Hospitals' operating performance continues to show signs of improvement, but real estate is one key opportunity health systems should not overlook to bolster their balance sheets and help meet growth goals, Kaufman Hall said in its latest "National Hospital Flash Report."
Healthcare real estate is a strong investment, as shown by its performance during economic uncertainty, including the COVID-19 pandemic. It can enhance a health system's asset portfolio and offer flexibility to meet changing community healthcare needs.
"Throughout the pandemic, healthcare asset values stayed solid. Unlike other sectors of commercial real estate that are subject to economic cycles and market volatility, healthcare real estate is characterized by stable demand," Steve Aleman, CFO of Ontario, Calif.-based Prime Healthcare, recently told Becker's. "People will always need healthcare services, regardless of economic conditions, and healthcare facilities must be available to meet those needs. This makes healthcare real estate a recession-resistant asset class that offers long-term stability."
Kaufman Hall outlined four action steps for health systems to take advantage of this opportunity:
1. Health systems must have a firm grasp of their owned and leased real estate portfolio, immediate and future capital needs as well as clinical expansion plans.
2. Real estate strategies can support offensive strategies (acquisition of competitors or expansion of clinical platforms) and defensive strategies (strengthening liquidity).
3. Specific financial and operational goals should be established to guide the structuring and execution of these strategies.
4. Based upon the established goals, specific transaction alternatives (sale/leaseback, foundation model, etc.) can be pursued to meet capital needs and growth plans.
Click here for more details on the Kaufman Hall report.