Two years into the pandemic, the shift to telehealth services appears likely to remain a long-term trend, and it is beginning to change the real estate decisions that health systems are making.
“I think the future of hospital design, the structure will look different,” said Michael Crawford, associate dean for strategy, outreach and innovation at Howard University College of Medicine at Bisnow’s Mid-Atlantic Healthcare Summit last week. “The hybrid model and how it impacts brick-and-mortar is something that we’re going to have to think about in the next few years.”
Joe Ochipinti, Michael Crawford, Courtland Wyatt, Daniel Durand and Lakshmi Nalluri speak during a panel at Bisnow’s 2022 Mid-Atlantic Healthcare Summit.
Data suggests telehealth will remain a bigger part of healthcare going forward. Last summer, telehealth use increased to levels 38 times pre-pandemic usage rates, according to an analysis from McKinsey last updated in July 2021.
The firm expects a higher level of utilization to continue post-pandemic, as venture capital flowing into the model tripled between 2017 and 2020.
Healthcare companies nationwide are taking note, and now face difficult questions on how they can repurpose their existing real estate portfolios to navigate not just the new technology but also rising construction costs and an aging population.
Mike Bellamy, executive director of Kaiser Permanente’s national facilities service, Mid-Atlantic region, said the healthcare giant had to press pause on its multiyear planning when the pandemic hit.
Bellamy said the increase in virtual care directly caused a reduction in the planned footprint for new buildings. He said Kaiser informed its facilities directors to stay within their overall program number for the next 10 years, and so in order to balance the rising technology costs, in addition to inflated construction costs, they had to scale back some of their plans.
“The effects of increased virtual care, literally our assumptions and our planning drove our buildings … to get much smaller,” Bellamy said. “We’re relooking at all those things.”
Mike Bellamy, Kaiser Permanente’s Mid-Atlantic executive director of national facilities, and Naseema Shafi, CEO of Whitman-Walker Health, speak during a panel at Bisnow’s 2022 Mid-Atlantic Healthcare Summit.
Kaiser has been expanding its portfolio in the D.C. region over the past four years. In August, it opened its new 36K SF Bowie Fairwood Medical Center, which serves 10,000 members in Prince George’s County. Kaiser is also planning new facilities in Woodbridge and Springfield, Virginia, and another Maryland location near the West Hyattsville Metro station.
Some of those facilities, like the Hyattsville location, will replace older facilities. But Kaiser is expanding in the market, and Bellamy said he is looking closely at how he can maximize service with the footprint he is already committed to.
“As we look at spaces, we want those spaces to be as efficient as possible,” Bellamy said.
Inova Health System is also confronting new challenges as it expands. The Falls Church, Virginia-based nonprofit provider has a major growth plan for its eastern region, which includes Potomac Yard, Mount Vernon, Springfield and Alexandria.
Roberta Tinch, president of Inova Mount Vernon Hospital, said the health system’s patient volume is now higher than it was pre-pandemic, thanks in part to deferred medical needs that patients waited to take care of until the pandemic ebbed.
As those patients have returned, she said the system is increasingly focusing on outpatient facilities as a key component of its expansion.
“We cannot not build because of where we are today,” Tinch said. “Populations are still growing, people are still going to need care, we’re just building more smartly for the future and not just replicas of what we’ve been building for the past 10 or 20 years.”
Steve Bolen, Gordon Soderlund, Roberta Tinch, David Moreno and Bob Gesing speak during a panel at Bisnow’s 2022 Mid-Atlantic Healthcare Summit.
Inova’s new facility at the site of the former Landmark Mall in Alexandria’s West End will feature a 566K SF hospital, a 107K SF cancer center and an 88K SF specialty care center, according to the Washington Business Journal. The new hospital will have 235 beds, down from the 302-bed facility at 4320 Seminary Road the Landmark hospital will be replacing.
Tinch said insurance companies partially drove that shift, as they increasingly decide to opt only to pay for outpatient instead of inpatient care for certain operations. But other pressures are also driving the design of new facilities, including the need to attract frontline healthcare workers with amenities such as offices with natural light or ground-floor retail connected to the lobby.
“Some of them [are] like us, we want to get a Starbucks in our hospital,” Tinch said. “A flexible lobby is a great idea, because people connect, they get their coffee, they work, and then they go up to their office.”
Flexibility has become key to hospital design, said Will Stann, a project executive at Forrester Construction. He said for projects currently in development, he is encouraging clients to future-proof their space in case technology or needs change.
“The question we’re going to be asking every client going forward is: ‘What do you envision this room will be in the future?'” Stann said.
Brian Martin, Will Stann and Matthew Sullivan speak during a panel at Bisnow’s 2022 Mid-Atlantic Healthcare Summit.
For those sites where a footprint has already been established, providers are considering ways to redesign their spaces to accommodate the telehealth trend.
Naseema Shafi, CEO of Whitman-Walker Health, said that if the D.C.-based provider had not committed to its 118K SF facility at St. Elizabeths East before the pandemic, the facility may have had a different footprint.
But now that construction is already underway, Whitman-Walker has doubled down on its investment in IT infrastructure and an overbuilt clubroom to prepare for future technology, Shafi said.
“If we’re really responding to the community’s request for demand, how do you build on: ‘I want therapy in-person today, and I want it virtual the next time?'” Shafi said. “Every single room has to have that amount of flexibility.”
Others are coming to terms with that shift, counterbalanced by an aging baby boomer demographic that is beginning to require more frequent and intensive care.
Those developments will likely lead to more ambulatory facilities, panelists said. Bellamy, with Kaiser Permanente, said the industry was staring down billions of dollars in development for new ambulatory facilities over the next 10 years, a class of healthcare real estate that has been growing since before the pandemic.
When nonessential operations were paused at the height of the pandemic, that sent the healthcare real estate industry into “asset management mode” for the first time in 30 years, said Steve Bolen, head of U.S. healthcare real estate at LaSalle Investment Management.
But Bolen said the industry has since fully recovered. He said he is increasingly encouraged by the merging of healthcare facilities and retail, both at planned developments like Landmark and in more traditional strip centers with empty but convertible space.
“Almost uniformly, the focus seems to be on continuing to build out the outpatient delivery strategy,” Bolen said. “We hear virtually no end to the outpatient focus.”
Bolen said ”virtually all” of his investors wanted to increase their exposure to healthcare real estate, in part because the class remained strong for decades even as market forces depressed demand for other kinds of buildings.
“Healthcare real estate consistently is a top-tier performer … it’s always done extremely well,” Bolen said. “There’s almost an insatiable appetite amongst institutional investors to grow their healthcare real estate.”