By Jeff Wardon, Jr., Assistant Editor

Heading into 2025, healthcare systems will navigate an evolving landscape where real estate decisions will be critical factors in both operational success and workforce stability. The nexus of location, employee housing and the overall workplace environment is influencing not only retention rates but employee sentiments towards their organizations, too. Meanwhile, healthcare providers are challenged with balancing cost-optimization strategies with the growing need to expand facilities that can meet increasing patient care demands. 

To understand these complex dynamics, Healthcare Facilities Today spoke with Jay Johnson, national director for healthcare markets at JLL. 

HFT: With the reported six percent increase in daily expenses from 2023 to 2024, how are healthcare systems strategizing to balance cost-optimization with necessary real estate expansion to support patient care and operations? 

Jay Johnson: It's a challenge. With limited dollars, finite bandwidth of management and uncertain market conditions, there's always a question of whether to focus on investing in improving current operations or investing in growth. However, you don't have to just pick one or the other. I mean, most of our healthcare clients that we work with are doing some of both. They have definitely favored optimization over the past 12 to 18 months. In this case, optimization being how do you make your overall health system run more efficiently. That encompasses things that aren't related to real estate as well as real estate, just making sure that you're getting the most productivity out of your square footage. Meanwhile, reduce the cost as much as you can around how you operate the facilities. For us, a lot of the focus that we put on has been on just reducing those operating costs, trying to run the buildings more efficiently.  

I'm also talking about the utilization of patient volumes and physician utilization if the buildings are not fully productive. Sometimes that's not readily apparent to the health system. So, we've learned to link that information to our information that we monitor by the building. Some clients are more sophisticated than others in terms of the way that they work with us, but we're able to show them where they're where there's hidden productivity opportunities in the building. This is when you observe that the building's not being fully utilized and think instead maybe we can repurpose that space for something else. Maybe we expanded a service that's already there, stay open more hours, get somebody in part of the building that's not being used or repurpose it for some other use. Maybe there's an opportunity to introduce another specialty or clinical modality to that site to make use of that space.  

We get the question of some element within the health system: some physician group or physician team wants to open a new site because they feel like they're out of space. A lot of times they're not out of space at all. If you're really monitoring utilization properly, you can show that to them and how there may be opportunities to use the facilities they already have. However, that's optimization that's just running more efficiently and at lower cost. Growth has not been as strong in recent years as it has in prior periods.  

However, that pendulum swings back and forth - the growth is just expanding into new geographies or new service lines. Really, what's been going on there is because of some of the uncertainties and the turbulence in the economy, which is getting better now, but they had uncertainty about where things were going. Ultimately, that's caused our healthcare provider clients to be more cautious about things, and they've made fewer decisions for growth. Hopefully that will be improving going forward into 2025. 

Related: What Amenities Do Healthcare Employees Want?

HFT: As healthcare organizations look to invest in employee experience and hospitality services, what design changes or innovations have shown the most promise for improving recruitment and retention in clinical and administrative spaces? 

Johnson: That’s kind of a holy grail question we ask ourselves all the time: how does the location of the space or the design of the space influence recruitment and retention of the employee? Or similarly, the experience and the well-being of the patient. It's hard to draw exact linkages with how the two are connected, but we certainly feel that they're connected. I think being able to design the building so that you can do whatever you're doing in the building, whatever service or activity that the employees are engaged in, that it's that the building actually supports that. Moreso, that it's well laid out, efficient and safe for them to accomplish their jobs. That's a really important part of the employee experience.  

One of the things that we did was a survey of around 5,000 or so employees within healthcare organizations and there was a direct connection between employee satisfaction with their job and their feelings about possibly leaving the job. This was also connected with the way that they felt about the real estate or for the buildings that they worked in. So, folks that thought that they might be leaving their job in the next 12 months had much stronger feelings about the kind of space that they worked in, and that was whether they were advanced clinical staff, mid-level clinical staff or administrative staff. Is that because they’re thinking about leaving because of the real estate? Or do they have some negative feelings that extend towards the buildings because they're thinking about leaving for other reasons? That's the question we don't know the answer to, but there’s possibly some of both there.  

There's the building itself, what's going on inside the building, but then there's also just where the building is located and how you get to it, kind of on a micro level and a macro level. However, one of the things that has been difficult for employees of healthcare in a lot of cases, has just been the connection between the location of where they work and the availability of affordable housing for the staff of the health system. That's something that other people have observed, but often it has less to do with the individual building and more just about where the organization operates.  

It is about physical proximity, though, which is an element of real estate. So, how do you address that? You probably can't move the health system because it is already serving the population of people that are around. However, there may be opportunities to provide housing or subsidized housing for staff in the vicinity.  

Jeff Wardon, Jr., is the assistant editor for the facilities market.