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Healthcare Operators Leverage Their Real Estate to Boost Systemness

In 2014, Becker’s Hospital Review described systemness as “the next frontier for integrated healthcare delivery.” For a healthcare system, implementing this concept means coordinating and leveraging service lines, facilities, regional divisions, and stakeholder groups to provide better care to more people at lower costs.

Seven years later, the sector has had to contend with the challenges of COVID-19, “and there was no time like a global pandemic to illuminate just how important a truly integrated healthcare system is in meeting these goals,” writes Amber Schiada, senior director of research, industries insight at JLL.

The past 18 months have seen a number of successes for healthcare systems, Schiada writes. These include the following: 

• Continued delivery of care despite COVID-19 challenges, and the adaptation of the real estate environment to meet these challenges, considering supply chain tests and other operational headaches 

  • Rapid ramp-up and success of telehealth networks to maintain care delivery, and telework enabling non- clinical operations to continue 

  • Portfolio-approach use of facilities within systems to segregate emerging COVID-19 patients from recovering patients and non-COVID patients 

  • Portfolio-approach for rapid adaptation of low-priority administrative and medical office spaces to acute-care clinical needs, including migration of outpatient services from inpatient environments; and 

  • Intensified focus on cash cost savings that will likely continue post-pandemic, especially as healthcare systems learn to plan for future disruptions and threats to business continuity. 

Healthcare systems can leverage their real estate to achieve greater systemness, Schiada writes. Doing so boils down to three main concepts:

1. Utilize location strategy to drive patient access. “Care locations influence market brand perception, patient accessibility and acquisition, and overall care experience. Location decisions often fail to align with the overall health system strategy and are made based on the merits of a single, isolated site or service line decision rather than as an integral component of the overall care delivery network.” 

2. Enhance facilities operations to advance outcomes. The pandemic added to the pressures health systems were already facing to reduce operating costs. During the pandemic, facilities management budgets within many healthcare systems were trimmed, with labor taking a larger relative hit, followed by maintenance and facilities expenses.” 

3. Leverage your healthcare real estate asset value. “Systemness strategies can drive real estate values via location commitment and credit strength of the systems themselves. More integrated health systems generally have better credit ratings than less- integrated systems or individual hospitals.” 

Credit quality is “a lever that health systems can use” to negotiate more favorable lease terms, writes Schiada. Similarly, owned facilities will drive greater returns in the event of monetization through a property or portfolio sale/leaseback. For example, physician practices acquired by health systems often see a boost in asset values, since the acquiring health system’s credit quality reduces the risk profile of the standalone physician practice. 


Inside The Story

JLL’s Schiada

About Paul Bubny

Paul Bubny serves as Senior Content Director for Connect Commercial Real Estate, a role to which he brings 13-plus years’ experience covering the commercial real estate industry and 30-plus years in business-to-business journalism. In this capacity, he oversees daily operations while also reporting on both local/regional markets and national trends, covering individual transactions across all property types, as well as delving into broader subject matter. He produces 15-20 daily news stories per day and works with the Connect team and clients to develop longer-form content, ranging from Q&As to thought-leadership pieces. Prior to joining Connect, Paul was Managing Editor for both Real Estate Forum and at American Lawyer Media, where he oversaw operations at both publications while also producing daily news and feature-length articles. His tenure in B2B publishing stretches back into the print era, and he has served as Editor in Chief on four national trade publications. Since 1999, Paul has volunteered as the newsletter editor of passenger rail advocacy groups (one national, one local).

  • ◦Sale/Acquisition
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