Yesterday, HSA PrimeCare senior vice president, Jon Boley, was a featured panelist at CAPRATE Events’ Second Annual Chicago & Midwest Healthcare Real Estate Summit. Boley joined three other healthcare real estate experts to discuss the evolution of the healthcare real estate lease and navigating the complexities of negotiations with hospitals, healthcare systems, and physician groups. The other panelists included Scott Becker, partner at McGuire Woods, and Michael O’Keefe, director at Navigant Healthcare Real Estate Practices. Mark Johnson, managing principal at Cushman & Wakefield, moderated the conversation.

With the rollout of the Affordable Care Act, healthcare systems have begun to shift from a volume-based, fee-for-service reimbursement system, to a more outcome-based system, requiring treatment throughout an episode of care. In many markets, this transition has driven the consolidation of physician practices into larger healthcare systems. From a real estate perspective, Boley explains, this means fewer tenants.

One example that we’ve had is our property in Michigan, an orthopedic center on a hospital campus. We acquired it in 2012 and 28% of the property was leased to the hospital. Today, that stands at 63%. Over that time period, the hospital has acquired the independent practices within the building… Really we’re seeing an evolution from a multi-tenant building to a single-tenant hospital [facility].

For more information on healthcare real estate trends, subscribe to the HSA PrimeCare YouTube channel to watch episodes of our informational healthcare real estate series, “Ask an Advisor.”