The rising cost of healthcare is putting financial pressure on physicians and driving consolidation in the healthcare industry. Younger doctors are increasingly seeking employment over private practice for stability and work-life balance. As a result, 85-90% of independent physicians will likely join larger healthcare systems. This transition is increasing demand for larger medical office spaces suitable for groups of physicians. It is also fueling growth in ambulatory surgery centers, which provide a more cost-effective alternative to hospital-based surgery. Meeting these changing needs will shape the healthcare real estate market going forward.

1. The Rising Cost of Healthcare
Centers for Medicare & Medicaid Services

2. The Hospital / Physician Relationship
• Physicians are transitioning back to hospital employment
• Physician reimbursements are going down, while costs are
going up
• Younger physicians are attracted to the stability of an
employer/employee structure and the opportunity to spend
more time with their families
• 85-90% of independent physicians will consolidate into
some type of system. (*2011 BOMA Medical Office Conference)
• How will these shifts impact the healthcare real estate
market?

3. Demand for Medical Space
• The employment of physicians by hospitals creates higher
demand for space from health systems and reduces the
demand for smaller individual medical office spaces
• There is a need for new, well designed, efficient medical
space.
• Typical medical office leases:
– In years past: 1,000-3,000 SF for 1 to 3 physicians
– Today: 5,000-8,000 SF for up to 8 or 9 physicians
• New York City, in particular, lacks large blocks of quality
medical space to meet current and expected future
demands

4. Ambulatory Surgery Centers (ASCs)
• Traditionally located adjacent to or in close proximity to a
hospital
• Base cost for developing an ASC is substantially higher than
a medical office building
• Construction, equipping and licensing a surgery center on
average ranges from twelve to fifteen months
• ASCs can operate more cost effectively and efficiently than
hospital based surgery and are more desirable to both
patients and doctors alike