By thinking and acting like real estate investors, health systems and hospitals can generate significant cost savings, secure capital to invest in technology and care delivery, and design more efficient patient-centric delivery systems, according to a new independent report commissioned by CBRE, titled “Enhancing the Value of Hospital Real Estate.”
While hospital and health system executives continue to manage cost pressures from new regulations, consolidations, and shifts in the delivery of care, they are in control of an historically underutilized asset: $1 trillion of owned real estate.
The report establishes the extent to which real estate affects the healthcare industry:
“Our analysis underscores that health systems should recognize real estate as a distinct cost center that offers opportunities for savings on par with drugs, products, suppliers and even professional fees,” said Jim Hayden, Executive Managing Director of CBRE Healthcare. “There are many creative ways to employ real estate to benefit those in need of care.”
Some real estate strategies that hospital and health system executives can employ to control costs and secure capital include:
“Monetizing existing healthcare real estate or leveraging investors to develop new healthcare properties both offer potential benefits to health systems,” said Chris Bodnar, Vice Chairman of Capital Markets, CBRE Healthcare. “Depending upon the cost of capital and the opportunities to reinvest proceeds from real estate into other areas offering a higher return on investment, both strategies can have significant impacts on a health system’s balance sheet and overall ability to deliver quality care while controlling costs.”
CBRE commissioned, on an independent basis, Jerry L. Doctrow, a prominent healthcare consultant, to analyze how real estate can be used to address the challenges facing health system executives. Doctrow is a former stock analyst who spent 15 years following health care REITs and advising corporate and not-for-profit clients.