Behavioral health properties have increasingly attracted investment with more than $3 billion in the past 10 years, the Colliers U.S. Research Report: Q2 2024 states. As behavioral health demand increased exponentially since the pandemic, the need for providing quality care and access for patients is essential. In conversation with Shawn Janus, National Director, Healthcare Services and Marianne Skorupski, Director, National Office Research, Shawn and Marianne discussed the three primary different types of facilities needed for treatment, the geographic breakdown of behavioral health facilities across the nation, and the current biggest challenges for real estate.
Read the below insights to learn more:
As was mentioned in the report, it is believed that mental health issues are underreported due to lag in pandemic data collection and publication for behavioral health research. In your opinion, why do you think this area remains underreported and what ways can we improve this awareness?
Shawn: A lot of the underreporting of mental health is due to stigmas related to behavioral health and mental health, and the fear of how others may judge you when you do come forward. In addition, other major issues contributing to the problem include patients that may not be able to afford treatment due to the reimbursement environment and fewer physicians in the healthcare space to meet the exploding demand.
Marianne: I agree and the other issue I would bring to light with this underreporting is lack of access. Whether it is the reimbursement for finding the right person in your area or the struggle of finding the right person in general, there are several barriers that can make it challenging to seek help.
In terms of real estate trends, the report shared that many behavioral health buildings haven't been built or remodeled since 1970. How can these existing buildings be repurposed to suit current needs?
Marianne: The current behavioral health facilities are in legacy locations, and for many operators, it might fill the need already. However, for facilities that may require different renovations, there is always the concern for costs, particularly in the general construction industry and the steep material and labor costs. Everyone is under a budget and is trying to maximize what they already have available. In addition, NIMBYs, or the “not in my backyard” misconception about behavioral health facilities, is an exhausting process for property owners that need to provide public notice for residents living near the facility. Unfortunately as this process goes, many residents may be resistant to this change.
Shawn: As Marianne mentioned, there are many challenges that can prevent current renovations, but the good news is that investors are recognizing the demand in this sector and seeking the opportunity to meet these needs. Institutional investors, whether it be some of the public real estate investment trusts or the private equity investors, have become much more interested in the space which brings the needed capital. But of course, it can be challenging to talk about the cost of that capital until there is more data available.
Of the three different types of facilities mentioned (outpatient, inpatient and residential), it is mentioned that the biggest challenge of maintaining these locations is: a) the property's physical structure; and b) the relationships with local government and neighbors. Can you expand on these challenges?
Shawn: One of the biggest difficulties of maintaining these types of facilities as the report mentioned is the property’s physical structure. Layout is very significant, for instance, for patient flow and the efficiency and delivery of care. In addition, as we discussed, many facilities haven’t been remodeled since 1970, which can impact the urgency for updating the infrastructure such as the HVAC systems and other equipment.
Marianne: In terms of the second part of the question – the challenges with the local government and neighbors for these types of facilities, I would return back to NIMBY, or the “not in my backyard” concept, because for many it is the fear of the unknown that can be difficult, especially when it may seem uncertain why facilities would move outside of the more traditional hospital environment. This is when it comes down to educating both governments and neighbors as to what is happening in the facility to better service patients. Additionally, educating investors is essential so they can understand what they are buying, whether it is both a practice and a facility or just the facility’s operations for example.
When looking at the report’s geographic breakdown for behavioral health facilities in the U.S., what did you find to be the biggest takeaway when reviewing the analytics?
Marianne: My biggest takeaway was that overall, there aren’t enough behavioral health facilities nationwide. I found that the geography of current facilities may not be where patients are present and I think that the healthcare industry in general is running into this issue of how to best locate and serve patients.
Shawn: My first reaction when evaluating the statistics is that the states which boast the most facilities like California or Florida may be very proud to be leading in this domain, but it doesn’t necessarily make sense when it comes down to population basis. Particularly, determining the behavioral health needs within that population will help provide minimum facilities for maximum care.
When you think about more spread-out geographic areas like Montana or North Dakota, how do you determine where to place these facilities when the populations are so spread out?
Marianne: This is a common detriment for rural areas looking to expand their behavioral health services. As mentioned, states like Montana and North Dakota rated lowest on the geographic breakdown chart for the number of behavioral health facilities they have currently. The types of treatment and care in the region should be evaluated in order to best determine the areas where the facilities should be placed.
Shawn: It’s also important to mention the prevalence of telehealth and its increase in utilization. Providing telehealth services, particularly in these rural areas, is at least the first step in providing access as it relates to the field of psychiatry.
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