Dive Brief:
- Commercial real estate firm CBRE urges hospitals in a report to begin thinking like real estate investors to cut spending and invest in technology and design "more patient-centric delivery systems."
- According to the report, real estate occupancy accounts for 8-12% of hospital costs. CBRE believes hospitals can save 10-12% of total real estate costs through outsourcing property management.
- Inpatient facilities account for 42.5% of all healthcare real estate in the U.S. and outpatient facilities account for 26.7%. The report urges hospitals to think about their real estate holdings as the industry shifts toward focusing on the latter.
Dive Insight:
According to the report, which uses data from 2016, U.S. hospitals and health systems own nearly $1 trillion of real estate, with 34 of the top-50 owners of healthcare real estate collectively owning $227 billion of real estate — "much more than all healthcare real estate investment trusts (REITs) combined."
Few health systems, the author argues, are realizing the cost-saving potential of those assets.
As consolidation continues to trend upward and health systems acquire more real estate, larger systems will need to rethink their real estate investment strategies. According to John Hopkins data cited by CBRE, hospital mergers have historically resulted in pricing up to 5% higher and cost savings of 1-2%.
The report warns consolidating systems against combining the costs of real estate maintenance with other administrative and operating costs. Grouping real estate costs can help systems isolate and better-track how much is being spent on real estate occupancy.
"Both existing and consolidating health systems see purchasing and back-office operations as opportunities for cost savings, yet their large real estate holdings are often overlooked as a source of cost savings or capital to fund other needed investments," according to the report.
Revista reports that in 2016, 447 new off-campus medical office buildings were developed in the U.S., and only 186 of those facilities were built on-campus. The report encourages health systems to incorporate mixed-use development and consider building or leasing hotels, restaurants, retail services or senior housing.