Health Care Real Estate Briefing: HHS Extends Public Health Emergency | SNF Staffing Shortages Still on the Rise | Record Amount of Real Estate to Hit the Market This Year

Our Health Care Real Estate Briefing is your comprehensive summary of weekly health care real estate highlights happening across the nation.

Last week, there were a number of new legislative updates. The Public Health Emergency was extended, CMS proposed a small increase in skilled nursing facility (“SNF”) reimbursement rates and South Carolina is pushing to repeal its certificate of need (“CON”) law. In other news, the number of new COVID-19 cases in SNFs is down significantly, although staffing shortages continue to be one of the top issues facing SNFs and other health care providers. Furthermore, COVID-19 is having a major impact on return to work. A number of reports indicate that fewer employees have returned to work than expected. For this reason, companies are hesitant to renew office leases. A record amount of office space is expected to hit the market this year. Real estate brokerage firm CBRE released two new investor sentiment reports. Health care real estate continues to be one of the most sought-after real estate assets. Finally, a number of new health care projects were announced across the country.

1. The Department of Health and Human Services extended the Public Health Emergency through July 14, 2022 as a result of the effects of COVID-19. The Public Health Emergency has been in effect since January 27, 2020.
2. CMS plans to increase Medicare reimbursement for SNFs by 3.9% in fiscal year 2023. The increase will be reduced by a 4.6% reduction in funds to account for overpayments by CMS in previous years per Modern Healthcare.
3. South Carolina is moving forward with its plan to repeal its CON program. A house committee will review the matter this week per KPVI-DTV.
4. AARP released new data on the impact of COVID-19 on SNFs. In February and March, the number of SNF patients and SNF employees testing positive for COVID-19 was down 90% from the peak in January. Currently, the number of COVID-19 cases is at an all-time low in SNFs.
5. Staffing shortages continue to plague health care facilities. According to new employment data, about 3 million people in the U.S. have not returned to the workforce out of COVID-related fears – this has been labeled “long social distancing.” Moreover, 1 out of 10 people do not plan to return to the labor market anytime soon per The Wall Street Journal.
6. Across the U.S., only 43% of employees have returned to the office according to data from Kastle Systems and Korn Ferry. Texas has the highest return-to-work rates. In Chicago, Washington, D.C., New York City and Philadelphia, only about 40% have returned to work, and 2/3 of employees say returning to work will have a negative impact on their mental health.
7. Offices leases covering 243M sf of U.S. office space will expire in 2022. This is the most office space to hit the market in a single year per JLL and The Wall Street Journal. Tenants are opting for short extensions (1 or 2 years) and many are giving up space.
8. CBRE released a new health care real estate investor report, stating that 85% of investors believe health care real estate is recession-resistant and 84% plan to be net buyers this year. In 2022, investors have allocated 57% more capital to health care real estate than in 2021.
9. CBRE released a new senior housing investor report. Active adult (“AA”) communities are the most sought-after senior housing category. Average cap rates by category include the following: AA 4.6%, AL 6.1%, CCRC 7%, IL 5.3%, MC 7% and SNF 10.7%.
10. Developer Minto Communities USA is seeing tremendous demand for its Latitude Margaritaville communities. Minto is planning new communities in Austin, Dallas and Houston, and each has long waiting lists. Top amenities at Margaritaville communities include “Fins Up” fitness centers and “Barkaritaville” pet spas per Senior Housing News.
11. Walmart will be opening 5 new health clinics in or near Jacksonville, Orlando and Tampa in April and June.
12. Banner Health is in the process of buying 40 to 50 acres in Scottsdale, AZ for a new hospital per Phoenix Business Journal.

Hall Render blog posts and articles are intended for informational purposes only. For ethical reasons, Hall Render attorneys cannot—outside of an attorney-client relationship—answer specific questions that would be legal advice.