Healthcare Industry and Medical Real Estate

October 14th, 2013 by Diane Moore

Healthcare is regarded as one of the basic needs of people living in the United States of America as people have become very much careful regarding their health and nutrition.

Healthcare Industry and Medical Real Estate

Healthcare Industry and Medical Real Estate

Over the past few years, a number of different healthcare and medical real estate systems in the USA have found different ways to manage the holdings of the property, their land, hospital facilities, medical office buildings and this have accounted for about 70% of the total assets. The healthcare industry and the medical real estate have created great competition in the commercial real estate industry of the USA and mostly the Los Angeles cross county.


Any part of the county requires medical and health care facilities and this was overlooked since very long. But today, other residential and business real estates are centralized and mastered around these healthcare industries and medical real estates as many hospital systems have become very much sophisticated in managing hospitals and other properties that are related to it. Healthcare industry has been making great profit in commercial real estate with $1.27 trillion a year in the United States with several facilities in quality of care, several office buildings related to physicians, outpatients etc. which have become a great concern today.


With several prospects of national healthcare through out the country, the reforms in Medicare and Medicaid reimbursements are no longer based on fees but on medical outcomes, and this has made the real estate industry in the sector of healthcare and medicine more efficient and effective.


What impact does it have?


The costs for health care, Medicaid and BadgerCare is rising since recent years in the Los Angeles and the Walker Administration of the LA crosse county had proposed around $554 million in Medicaid to the budget shortfalls. This healthcare and medical real estate has a great impact in the country’s economy. Several reports and discussions are made with regards to the country’s economy with a focus on the healthcare industry and the medical real estate, contribution of these real estates on the economy of the country together with the nation and the potential impacts of the reduction in the reimbursements of these industries.


As we can see, the Los Angeles commercial real estate beholds several world class international facilities around the country that seeks to offer the best service to the residents and business offices through several government and private sectors. The country readily focuses on the healthcare and medical facilities for locals as well as tourists who come to visit this place.


Los Angeles county has $378 per square foot as the average price for any commercial real estate,and there are around 4,000 resales for homes, offices, medical and business firms, clinics, etc. However, the extent to the cost-shifting, the profit in the cost shifting in several of these business entities is analysed and studied so as to make a good assessment of the economic impact in the overall country and the states itself. Reports also show that around 18% of a total of 40 healthcare industry are strategically managing their property assets in real estate business.


What changes are there going to be?


For the healthcare industry and medical organizations, delivering quality is a mission and not just a promise. However, the regulatory environment and rapidly changing fiscal has strained a lot of resources of several of these types of real estates. As real estates are regarded as the third largest expense on hospital’s income statement that accounts more than 40 percent on the balance sheet of these healthcare and medical real estate, they can be optimized for improving the overall business performance by utilizing them properly.


Even if a business is delivering high quality performance, finding of a sustainable and performance improving and saving management can improve the real estate facilities for these types of services that are provided to residents and people living around the place or abroad. It has also been seen that a lot of healthcare industries have gained efficiency through the revenue cycle management that has helped in enhancing the capital positions of these real estates. Many of these systems are now focusing a the real estate strategy and different management models to help in lowering the cost of patient care for cost-effective and efficient outpatient models.


Possible pitfalls


In the Los Angeles county, managing of assets that were built and managed in the historic way is a big problem for the hospitals and the systems that they have inhibited. These sites do not have prospects in upgrading and renovation through local level. However, most of the industries that were built lately have centralized on several aspects of construction, outpatient clinics, medical office buildings and running hospital facilities. Several profit and non-profit industries and medical real estates with a revenue of around $1 billion are found in the Los Angeles county that were freeing up funds, cutting costs and helping to improve the quality of care to overall develop the commercial real estate industry of the country itself.


A very high level of capita is invested in healthcare property investments every year. The demand of medical office buildings is still unabated because of the amazing returns they produce back. It has also been studied that 70 percent of Class A senior housing products have already changed the brands and the entrepreneurial investors need to understand the high value of their holdings that can easily cash back in return. The commercial real estate of Los Angeles has implied several practices in the basic areas of property management, and these are explained below.


