MOBS HELP KEEP HEALTHCARE COSTS DOWN

June 16, 2023

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The healthcare industry is under pressure to be more cost efficient – a key trend that Alliance is tracking.

An aging baby boomer population is moving to new locations at a time when they need ever more care. In many of these geographies, higher demand is intersecting with shortages of nurses and other needed professionals.

Overall, costs are high in the US healthcare system, relative to many other advanced countries. Insurers are pressuring medical providers to control costs.

One of the key ways that the industry is moving toward greater efficiency is by shifting care to lower acuity settings.

Why pay hospital prices for an endoscopy when you could do the same procedure in an outpatient center?

Minor surgical procedures can be performed in ambulatory surgical centers (ASCs). Urgent care clinics can stand in for hospital emergency rooms.

Alliance is staying very close to this trend in our investing. We’re not just buying doctors’ offices, we’re allocating capital to this area that is critical to the efficiency of the healthcare system, medical office buildings (MOB).

Quality healthcare just requires the right personnel and an appropriate space. Outpatient care in MOB is almost always more cost effective than going to a hospital.

The trend toward delivering care in lower acuity settings is strong. More ASCs and MOBs are getting built, even during a time when commercial real estate construction has slowed.

This trend of moving medical market share away from hospitals and toward MOBs is a huge win for the industry. It’s helping to keep costs down, quality up, and the medical system strong. Because demand for care is growing, this shift is win-win. Even hospitals that are losing market share on a percentage basis are coming out ahead as the market grows.

As medical systems look to cut costs and move to more efficient care, growth in MOB is great for the industry. It’s also rewarding for investors, like Alliance, who are closely tracking the trends and putting capital in the right places.

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