Weekly Health Care Real Estate Briefing: VMG Releases 2023 Healthcare M&A Report | Private Equity in Health Care | CBRE Releases Q4 2022 Health Care Report

VMG Health released its 2023 Healthcare M&A Report. The report mentioned the following:
- ASC transaction volume is expected to be strong as large operators continue to acquire smaller operators;
- Diagnostic imaging center transaction volume has been declining;
- Acute care hospital transaction volume has been relatively flat;
- Dental and eye care transactions make up a majority of the physician practice transactions;
- Home health and hospice transactions are leading the way in terms of post-acute transaction volume;
- Behavioral health transaction volume has been robust with PE firms leading a majority of the transactions;
- Oncology transaction volume has been strong as demand for oncology services continues to increase dramatically;
- Urgent care transaction volume has been robust as PE firms look to exit investments made years ago;
- Dialysis transaction volume has been down as the traditional inpatient model shifts to an at-home model; and
- Laboratory transaction volume has been driven by hospitals selling their lab businesses to large lab operators.
CBRE released its Q4 2022 Health Care and Life Sciences Investor Update. Among the highlights: Q4 MOB transaction volume hit $3 billion, although transaction volume for the quarter was down 41% from the same time period in 2021; MOB cap rates have risen 80 bps (avg. now at 6%) from Q3 to Q4 due to interest rate movement; construction activity has continued to rise with 37.7 million sf of health care product under current construction, which is a 52% increase over Q4 2020.
The Harvard Business Review published an article titled What Happens When Private Equity Firms Buy Hospitals? Key findings: Hospitals acquired by PE firms have performed better financially in some cases than their counterparts; PE operators find ways to cut costs and improve margins by implementing technology and focusing on profitable service lines; clinical outcomes at PE-owned hospitals weren’t materially different than their peers, and it’s unclear whether PE ownership results in more hospital closures.
The Kaiser Family Foundation published an article on The Estimated Value of Tax Exemption for Nonprofit Hospitals. In 2020, nonprofit hospitals benefited from nearly $28 billion in tax exemptions ($14.5 billion federal and $13.2 billion state and local). This represents 43% of their aggregate net income in that year. The $28 billion exemption value exceeded aggregate charity care costs ($16 billion), although nonprofit hospitals also provided community benefits beyond traditional charity care. The value of the exemption rose 41% from 2011 to 2020 as a result of income growth generated by hospitals during that time period.
NYC Health + Hospitals plans to spend $14M to hire Coordinated Behavioral Care, a nonprofit group of behavioral health providers, to help its homeless patients find housing. The goal is to decrease the cost of emergency room visits and improve overall health outcomes for these patients.
As a result of single-occupancy room initiatives, skilled nursing facilities are struggling financially due to high renovation costs, staffing challenges and state-specific occupancy initiatives.
UPMC For You, a division of UPMC, announced an $11 million loan program to preserve affordable housing in Allegheny County, PA. The program will provide loans to developers with plans to acquire existing affordable housing units.
Minnesota Healthcare Learning Cohort announced a year-long learning endeavor to study health care and housing with the goal of influencing future policymaking. The Minnesota Cohort will dedicate 30 employees to this initiative.
Freestanding emergency departments are making a comeback. HCA Florida Gulf Coast Hospital opened a new $11 million 24/7 freestanding emergency room in Panama City Beach. The 11,000 sf facility will employ approximately 30 full-time health care professionals with additional staff hired to support growing needs.
South Texas Health System broke ground on its 7th freestanding ED. The $14.3 million project will be a 24-hour full-service emergency room providing urgent care, diagnostic services and laboratory services.