Different ways of commercial real estate management


  • The healthcare industry and medical real estate of Los Angeles enjoys a practice of transacting which deals with the better leases to determine about property around the county that are to be owned or taken. Some of the healthcare industry and medical real estate in Los Angeles even enjoy mixed type of maturity model to stay flexible and accommodate any changes if required in the future days to come. Some healthcare centers in the USA like the Baptist Memorial Health Care has shifted itself to leasing MOBs from owning, and this has reduced the changes of having any sort of unproductive assets if the partnership falls apart. Similarly, Duke Health System has gone to 10 percent own and 90 percent on lease and is considered very flexible to change the real estate footprints anytime as required from any levels.


  • Management of the real estate properties. Classical real estate trends in the county was managing the medical facilities at local level which made it difficult in getting bulk economies for several repair and construction works in the past years. Another modern system utilized the facilities and construction only that boosted the productivity from 30 percent to 75 percent in no time. By centralizing energy management, a cut of over $5 million has been obtained by several healthcare industries in the Los Angeles that has helped a lot in influencing and promoting other commercial real estate.


  • Another approach taken by the real estate realtors was taking some strategic approach at analyzing the viability and the impacts of the existing healthcare and outpatient facilities. A number of systems readily saw great benefits from taking real estate decisions out of hands from the local hospitals and make a good profit on the overall. Planning the buildings and separating different sections in different parts can readily increase the revenue in any real estate business operating in this sort of healthcare and medical real estate in Los Angeles.


  • Another way of influencing at the commercial real estate market is designing and constructing several systems and buildings reducing the risk of project overruns and lowering the construction costs. A Health care system in LA that made standard construction designs across the Los Angeles county made a revenue of around $2.3 billion which was just $955 million ten years back. Other systems included redesigning of hospital buildings and clinics to maximize efficiency and the experience of patients. By getting to know the consumer expectations and evidences required for commercial real estate business, acceleration of the business can hand-over great profit.


Further several researches reveal that the profit and benefit from the real estate belonging to healthcare facilities and medicine are dependent on the way they facilitate the operations or organize the real estate. Several categories have been made for these real estates that move from being decentralized to centralized and from tactical to strategic to provide more aspects of real estate and facilities management that can generate more profit.


Locally managed commercial real estates are made at the local level to serve to a specific community. A very small number of such healthcare industries are found in Los Angeles as it has no ability to coordinate any sort of property-related activities. Only some facilities are provided in these type of real estate assets and they last for a very short period only. Another category is the centrally administered healthcare industry that plays a role of oversight to the plans that are developed or implemented at a local level. This can help in making necessary improvements to the decisions that were made independently at the local level without any regard of the overall real estate system.


The purchasing power, different services and supplies, project management, etc. can be setup to reduce the overrun risk. However with this type of centrally administered commercial real estate, several plans for shifting medical services to other hospitals and strategies that prove to be more efficient are not ventured in this field.


What is the good news?


The centrally managed model of these type of real estate gives freedom to developing and implementing the property plans that can include constructions, office managements, facilities etc. This system will help in making a good cost saving plans that can include several architectural designs and implementations of them. It also helps in increasing the effectiveness of the services by improving the quality in reducing the costs of the service that are provided.


Only a few systems in the commercial real estate of Los Angeles are placed in the category of strategically managed real estate in the sector of healthcare industry and medical services. They help in developing close co-ordination sites like clinics, hospital expansions etc., and also give spaces on lease by getting all the real estate and facilities decision on themselves. This sort of real estate in Los Angeles cost around $4 billions and is solely accountable for leasing, buying or divesting the healthcare industry of the real estate.


Final Thoughts


The commercial real estate market in Los Angeles is growing every day and has endured in the economic development of the country and the state. With the healthcare industry and the medical real estate, it gives access to the capital to get projects off the ground by providing several financial possibilities in existing services and facilities. Medical industry and medical real estate provide a great influence at the commercial real estate by quantifying the values of the assets by obtaining the right space or a building at the right time for a right price. 


Also, it is surely going to help in identifying the opportunities through several strategic planning and process that can give right solutions to develop a measurable, specific and manageable plans to reduce the overall cost of operation but providing a great quality to what is required. It will also foster in the successful implementation of several new programs that are based on different facility management and missions of the real estate business.


Diane is a highly-qualified translator of the English, Italian and Spanish languages. She has studied extensively in Italy and Switzerland. She writes about a variety of financial services industries including insurance. She has a love of life and a curiosity that drives her both personally and professionally.

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