2023 was marked by predictions that failed to come to fruition. The start of 2024 has been marked by wild cards, from continuing geopolitical uncertainty to an economic slowdown, but not a recession. 2024 will be notable not only because it’s a Leap Year but also because it’s a year of worldwide elections that will shape what is to come.

As the healthcare landscape changes, systems must reevaluate the best path forward to support patients and caregivers and ensure financial sustainability across their real estate portfolios. Cascading changes in the healthcare industry and the current economic landscape are necessitating new real estate strategies for health systems as they manage cash and affect sustaining change. Though median hospital margins improved in 2023 and through early 2024, according to Kaufman Hall, half of the hospitals and health systems are still operating at a loss despite the deceleration in wage growth and inflation. Interest rates have altered financing costs, and raising capital is more difficult today than just a few years ago. Additionally, health systems must contend with new entrants who are well-capitalized, agile, and disruptive.

Owners who continue to invest in and operate their real estate portfolios as they did a few years ago are unlikely to realize expected value returns. The key to success lies in embracing these challenges and proactively looking to rebalance risk and return of capital assets. This adaptability is crucial for health systems to position themselves for success in the evolving healthcare landscape.

As healthcare is redefined in 2024 and beyond, we must consider how space utilization changes to better serve growing populations and complex care needs. This approach includes merging inpatient, outpatient, and digital care into a reimagined model that supports integrated and flexible care.

Learn more as DPR’s healthcare team considers these market drivers in our continuing Healthcare Insights series.