Between the ever-evolving impacts of healthcare reform and an increase in new technologies that dramatically change the way we receive our medical care, the industry is becoming more complicated and commercialized than ever before. New technologies and legislation have created an environment where local clinics and independent practices can’t afford to be on their own unless they are in the hyper-specialized realm of care.

Medical Practices Are Consolidating

In order for primary physicians to afford the multimillion-dollar software needed to maintain the electronic record management system that is now required in the medical field, the medical industry is becoming accustomed to an entirely new way of building, buying, and investing in medical real estate.

“In order to compete and make money doctors have had to put in some cost saving measurements. Many healthcare companies are taking to a hub and spoke model where there will be a central hub that offers tier one range of stuff from impatient care, to heart care, to specialized areas that partner with different physicians. Those are the big hospitals we see,” says Dan Ford, senior agent at Colliers International. “From there what we are seeing is a lot of smaller clinics, or the spokes that come from that central hub. Their main focus will be on urgent and primary care.”  

This type of model helps reduce costs for the physicians because each clinic within the hub-and-spoke system is able to share the cost of the software required. This new model also has a trickle-down effect for the consumer due to the cost savings the consolidation creates.

“It used to be very independent. Doctors ran their own everything. Now there is a significant amount of money coming in from Medicare, which requires you to be compliant with the ever-evolving electronic record management requirements in order to get that money,” says Mr. Ford. “So it is advantageous for doctors to join the larger medical groups and consolidate their practices.”

Urgent Care Clinics Are Taking The Place Of The ER

These new legislative reforms haven’t only created a mass consolidation between hospitals, clinics, and independent practices, they are also reimagining what the physical real estate landscape looks like for the healthcare industry as well.

“This new model has created a bigger shift towards outpatient care and more affordable care in the form of urgent care facilities that are smaller than hospitals and built in more strategic areas where doctors can provide care at a more affordable cost,” says Mr. Ford. “Within the next couple years, we are going to see a lot more of these regional outpatient facilities, that still provide great care but will overall be more affordable for everyone.”

According to Mr. Ford, about 70 percent of all Emergency Room visits are not necessarily emergencies, yet by going to the ER patients are hit with high bills for care. Having more regional outpatient and urgent care facilities will help to reduce medical expenses by providing more options to patients, aside from just going to the ER. Within the next couple of years there will be more facilities, more physicians, and more locations for patients to go to when they need it most.

These locations will be smaller, ambulatory facilities that will be able to provide quality care without the overhead costs of the giant hospitals that usually house multiple specialists within one place. This new hub and spoke model is designed to provide doctors with the legislation requirements they must meet, as well as ensure people have access to medical help when they need it.

Doctors Are “FaceTiming” Their Patients

However, legislative reform isn’t the only disruptor in the medical industry. The tech-driven world we live in has also played a big part in the medical space. Not only as a facilitator to care, but by creating less of a need for physicians to be present in rural areas.

“There are a lot of disruptors in the medical space, but technology is definitely one of the biggest. With so many new ways to communicate with the patients, like FaceTiming, we are seeing that physicians don’t necessarily need to be present with a patient to diagnose or treat. This type of technology also allows for lower costs both on the real estate side and the patient side,” says Mr. Ford. “Quality service in an urgent care could cost upwards of $700, however, if you FaceTime the doctor, that average cost is around $49. That is a significant savings.”

There have also been cases of doctors from larger cities using technology to assist as needed in operations, labor and delivery, and providing specialist care via FaceTime to patients in rural areas. This technology has allowed specialist doctors to assist primary care physicians without the high cost of Life Flight or travel. Patients are also able to receive immediate diagnoses to the more common ailments such as sinus infections or the flu without having to pay for a doctor’s visit. This changes the need for a doctor present in a physical space, which saves them the money they otherwise would have spent on real estate office space.

Real Estate Investment Trusts Mean Medical Groups Can Free Up Capital

Another unique element entering the medical space is the growing amount of real estate investment trusts, or REITs. “With REITs becoming a large part of the medical space physicians and medical groups will be able to free up a lot of capital,” says Mr. Ford. “I think this will have a big influence in this space in the next 10-15 years.”

Overall, it is hard to predict where legislation reforms and technology will take the medical space throughout the next decade, but for now, it seems that we’ll see more commercial real estate being bought or invested in by larger medical groups and a greater consolidation of private practices.