The Pew Center predicts 10,000 Americans will turn 65 every day from 2011 to 2030. One result: there will be an increasing demand for health care services in Maine, the nation’s oldest state.
Some of that impact in Portland can be seen now — Maine Med is in the middle of a $525 million expansion and Northern Light Mercy is embarking on its own $75 million expansion.
But there’s also plenty of evidence elsewhere: urgent care centers cropping up in many suburbs; specialty care medical office buildings opening; and pharmacy franchises opening on-site clinics.
How will Mainers get their care in the future, and what is that probable impact on commercial real estate? Three experts joined moderator Carol Coultas to unpack what trends health care providers are seeing now, and what might lie ahead.
- Charlie Therrien, senior vice president of Northern Light Health and president of Northern Light Mercy Hospital
- Jessica Estes, partner and broker with The Boulos Co. commercial real estate firm who recently closed on four deals involving health care provider clients
- Jim Damicis, senior vice president Camoin Associates, a public policy and analysis firm
Here are some of the takeaways:
By consolidating its State Street facility into its expansion at Fore River Parkway, Mercy hospital will actually reduce its footprint by about 100,000 square feet, and thus its operating costs, said Therrien. But it also reflects a change in the delivery of health care services as same-day surgeries replace three-day hospital stays, reducing the number of in-patient beds needed. Medical and technology advances of the last several years have changed who needs hospital care now. Had Mercy pursued its consolidation plan eight or 10 years ago, it’s likely it would have overbuilt, he said.
More medical services are available in a spectrum of facilities, leading to what Damicis describes the retailization of health care. Whereas real estate development used to have one purpose — industrial, retail, office — there’s now much more mixed use, often combined with residential building. Previously, health care used to account for about 2 percent of retail occupancy, but that number is trending toward 40 percent when development is combined with other uses.
The softening of bricks-and-mortar retailing means there’s now available space that can be converted to medical use, said Estes, often for less money than building new. As an example, she cited the transformation of the Best Buy building in Topsham into a Central Maine Medical Center and partners complex. Consumers are increasingly making health care decisions based on accessibility and location — they like the easy access and parking of non-hospital facilities; the providers like the high visibility and relatively low cost of the conversion.
Like many other industries, the thing that will hold back future development of medical facilities here in Maine is available workforce, said Damicis. Hospitals and other health care providers are having the same problems as other employers finding and retaining a workforce to meet the demand for their services. Metro areas with a critical mass of large hospitals, such as Boston, also deal with the labor squeeze, but the pool of potential employees is much denser because of the concentration of providers. Therrien concurred, saying Mercy is challenged by a 10 percent vacancy rate in its workforce.
Although there was much speculation that the 2017 tax reforms would make it more expensive for tax-exempt organizations to borrow money, that hasn’t been borne out at Mercy, which is seeing historically low interest rates, said Therrien. Another financing boon: The Maine Health Care and Higher Education Facilities Authority, a quasi-state funding agency that hospitals and colleges can tap to help pay for big projects, was underused during the LePage administration because the former governor was unwilling to sign off on those state-backed loans. Gov. Janet Mills has indicated her willingness to back those loans, opening up new, low-cost financing options for certain tax-exempt organizations, said Therrien.