Marc Schwartz, one of the leaders of HSSK’s team of experts, recently attended the Bisnow Healthcare Summit. Below are his initial thoughts following the event.
“Tuesday I attended the Bisnow Healthcare Summit and learned some interesting facts that could impact the valuation and economics of some segments of the healthcare industry in the next few years. We all know that hospital operating margins are being strained by lowering reimbursements and growing costs. I was a little surprised to learn that the operating margin for the average non-profit hospital is down to 2.5%. In contrast, cap rates last year for purchases of medical office buildings were predominantly in the range of from 6% to 7.5%, depending on market and whether they had single or multiple tenants.
Another overall observation was the move by hospitals to establish more and more facilities in retail type facilities at daily need sites, such as strip shopping centers. The push is to compete by being more convenient to the patient, so not only are we seeing clinics and lab facilities in retail locations, but also urgent care centers. In Houston, Texas Children’s has two pediatric urgent care facilities planned and Memorial Herman is putting them throughout the city. Although Houston is in the lead with the most off-site care facilities currently existing, this trend is growing all across the country.”