The not-for-profit system went to the bond market last year to fund a $260 million 192-bed tower in Albuquerque and the project continues to move forward. COVID-19 reinforced the need for more capacity, particularly high-acuity care, as well as the imperative for greater control over its facilities, said Clay Holderman, Presbyterian’s chief operating officer, adding that much of its revenue comes from premiums, which helped insulate the integrated system.
All the rooms in the 335,000-square-foot tower will be sealed so they could meet standards for either regulatory isolation or negative pressure. The emergency department will be modified to house separate triage centers and waiting areas for those with respiratory disease symptoms. There will also be a resuscitation room.
The tower, which is replacing an aging facility with shared rooms, will give Presbyterian substantial flexibility in future responses to infectious diseases and other pandemics, Holderman said.
“We think this is a 9/11 event,” he said, adding that customer expectations have been irrevocably changed. “Just like airports were not the same after 9/11, we don’t think hospitals will be the same after COVID. We’re looking at this as many potential waves of not just COVID, but other SARS-like infectious agents. It is changing how we think of a hospital altogether.”
The rise in high-acuity cases, the telehealth surge, social distancing guidelines, work-from-home arrangements and margin crunch are among a host of COVID-19 consequences that have prompted providers to reassess their real estate. Health systems are evaluating how to prepare for future disasters, consolidate where appropriate, and design flexible spaces.
Before COVID-19, only about 7% of Presbyterian’s primary care was virtual. That has shifted to 82%, and executives expect that to ultimately settle around 50% to 70%. Presbyterian is contemplating consolidating its outpatient footprint as physicians rotate through shared pods during the week, limiting the necessary staff support, preparation and other overhead since they may handle more of their cases through video visits from their homes.
The cost of an in-person primary-care visit has gone up around 60% per patient, accounting for the additional spacing and cleaning requirements, Holderman said. Maintaining most of its virtual business makes financial sense and meets customers’ expectations, he said. “Customers expect different practices—they don’t want to be in a waiting room next to someone,” Holderman said.
There is also opportunity to cut square footage for the around 3,000 administrators of its health plan, revenue cycle, call centers, and legal and human resources services, he added. About 85% of its administrative employees said they can work more effectively from home.
For years, the push to cut expenses has spurred talk of how overbedded markets are a “drag on health systems’ cost structure,” said Jay Johnson, national director of healthcare markets at real estate management firm JLL.
The average occupancy rate of acute-care beds at short-term hospitals was 48.1% in 2019, up from 48% in 2018, according to a Modern Healthcare analysis of Medicare cost reports from more than 1,800 hospitals via HMP Metrics. Meanwhile, average critical-care bed occupancy dropped slightly from 55.2% to 55%. According to American Hospital Association data, average inpatient occupancy has declined about 11 percentage points from 1975 to 2018.
“But in the grip of the pandemic, providers may realize they need to have not just excess bed capacity but ICU beds, whether they are permanent or convertible,” Johnson said. “A lot of health systems don’t think COVID-19 is the black swan—in some ways this could be a dress rehearsal for something far worse.”
Still, Johnson expects a net reduction in total square footage of healthcare space.