Weekly Health Care Real Estate Briefing: NIC Reports Increased Senior Living Lease-Up Trend | Labor Department Report Shows Decline in Remote Workforce | Hospitals Increasingly Struggle to Fund Construction Projects

The Federal Reserve raised interest rates by another 25 basis points, bringing the Fed’s benchmark target to between 4.75 and 5%, the highest since September 2007. The increase poses challenges for hospitals, particularly for providers with lower credit ratings as they look to borrow funds, complete construction projects and control labor costs.
Data from NIC MAP Vision shows that lease-up trends for senior living communities across the country are accelerating. For Q4 2022, occupancy in primary markets was 83%, trailing pre-pandemic levels by 4.9%, while occupancy in secondary markets was 84.9%, trailing pre-pandemic levels by only 1.8%. Occupancy for assisted living continues to recover more quickly than occupancy for independent living.
Work-from-home is on the decline. The U.S. Department of Labor released a report stating that 72.5% of business establishments said their employees teleworked rarely or not at all last year, which marks an increase from 60.1% of employers in that category in 2021. Two factors are driving the drop in work-from-home days: managers and professionals are being asked to return to the office for more days each week, and the number of fully remote workers is decreasing. Even the share of businesses with hybrid work arrangements decreased from 2021 to 2022.
Pennsylvania lawmakers plan to introduce legislation that would place a moratorium on private equity groups and other for-profit entities from buying hospitals. The legislation would also limit sale-leaseback transactions on hospitals’ real estate. The goal is to curtail the rate of health facility closures in the state, which lawmakers view as a risk of PE ownership.
Colorado legislators have proposed a bill that requires nonprofit hospitals to spend more on “community benefit.” The bill would require nonprofit hospitals to spend 3-5% of their patient revenue on community benefit, unless their federal and state exemptions are worth less than that amount. The bill would also restrict the hospitals’ ability to claim as community benefit the free and discounted care that normally meets the IRS’s “community benefit” requirement.
Georgia’s Lieutenant Governor is promoting a measure in the Georgia House of Representatives allowing hospitals to be built in smaller counties without applying for a certificate of need. The state Senate has already passed the legislation; however, it is still pending in the House.
California Governor Gavin Newsom has asked President Joe Biden to authorize a program called “transitional rent,” which would provide up to six months of rent or temporary housing for low-income enrollees in California’s state Medicaid program. Proponents point to the correlation between housing security and health outcomes, while opponents have raised questions about whether this is “really Medicaid’s job.”
Kaiser Permanente Roseville (CA) Medical Center is building a new six-story hospital tower that will provide more patient beds and expand health care services. The 272,000 sq ft tower will contain 138 new beds, including an ED expansion, and is expected to cost approximately $1 billion. The project is expected to be completed in 2027.
NYU Langone Health is spending millions on vacant retail spaces with plans to build 700,000 sf spread over three new ASCs and imaging centers.
The American Society for Health Care Engineering released its 2023 Hospital Construction Survey, which reported that health care facilities are prioritizing sustainability, technology and safety in new construction and renovation projects in 2023. A majority of survey respondents reported that competing investments and spending priorities, as well as underfunded budgets, presented significant roadblocks to upcoming development projects.
After losing a state land auction late last year, Arizona’s largest health system, Banner Health, now has plans to build a $400 million hospital in Scottsdale.