The prognosis is clear: Healthcare real estate is about to change

By Matt Baker | Originally Published November 11, 2020 at

Imagine, for a moment, a medical office space constructed in 2019, and another developed sometime in 2021. These two properties will have marked differences, as the pandemic is bound to have lasting effects on how we design healthcare real estate.

When it comes to the healthcare sector, the most drastic impact that we’ve seen thus far this year is the increased usage of telehealth. According to data from the U.S. Centers for Medicare & Medicaid Services, an average of 14,000 beneficiaries per week received telehealth services last year. Between mid-March through early July, after the onset of COVID-19, that figure shot up to 10.1 million beneficiaries. Per week.

In response to the pandemic, the federal government adjusted payment plan policy and regulations to support greater access to telehealth. They took a pilot program introduced last year that paid for some rural residents to virtually visit with their doctor and expanded it nationwide.

As a result, multitudes of new users have interacted via telehealth during this time, including the aging population that are both the largest consumer block within the healthcare system and the least likely to adopt this novel, technology-based approach to medical visits. Telehealth’s trajectory has been altered from nascent to emerging, and now the question is what does this mean for healthcare real estate?

“We don’t think telemedicine is going away, but we’ve also not seen anything to suggest that it’s going to have a dramatic impact on footprint,” said Russell Brenner, president of medical office and life sciences at CA Ventures. “It’s going to supplement, not replace.”

The most likely change to the physical space is one or two exam rooms being fitted out for telehealth. These rooms would still have all the necessary equipment for a face-to-face examination, and then when a virtual visit is scheduled, the doctor could use this space to virtually consult with a patient.

It’s unclear if Medicare patients will continue to be covered for telehealth services once we have control of the virus. There are also Stark Law and other interstate regulations that can muddy the process for insurers. But the writing on the wall seems to suggest that wider use of this technology is a near certainty.

“There’s a lot that still has to be worked through,” said John Wilson, president, HSA PrimeCare, “but I think the experience from the pandemic has been very positive—on both sides, the provider side and the patient side.”

Fast forward a few years to a point where perhaps 20 to 30 percent of the patients that a doctor interacts with do so virtually. Does that correspond to a shrinking medical office footprint? Not necessarily.

“At the end of the day, physicians are observers, and those observations are best made in person,” Brenner said. “The general feeling is that the configuration may change, but the overall square footage will not.”

Telehealth is an excellent tool for early consults and for follow-up visits. It’s lousy for administering vaccines or wrapping sprained ankles. The fact is that there is much that occurs between a physician and his or her patient that simply cannot be done virtually. If anything, telehealth may result in an expansion of medical office space. By reaching out to more rural residents—and providing consults that lead to in-person visits—telehealth will probably lead to more foot traffic into medical office spaces.

The pandemic will have other impacts on how future MOBs are designed and constructed. According to Wilson, some of HSA’s recent healthcare projects included more open staircases that allowed for vertical transportations between the lower floors. In hindsight, that mode of transportation proved prescient during the pandemic as able-bodied patients were keen to avoid the elevators. Where feasible, he believes this is likely to be a permanent fixture in future MOBs.

A lot of buildings have already implemented touchless entry to reduce cross contamination and this will become much more commonplace. Air handling is already highly scrutinized in medical buildings and clinics. While other commercial spaces such as office buildings and retail outlets will to a large degree not implement more expensive HVAC systems to eradicate the smallest viral and bacterial infiltration, healthcare spaces are going to stress this to a greater degree than ever before.

Many changes will be operational and behavioral. Spaces may be set up so that should there be future outbreaks, visitors can enter and exit via different doorways. Sanitation policies and procedures have been enhanced since the beginning of the year and these changes are probably here to stay.

“These properties are probably the cleanest they’ve ever been,” said Wilson. “I’ve talked to many of our hospital partners and they’re saying that their facilities are the safest that they’ve ever seen.”

One trend from the past few years that will not change is the growing retailization of healthcare. As the pandemic has decimated the retail industry these past few months, it may in fact have accelerated the process. Medical uses located in commercial retail corridors is nothing new, but these users can now pick from suddenly vacant prime locations.

“Retail, over the past 50 years, has cornered all the Main and Main locations,” said Wilson. “Property owners are looking at healthcare as a supplement to previously occupied retail spaces.” 

As of this writing, we’re still deep in the midst of the COVID-19 pandemic, so it’s difficult to find sightlines of where trends may be headed or how long this crisis will last. But it is clear that the pandemic will have an enduring impression on the way we design healthcare space.