Physician employment by health systems is surging. According to a 2009 poll by the Medical Group Management Association (MGMA) 65% of physicians who changed jobs in 2009 moved into a hospital employment model. Additionally, almost half of new fellows across all specialties agreed to become hospital employees. This shift in employment is also shifting the medical real estate market.
Standard leases within a medical office building typically used to be in the 1,000-3,000 square feet range which compensates for a small physician group practice. Now that physicians are on the move to become part of larger entities, space requirements have increased as well. Today, the average lease space is between 5,000-8,000 square feet and holds larger physician practices. As hospitals continue employing physicians, they are also acquiring medical office space. Physicians, many of whom have their own leased space, are vacating for the preferred route of hospital owned space.
This growth in hospital employment stems from several factors:
• Running the business side of a medical practice hosts a full share of hassles that medical school graduates don’t want a part of and seasoned veterans are fed up with.
• Medical school students would rather have a secure salaried position in a hospital enabling them to pay off large school loans more quickly than a long term investment into their own practice.
• Hospitals provide resources such as advanced technology and electronic medical records that small practices might find financially taxing to acquire
• Medicare and Medicaid reimbursement rates are continuing to dwindle and gaining in difficulty to effectively navigate. A continuous hospital paycheck seems more palatable than a solo practice endeavor.
A trend for increasing hospital employment can already be seen, and as healthcare reform progresses, increasing uncertainty in reimbursement rates, physicians seeking to become hospital employees will grow as well.
James Ellis, CEO, Health Care Realty Development Company, is a nationally recognized successful real estate investor and developer of medical office properties with a comprehensive knowledge of sophisticated real estate transactions, cost effective designs, and efficient property management.
Aaron Razavi is Associate Marketing Director at Health Care Realty Development.
Visit their blog at http://www.hcrealty.com/medicalrealestatedevelopment/