The Affordable Care Act and it’s effect on Medical Office Buildings

Much has been discussed regarding the passage and implementation of the Patient Protection and Affordable Care Act. It is interesting to note how the law, thus far, has impacted Medical Office Building (MOB) development, leasing, and investment.

One of the first changes was to patient records, with a transition to an electronic patient records system. While initially challenging, it means an office requires less space for a records retention room. This translates to a savings in the overall Tenant Finish costs as well as a savings on rent. There is a slight increase in the IT requirements, but that equates to much less than build-out costs or overhead on more square footage. New MOBs no longer have to strengthen floors to hold the weight of a multitude of file cabinets. All doctors’ offices are now designed and wired for computer access in all of the exam rooms.

Medical office leasing activity was slow from 2009-2012 when the future of healthcare reform was unknown and physicians were uncertain about the fate of their practices. Not only are physicians realizing that healthcare services are still in need despite the turns in the economy, but the new law will most likely increase the demand for medical facilities and doctors.

With the decrease in interest rates causing low rates of return on average investments, lucrative investment opportunities remain in healthcare real estate. The main driver of successful real estate projects are tenants, and therefore, physicians are finding a great marriage with ownership in the real estate for their practice.

Many articles address the change in healthcare practices by doctors joining large organizations to reduce the pressure on costs. Concurrently, to economize, the drive for healthcare services tends to be in satellite facilities, walk-in clinics, off-campus medical office buildings, and multi-specialty suites where different specialists share resources (and costs).