By Mark C. Royal, CEO at PIE Development (“Real Estate for Healthcare”) and Founding Team Partner at Bespoke Real Estate Advisors
November 2021
The Pandemic’s Exposure of an Endemic Problem
COVID-19, with more than 766,000 American deaths in just over 18 months, has revealed just how dangerous a lack of broadly dispersed, innovative, readily available healthcare can be to the security of the United States. It was not just the dearth of ICU beds, PPE and the like, but also the lack of local infrastructure to test, track and treat all manner of health threats in the face of a pandemic. As a result, millions of people lost loved ones, or found themselves, family or friends dealing with profound, long-term health issues from COVID-19. What’s more, many individuals who never contracted COVID-19 still suffered medical setbacks as a result of avoiding medical care — even in emergency situations — for fear of acquiring COVID-19 in the hospital. The economy came to a virtual standstill, and businesses of all sizes that were thriving pre-pandemic failed.
What has played out for the U.S. economy and, tragically, for so many individuals, was the catastrophic failure of our current healthcare system to adequately address the health and security of the people in this nation. Our security continues to be compromised by this failure, as much as by any other threat.
The Health of Nations
Healthcare is an integral component of the national wellbeing. What is the pursuit of happiness without health? Under its founding documents, the U.S. was created “in order to form a more perfect union, establish justice, ensure domestic tranquility, provide for the common defense, promote general welfare … for ourselves and our posterity.” Care for the sick, and the health of the population overall, are cornerstones of “general welfare.”
Nations, even the U.S., are not physical things. They have physical representation in their written constitutions and laws, but countries and their borders are imaginary constructs. Many different nations have existed on the same land over time, depending upon the power and consensus of the people in the current moment. Laws, a constitution and borders — the basic systems of modern national government — can neither self-exist, nor self-operate. They exist only so long as there is consensus in the minds of the many people who agree to recognize the governance of the State.
What, then, is national security? It cannot be the safety of the laws, the constitution, or the integrity of a country’s borders in the abstract, since these only exist in the minds of the people who acknowledge them. National security must, therefore, be the safety, care and wellbeing of the actual people. Individual health (or the striving for health) is the underpinning of robust communities and nations. To be clear, it is not the sick who are the problem. Rather, the problem is the lack of quality, inexpensive healthcare available to those who need it.
Waiting for Godot
As a nation, we readily acknowledge the threat of outside force and internal lawlessness. We invest, with little debate, trillions of dollars, and have risked countless lives in military and civilian forces to counter these threats. These threats harm our people and, therefore, the fabric of our nation. But so does illness — only more regularly, and often to a greater extent.
We do not address the obvious national security risk posed by inadequate healthcare for our citizens with the same national zeal that we approach external threats and internal violence. Much of our population is left to individually fend for themselves with inadequate access to quality healthcare, and financially ruinous services and medications.
Though we continue to make progress in addressing the COVID-19 virus, other viruses lie in wait, and more natural disasters loom. The underlying gaps in the healthcare system remain. As we have so tragically seen, old-fashioned, hospital-based healthcare delivery does not support the weight of national emergencies, be they viruses, hurricanes or other disasters.
“Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat,” said Sun Tzu. The U.S. has yet to settle on a coherent national healthcare strategy. Waiting for Washington D.C. to solve this very solvable problem is like waiting for Godot.
If You Want Something Done Right…
Thankfully, private enterprise can help to revolutionize healthcare for all, and fill some of those gaps. One promising fix to this problem, which some healthcare providers, payors, physicians and real estate developers, including this author, are betting on, is delivering hands-on, direct healthcare in a retail environment. Smaller, more localized, retail-style urgent care and emergency centers (5,000-20,000 sq. ft. facilities), or micro-hospitals (15,000-30,000 sq. ft. facilities) can provide a wide range of healthcare services. From telemedicine to homecare, to urgent and even emergency care, smaller, more nimble facilities will better address the unscheduled care needs of patients across the country. The services in these facilities can be delivered by the same types of board-certified physicians and qualified staff that hospitals employ. And the cost of care in these smaller facilities can be as much as 50%-90% less, for both patients and payers. This is true in large part because these innovative providers do not have the tremendous overhead of a much larger facility or campus, nor do they have the staff redundancy and loss-leader services that burden larger hospitals.
These new facilities can be placed in or near retail mall developments, town centers, residential communities and multi-family developments, as well as in more rural areas that larger providers would have limited interest in due to lower patient volume — which can greatly expand access to underserved populations, too. As an added benefit, offering this type of innovative, community-based healthcare service can help retail malls and business centers reinvigorate. These medical facilities naturally attract new traffic and other beneficial activity for real estate owners and surrounding businesses.
Our capacity to deal with and not be overwhelmed by national emergencies will be profoundly enhanced by these innovative facilities. Several states currently allow such facilities, and more are looking at modifying their regulations. Many states operate under long-established (some might say antiquated) guidelines, or Certificate of Need (CON) regulations that were originally intended to ensure that healthcare services were evenly and fairly distributed. These regulations give states control over who can deliver healthcare, and where it can be located. CON laws allow states to, for example, block competing hospitals from oversaturating a particular market where, perhaps, the hospitals might receive greater profits from a patient base that is well-insured with private insurance. This, in theory, forces hospitals to distribute care more equitably to areas that might be “underinsured” or underserved. In practice, however, these CON regulations have at times dampened competition and created a method for large hospitals to maintain dominance, regardless of the affected communities’ interests. Given these historic restrictions, the slow trend toward allowing these innovative providers is encouraging. As the effectiveness and economic viability of these new models is successfully demonstrated in states such as Florida, Texas and Colorado, other states may gravitate toward them.
More Is Better
Many investors and large organizations are focused on the technological side of improving patient care and lowering costs through apps, improved electronic medical records and portable home medical devices. A tremendous amount of private funding is rightfully flowing into these technological efforts. Nevertheless, until the cost, convenience and accessibility of hands-on care delivery is addressed, serious health-based threats will remain a grave national security risk.
Three solutions seem to warrant particular attention: 1) creating these new, localized, entrepreneurial healthcare delivery businesses and facilities, 2) increasing investment capital funding for them and 3) creating a national healthcare strategy that encourages these innovations, at least on a private level.
The obvious commercial potential of these new, entrepreneurial healthcare models continues to attract more and more investors. The financial and social return on these businesses can be significant for investors and communities, alike. And, as these innovations take hold across the country, we can better mitigate the limitations inherent in the current system and bring greater security to our population.
These new private facilities will ultimately work synergistically with traditional hospitals, freeing up hospital bed space and thereby obviating many of the sudden over-capacity problems crystalized by the pandemic. As the roles, strengths and teaming-potential of each becomes clear, a seamless system of optimal healthcare can emerge.
The private pioneers of these new healthcare delivery models are leading the way to long-overdue changes. Government can follow, perhaps when Godot arrives.
