When we think of the hospitals and medical centers that dot our landscape, we think of a very stable and ongoing institution in our American business and social life. The ownership models are complex and diverse, mostly non-profit entities, sometimes religious in nature. They have always been and will remain pillars in the fabric of the community.
This is where healthcare reform and all of its dramatic changes will take place. The employment experience will change, the business model will change, the fiscal and efficiency measurements will change, and soon the hospital experience you are used to will be markedly different.
For example, hospitals get paid on services provided. This is akin to wanting more patients, more times with longer stays. Instead, soon hospitals will be profitable by keeping populations out of the hospital, and keeping them from coming back. Controlling diabetes instead of ongoing treatments, efficient rehabilitation instead of recurring treatments will become the norm. They will not make money, and may have to close due to inefficiency if people keep getting sick and keep coming back.
The latest round of hospital consolidations in our market hasn’t been front page news compared to other stories about politics, crime and the Kardashians. But inside this colossal industry it is like a revolution. The for-profits have come to New England and are swallowing up facilities at a rapid pace. Big money investors are investing hundreds of millions of dollars into under-performing hospitals.
Perhaps most noticeably, just about every smaller facility or system is looking to merge into a bigger system. There is efficiency in numbers. The bigger the system, the more efficiency can be executed through centralizing operations. The bigger the population, the better rates can be negotiated with the payers: insurance companies and the federal government.
All of this change brings with it great responsibility to firms like ours. The administrations are generally more knowledgeable in healthcare than real estate. It is our collective duty to help these vital institutions with the real estate component of these changes. Recognize and implement financial and operational solutions, project management and construction. It is important to keep these indispensible facilities around. This is a task we should not take lightly.