatically, its role in the healthcare service delivery spectrum continues to be secondary.

Yet, the long term may reveal a different story. As healthcare providers look to drive down costs while boosting reimbursements, telehealth’s role will likely become more prominent. As a result, many healthcare providers will need to reconfigure their facilities to provide HIPAA-compliant, technology-enabled spaces for the provision of telehealth and remote health monitoring services.

In light of the telehealth trend, the following are four steps healthcare occupiers, owners and investors should consider for the future of their facilities:

Develop telehealth care provider suites. Although patients will be able to participate in telehealth calls and remote health monitoring at home, practitioners will still need space for calls or electronic communications, as well as for remote monitoring and diagnostic equipment. Medical office buildings could provide suites for technicians and nurses to virtually manage intensive care, emergency and home care patients, for example. These spaces would require Internet redundancy, appropriate lighting, screens and acoustics, and assured patient-caregiver privacy for HIPAA regulatory compliance.

Reconfigure public spaces. Even as healthcare providers transition more basic care and monitoring services to online delivery, patients will still need office visits for advanced treatments, extensive physical evaluations and for use of advanced diagnostic equipment. However, the pandemic already has led healthcare providers to rethink their waiting room management to allow for social distancing. For instance, some providers ask patients to wait in their cars rather than in the waiting room and use text messaging to alert patients of their appointments.

With widespread adoption of digital patient registration and text messaging, less waiting room space will be needed even after the pandemic. An onsite kiosk, for example, could be used by patients to register upon entry, and possibly could support healthcare service delivery in other ways.

Reconfigure and repurpose healthcare delivery spaces. Many facilities will require interior reconfigurations, renovations and build-outs to support the transition to telehealth services. The adoption of telehealth care delivery will likely reduce the number of physical exam rooms needed in a healthcare facility and will free up square footage for other purposes. With less space required for physical exams, facilities can prioritize space for high-value imaging, diagnostics, injectables, wound care, advanced and acute treatments, obstetrics and laboratory services.

Pursuing The Possibilities Of Telehealth

As pandemic-related financial losses continue to mount across the healthcare sector, telehealth offers the potential to provide efficient, effective patient care while maximizing productivity-per-square-foot of healthcare real estate. For some healthcare providers, telehealth adoption could dramatically reduce the need for office space or increase the need for different kinds of spaces, depending on the services provided. Whatever the situation, healthcare providers, owners and investors have always been adept at adaptation—and many are already positioned to pursue the possibilities of telehealth.

 

Source: GlobeSt

The CARES Act Is Positioning Healthcare Real Estate For A Bright Future

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The Coronavirus Aid, Relief, and Economic Security Act, known as The CARES Act, was passed with great fanfare and a lot of promise.

In a lot of ways, it hasn’t lived up to that hype as small businesses struggled to get the help that they needed. But Kyle O’Connor, President and Founder of MLL Capital, which owns medical and life sciences facilities, thinks one sector was well-positioned to benefit from The CARES Act.

“One of the things that has been a big help for the medical industry has been The CARES Act, whether it be the payroll protection program [PPP] or the other funding that went to the health systems,” O’Connor says. “That has, I believe, helped quite a bit.”

O’Connor thinks the medical sector has received many benefits from the act that haven’t been there for other sectors.

“If you look throughout the economy, not every type of business was as well suited as the health care industry was to take advantage of the payroll protection program,” O’Connor says.

The employee size limitation for PPP grants is 500 employees. Since most medical offices won’t clear that threshold, they are great candidates for that funding.

“Most medical practices plan to rehire all of their laid off or furloughed employees given they expect demand to resume,” O’Connor says. “It’s also important to note that the health systems received/will receive funding from other elements of The CARES Act. In the medical field, The CARES Act has allowed doctor’s offices to keep critical medical workers employed. The doctors can only see so many people. So the nurse practitioners, the administrative staff, all the nurses that support each individual practice are a pretty important part of the system.”

Doctors are also adopting things like telehealth to offset a decline in office visits.

“The occupiers in our buildings were organizing themselves for dealing with the issues that have been caused by the stay-at-home orders,” O’Connor says.

Once the COVID crisis eases up or clears, O’Connor does not doubt that patients will return to medical offices. And demand could be even more significant as there is pent-up demand for medical services.

“They’re going to be much more comfortable going back to the doctor, and there will be a flood of requests for appointments,” O’Connor says. “There will likely be greater levels of health care that is being provided as the impact of the stay-at-home orders dissipates.”

The support from The CARES Act, in addition to the resilience of the sector, has made O’Connor optimistic about its future.

“Medical offices and life science property types have a defensive element to them,” O’Connor says. “We are going to hold their value better than some of the other property types.”

 

Source: GlobeSt.