It’s a simple fact that, as the population grows, the nation’s healthcare needs grow alongside it. The recent Covid-19 pandemic has only served to exacerbate present weaknesses in the system, as well as reveal others that may have gone unnoticed. The total costs of the pandemic still haven’t been completely tallied, as there is the potential for long-term health and economic ramifications, especially when considering chronic conditions that may arise later down the line.
One thing that it has highlighted is the vital role that real estate plays in the world of healthcare. Covid-19 has only increased the pressure on the healthcare system, including the pressure on the real estate controlled by the sector and how it is used.
The Healthcare Economy
The healthcare sector is considered to be one of the most important parts of the United States economy. This is because of several factors. It can’t be denied that every individual’s life is directly affected by the healthcare sector, as their health and well-being depend on the medical care that is provided to them. Even someone who is relatively healthy will eventually need a measure of healthcare.
However, the healthcare sector also matters a great deal because of the sheer economic scale and budgetary implications it carries. According to recent figures, the healthcare industry alone is the largest employer in the United States, employing between 11 and 13% of the active workforce. Healthcare is also one of the largest categories of consumer spending and health insurance encompasses 26% of nonwage compensation.
These figures are constantly growing, as the healthcare industry is one of the fastest-growing industries in the US. Healthcare real estate is also expanding, but at nowhere near the same pace. This makes real estate a premium, meaning that the way that healthcare is delivered needs to change to accommodate it.
The Shift to Outpatient Care
The increased pressure on real estate in the healthcare industry has caused a shift in priority towards outpatient care. As demand increases, many hospitals and other facilities are reconfiguring their available footprints to accommodate more outpatient medical offices as a potential way to meet new demand.
While many patients do need to be treated within medical facilities, healthcare delivery is evolving towards a more decentralized model with less emphasis on inpatient care in hospitals. Outpatient facilities can deliver safe, efficient, and convenient care to many patients, which reduces the need for real estate being taken up by inpatient care facilities.
New technologies are constantly being developed to assist this evolution towards outpatient care. Many surgeries and procedures can now be performed safely and efficiently in an outpatient setting, or in such a way that reduces recovery time and allows patients to continue to recover from home. For example, laparoscopies and robotic surgeries are far less invasive, which when combined with new and improved anesthesia techniques, reduce complications and allow patients to return home more quickly.
Over the past decade, outpatient care has increased by 25%. This has impacted the real estate within the healthcare sector enormously, as medical office buildings have become more and more popular within the niche. However, while this relieves some of the pressure on the healthcare-specific real estate industry, there are other factors to consider.
An Aging Population
Another factor that only serves to highlight the importance of real estate is the aging population of the United States. Increased longevity and better health in older people is undeniably a sign that the medical field has progressed exponentially in the 20th and 21st centuries. However, it does present some challenges to societal growth and particularly to the healthcare industry.
An aging population comes hand in hand with chronic diseases and disabilities. Illnesses that would have been a death sentence not so long ago can now be treated, allowing people to live with these conditions for decades.
While many older people are living longer, fewer babies are born in the United States. This means that, if current trends continue, 1 in 5 of the American population will be of retirement age, outnumbering children for the first time in US history in less than 15 years.
This suggests that, in the not too distant future, there will be much more demand than the supply of healthcare. The healthcare system is already strained, particularly with regard to senior care. By only 2025, it’s estimated that US healthcare providers will have a shortage of half a million home health aids, 100,000 nursing assistants, and nearly 30,000 nurse practitioners.
Ideally, most of these patients will be able to be cared for from their homes, as this increased strain will inevitably be passed on to inpatient facilities such as care homes and other nursing facilities.
Much like other advances in technology that allow for increased outpatient care, the medical field is constantly developing ways to allow people to stay at home. The vast majority of patients prefer to have a measure of independence at home, and some even fare better as they remain in a comfortable and familiar environment for longer. This is also beneficial for financial reasons, as keeping people in their homes rather than inpatient facilities can save between $3,600 to $7,700 per month.
A prime example of this technology is telehealth, which allows medical professionals to monitor their patients outside of traditional clinical settings via mobile technology. These delivery systems could be remote patient monitoring, which transmits information between patients and medical practitioners. For example, voice apps have been developed which remind patients to take their medication, while allowing their doctors to monitor their condition, perhaps with digital blood pressure cuffs or similar devices.
Even voice assistant technology can be vital for helping senior citizens to be more independent, assisting with their daily routines. Smart pillboxes make it easier for patients to take the correct dosages of their medications at the right time, and other technology can make an older person’s life safer and more pleasant.
What This Means For Real Estate Investments
While it may seem as though an increased focus on outpatient care makes real estate investments in the healthcare sector less important or potentially profitable, such an assessment would be sorely off the mark.
While the focus is shifting away from long hospital stays, the increased pressure on the healthcare system due to recent events and a growing population means that this part of the industry is still growing. Hospitals and other inpatient facilities will be necessary for the foreseeable future.
In particular, even with advances in technology that allow senior citizens to be cared for from home for longer, the aging population still necessitates more inpatient care. At a certain point, many older people become unable to care for themselves from home. This is usually due to worsening chronic conditions, including those brought on by advancing age such as Alzheimer’s.
Older people also become more frail, increasing the risk of broken bones which are far more debilitating and often result in permanent disabilities and the need for more intensive care for long periods of time. Even senior citizens who don’t need permanent inpatient care are more likely to require inpatient care after procedures and illnesses.
The aforementioned advances in technology also require research facilities and laboratories, so that the medical field can continue to become more refined to better take care of patients.
Finally, there is a constant demand for medical offices because of the increased focus on outpatient care. These medical offices can be smaller and less centralized than hospitals, allowing patients to reach them more easily.