Our Advisory Board team recently published on the ten most important market trends in the health care industry. We know what they mean for health systems, but what implications do they have for REITs and architecture and construction firms? I've identified the four trends you need to focus on. The first two trends have similar implications for your business.
1. Pandemic ripple effects continue to suppress near-term volume growth for health systems. But the long-term outlook on provider demand remains strong due to heightened disease prevalence, aging baby boomers, and overall population growth.
Labor shortages and care avoidance will continue to suppress volumes in the near-term, but longer-term demand remains strong due to a sicker and aging population. Advisory Board's forecasting model predicts 7.3% growth in outpatient volume and -1.1% decline in inpatient volume by 2026.
What this means for you: Given nationwide inpatient volume is expected to decline, most revenue growth will come from outpatient service expansion. You and your clients should examine their current real estate footprints and future new construction and renovation plans. This trend could mean investing more heavily in outpatient facilities and placing less focus on inpatient buildings.
2. Site-of-care shifts have been initiated and accelerated by pandemic-era regulatory flexibilities, payer steerage, and new competitors in the ambulatory space. Three shifts are most important: high-complexity procedures to ambulatory surgery centers and office-based labs, physician visits to telehealth, and medical admissions to the home.
Volumes will continue to shift out of the hospital to other sites of care due to payment expansion for non-hospital-based sites, intensified payer steerage, and rapid growth in number and scope of ambulatory competitors. High-complexity procedures such as joint replacements and coronary interventions will move rapidly from the inpatient to both the hospital-outpatient, and ambulatory surgery sites of care.
In fact, services at risk of shifting away from the HOPD comprise one-third of HOPD revenue and account for 18% of HOPD volume. There has been a lot of recent talk that telehealth and home-based care will cause widespread reductions in in-person care. But shifts to telehealth and home-based care will not reach their theoretical potential due to factors such as an unclear reimbursement future and reluctance among physicians.
What this means for you: In order to withstand this shift, outpatient facilities will need to become increasingly more specialized. Facilities may need more space to house specialized surgical equipment for procedures previously conducted at the inpatient setting. And if cancer care follows this trend, facilities may need pathology labs to meet these evolving needs.
3. Amid record-breaking venture capital funding and a growing presence of private equity firms in the health care industry, incumbents are consolidating (horizontally and vertically) to adapt to disruptive industry changes and to find synergies in care delivery and administrative platforms.
There has been an unprecedented increase in venture capital funding—including from newly launched health system venture capital programs. Non-physician entities—including hospitals, health plans, and private equity firms—are increasing their stake in the physician practice market. Physician practice ownership is shifting quickly. Nearly 50% of practices remain independent but further acquisition activity is likely.
What this means for you: As private equity firms acquire more health care real estate, the clients you've traditionally partnered with may shift. You may need to proactively familiarize yourself with these new partners and adjust the way you interact with them to account for how their priorities differ from those of traditional health system leaders.
4. Industry care standards are being elevated by new, life-changing clinical treatment innovations and cross-industry stakeholder investments in health equity initiatives.
Health disparities have always been a reality, but now payers, providers, and employers are taking real steps to address historic inequities. Addressing health inequities will require a long-term commitment to areas with the greatest community need.
Health system leaders will need to prioritize among multiple deserving health equity focus areas by comparing disparities according to the size of the impacted population, community need, severity, clinical impact, and business impact.
What this means for you: Facility planners have an opportunity to partner with health systems to advance this important goal. Start a conversation with your clients and community leaders to consider these questions:
- Can patients easily access your facilities by public transportation?
- Are you building new facilities in historically marginalized communities?
- Are you building trust within your facility's community so that patients feel safe choosing your facility as their site of care?
- Are you equipping facilities (especially those in rural areas) with the necessary telehealth infrastructure to aid patients who are unable to travel?
All of these questions impact patient outcomes and have implications for designing facilities that improve access and trust within the communities you serve. It's a potentially difficult conversation to have, but a necessary one in order to advance health equity together. Making a meaningful community impact will take long-term commitments, meaningful performance indicators, and solutions that can scale.