🔒Rise of telehealth hasn’t slowed boom in medical office buildings

As the need and use of telehealth has skyrocketed in Connecticut and nationwide due, primarily, to the global health pandemic, it hasn’t affected the ongoing boom of medical office buildings sprouting up all over the country, hospital and real estate experts say.

In fact, growth in the medical office building market is surpassing almost every other area of construction, experts said.

“These medical office buildings are booming and are a real growth area,” said Nicholas Morizio, Hartford president of property broker Colliers International. “Telehealth is here to stay but it really hasn’t affected the big guys, like Hartford HealthCare and Yale New Haven Health,” in terms of their efforts to continue building new medical offices, including urgent care centers located closer to where patients live, he said.

The trend is due to hospitals and other care provider’s increasingly looking to get patients out of the emergency department and into less-costly care centers, Morizio and others said.

At the end of the fourth quarter of 2021, there were 703 medical office building projects under construction nationally totaling 50.4 million square feet of space, according to a healthcare marketplace report published earlier this year by Colliers. That was up from 44.2 million square feet 12 months earlier.

That same report showed medical office building construction remains concentrated in off-campus facilities that provide accessible locations and accommodate the shift from inpatient hospital care.

Retail health

The rise of telehealth has not slowed Yale New Haven Health’s efforts to continue building facilities that “meet patients where they are,” said Senior Vice President and Chief Information Officer Lisa Stump. “National and statewide data tells us the population, especially here in Connecticut, tends not to want to travel more than 30 minutes for its medical needs.”

Yale New Haven has several medical office building projects currently underway.

They include plans for a major outpatient center at Macy’s former Meriden Mall storefront, which Yale New Haven purchased last year for $2.8 million.

Hospital officials said the 179,258-square-foot site will be used to provide advanced ambulatory care for patients through collaborations with the Smilow Cancer Center, Yale New Haven Heart and Vascular Center and Yale New Haven Children’s Hospital.

Construction started early this year and the project is expected to be completed by the end of 2023 or in early 2024.

“This project is incredibly exciting as positioning medical care in retail and shopping mall settings opens up a different way of thinking about care,” Stump said. “We can bring care into a much more inviting and rapidly-accessible location. We can break down the barrier of going to the doctor.”

Yale also has other ongoing projects in the works, including a 21,000-square-foot site in North Haven that will offer several medical specialties, and a 500,000-square-foot Neurosciences Center on its St. Raphael Campus in New Haven. That $838 million project will include two new patient facilities and focus on innovation in the neurosciences. The pandemic delayed certain aspects of construction, and the facility is expected to now open sometime in 2027, officials said.

Integrated telehealth

While medical office construction continues at a steady pace, telehealth use has also skyrocketed, said Dr. L. Scott Sussman, Yale New Haven’s physician executive director of telehealth and assistant clinical professor of medicine.

Both trends don’t necessarily have to be at odds with each other, he and others said.

“In 2019, before COVID hit, we did 316 telehealth videos a year,” Sussman said. “Now, we do 500,000 every year and it’s growing. The clinics are quite busy. Previously, you did not have enough space to see patients but now physicians can see patients via video in select office spaces.”

Comparatively, officials at Hartford HealthCare said they had less than 300 virtual visits in 2019 and now do more than 835,000 video calls annually.

The current trend is to have specialized telehealth examination rooms, according to several experts.

“Telehealth has not stopped; it’s been integrated into the medical office buildings. They are doing telehealth in exam rooms now,” said Ron Goodin, healthcare architect for Simsbury-based Phase Zero Design. “Exam rooms typically have a counter with a sink and a monitor to share reports, a couple of chairs and exam tables. Now, exam rooms are all set up with wall-mounted computers and monitors. We are seeing more and more of that. The flexibility of exam rooms being used for telehealth is important especially as real estate prices continue to climb.”

Those medical office real estate costs depend on the market, but Goodin said they typically run about $25 per square foot in the Hartford region, to $40 per square foot and higher in areas closer to New York City, like Westport and Greenwich.

According to Colliers, average net asking rents for medical office building space nationally increased by 1.7% in 2021 to $22.61 per square foot, setting a new high for the sector.

Construction costs have also jumped 25% to 50% the past six to 10 months, driving up costs further, Goodin said.

Dr. James Cardon is Hartford HealthCare’s chief clinical integration officer and CEO of Integrated Care Partners, which includes the health system’s employed physicians.

Cardon said HHC currently has “dozens” of construction projects either underway or ongoing in the state. They include a mix of urgent, ambulatory, primary and specialty care services.

HHC opened its 23rd GoHealth Urgent Care center in the state in Newington on May 25, with more in the pipeline.

“We want to get to where there is a need and not just have more to have more,” Cardon said. “This is not a Starbucks strategy where you have more and more. We want to provide access and care where needed. We want to assess the need and then, if there is a need, to build it.”

Cardon said HHC’s focus is to offer services outside of the more costly hospital setting.

“It’s kind of like a blitzkrieg, they have gone in pretty much all of the markets within the state,” Goodin said of Hartford HealthCare’s aggressive expansion. “They are even going toward the Springfield, [Massachusetts] area. In order of being busy with projects HHC is at the top of the list, followed by Yale New Haven Health and then Trinity Health of New England and Nuvance Health.”

Small players in the game

It’s not just the large hospital systems aggressively expanding their real estate footprints.

Smaller entities are as well.

Lynne Rosen is the CEO of Brookfield-based PhysicianOne Urgent Care, which acquired West Hartford’s New England Urgent Care in 2020. She said her company currently has 23 locations, including 16 in Connecticut, with plans to add about a dozen more in the next 18 months.

“Our goal is to have an urgent care within 10 minutes of every patient’s home,” she said. “The healthcare system is very stressed and patients have a hard time accessing primary care. We believe we can give people the care they need and want and demand, when they need it.”

Rosen said that five years out she foresees “a continued growth of urgent care centers in all states. There is always a need for face-to-face care. The integration of urgent care, on-demand care and telehealth into the broader healthcare system will make it more efficient and effective.”