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Private Equity’s Impact on Healthcare Facilities Management

Jun 25, 2023 | Public | 0 comments

Facility managers must be prepared to adapt to balance financial priorities, quality of care standards and patient experience.

The healthcare industry has experienced massive shifts in recent years, from the rise of telehealth to the retailization of non-urgent care. Among these changes is a steep rise in private equity investments. Private equity firms own at least 386 U.S. hospitals, which amounts to 9 percent of all private hospitals and nearly one-third of proprietary for-profit hospitals, according to a report from the Private Equity Stakeholder Project (PESP). And investors’ appetite for assets in this space is growing.

When it comes to capital priorities, private equity firms tend to favor investments in cutting-edge tools and strategies that maximize a business’s growth potential, including analytical tools to understand business processes and boost efficiency. They are also laser-focused on streamlining costs to increase their return on investment — a topic familiar to many in the healthcare space, where 75 percent of leading healthcare systems are looking for ways to cut operating budgets.

To balance these financial priorities with exacting standards for quality of care and patient experience, private equity owned hospitals and healthcare facilities are exploring new models of care, and facility managers must be prepared to adapt accordingly.

New services and challenges

Thirty-four percent of private equity owned hospitals are located in rural settings, accelerating the trend away from large, downtown hospitals toward community-based, non-acute care. While not exclusive to private equity-owned facilities, outpatient facilities are driving more provider demand as consumers seek more convenient, accessible care. Between 2020 and September of 2022, year-over-year inpatient revenues grew 8.5 percent while outpatient revenues grew 30 percent over the same period, according to Kaufman Hall.

As facilities spread out to cover a more distributed footprint, technology becomes an even more critical component of healthcare delivery. For patient care, more than one-half of all healthcare visits happened via telehealth during the peak of the COVID-19 lockdown. JLL’s 2023 Patient Consumer Survey shows the percentage of respondents that ever had a telehealth visit remained steady from our 2022 survey, with 64 percent of respondents having a telehealth visit.

This adoption of telehealth practices could help bring more services to rural settings, allowing physicians to serve multiple facilities as opposed to working in the same hospital or clinic every day. A doctor can evaluate or diagnose a patient remotely via telehealth, supplemented by information and lab results collected by a nurse or physician’s assistant (PA) on site. If the patient needs basic care, such as fluids for dehydration, an onsite nurse or PA can provide it, while more acute care can be managed by transporting the patient to a location with a doctor on site.

These technology investments are exactly the kind that private equity is ready to make, creating more efficient service delivery to a greater number of patients. But even as technology further integrates into the healthcare realm, healthcare systems need more facilities and must be more flexible to deliver care where and when it is needed.

Private equity investments in workflow technology and automation can help facility managers address daily operations, repairs and improvements across multiple smaller facilities, delivering on the promise of systemness by creating scale, reducing costs and generating greater efficiencies throughout the healthcare ecosystem.

When operations are decentralized and siloed, run rate costs are 12-18 percent higher compared with an integrated system. An integrated facilities team that has documented processes, centralized data and advanced technology tools is more cost-effective, accurately predicting maintenance work to save time and money on emergency repairs, and it is more compliant overall.

In a challenging economy, private equity owners are scrutinizing every dollar of capital investment. Efficiently managing and servicing a distributed portfolio of healthcare facilities will require embracing original approaches, as well as innovative technology that streamlines operations without compromising quality. With more outpatient services and smaller healthcare facilities in more rural areas powered by private equity, an integrated delivery approach will be essential for aligning operations with patient care.

With its emphasis on innovation and growth, the influence of private equity will drive transformational changes across the healthcare industry in the coming years, and facilities management will be no exception.

Brad Shokes is managing director of the healthcare division with JLL. 

The post "Private Equity's Impact on Healthcare Facilities Management" appeared first on Healthcare Facilities Today

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