After a two-year hiatus, the annual National Healthcare Conference was reinstated this fall as an opportunity to gather the industry’s leading experts in Denver. The mile-high city was a fitting backdrop to the sessions, panels and presentations that explored the peaks and valleys of the current healthcare landscape.
Colliers’ professionals and clients collaborated and re-connected in-person as the sector enters its third year of unpredictability, and together were able to navigate how the “next normal” in healthcare may look. The conference covered comprehensive topics, and multiple days of sharing produced and abundance of learnings, emerging trends and critical conversations. Here’s the key takeaways from the 2022 Colliers National Healthcare Conference (NHC).
Labor Shortage Remains at the Forefront
Nationwide, the healthcare workforce and labor shortage remains top of mind going in to 2023. Advisory Board shared research during the keynote address that showed 95% of CEOs are concerned over the RN shortages.
Jeff Harrington, S.V.P., Chief Financial Officer for Children’s Hospital of Colorado, discussed the high rate of turnover happening in hospitals and the trickledown effect this can have. Large turnover trickles down, negatively impacting the operator and the overall patient population, which ends up suffering from the lack of supply for beds and rooms.
Among other headwinds the market is facing in the sector, solving these staffing challenges won’t happen overnight, and is not a short-term issue. In the long run, healthcare labor shortages can impact future development, as healthcare organizations have to assess their labor pool as they make forecasts for future health and hospital centers.
Impact of the Economic Climate
The last couple years have been filled with economic inconsistency but rising inflation and historic interest rates reared their head in 2022.
Naturally, investment and debt & equity were prominent topics at NHC. The Private Equity & Investment in Physician Practices panel focused on the role of PE as investors and consolidators of physician practice groups. Experts shared what their experience has been and their outlook for future consolidation.
With the current economic conditions, they are seeing more PE funds and consultants reassessing their positions and underwriting their valuations. Underwriting is also impacting developers like NexCore, who shared with NHC attendees the necessity of making pivots during the development stage on medical office buildings to have underwriting assumptions as construction costs continue to be a moving target with cause for concern.
Consolidation with physician groups will continue, but the rate may decrease in 2023. Research from Colliers Capital Markets reports that Q3 transaction volume was down across all asset classes compared to 2021: “This is not a surprise, as higher borrowing costs and multiple headwinds are making deals harder to complete.”
Despite the economic outlook, investors expressed optimism on where healthcare assets are in the cycle and are largely bullish on the sector despite headwinds on the operator and developer sides. Understanding that there will likely be pricing adjustments for the interest rates will be key.