Vital Signs 2022

VITAL SIGNS

The Healthcare Sector: Moving Beyond the Pandemic and Meeting the Challenges of 2022

This time last year, the healthcare industry was in recovery mode—attempting to make up for lost healthcare spending and revitalize the workforce that was experiencing pandemic-fueled burnout. While consumer spending in the sector has been revived, there are still long-term issues affecting the healthcare clinical workforce, most notably a growing labor shortage, as well as a rise in inflation and shifting sites of care—all of which are expected to affect growth and performance of healthcare commercial real estate. Impacts of tight labor markets, inflation and rising supply chain costs have had an acute effect on the expenses of hospitals and health systems around the country. In 2022, health systems have reported a 37% increase of median labor expenses per discharge as compared to pre-pandemic expenses

in 2019, according to The Advisory Board. Not only have expenses risen for health systems, but revenue also has declined because of drops in inpatient visits, discharges and billable operating minutes. Additionally, most pandemic-era federal and state support funds have since expired, adding further stress to hospital operating budgets. As of 2022, the American Hospital Association estimates 33% of hospitals are operating at a negative margin. As this trend is expected to continue in the short term, health systems will likely be forced to make difficult decisions regarding capital expenditures, including investment in new real estate projects, as well as consider further consolidation opportunities. Despite these challenging conditions, there are some silver linings. In 2022, 92% of health systems report that utilization volumes are now within 5% of pre

Impacts of tight labor markets, inflation and rising supply chain costs have had an acute effect on the expenses of hospitals and health systems around the country.

VITAL SIGNS 2022: PERSPECTIVES ON HEALTHCARE AND MEDICAL OFFICE BUILDINGS