August 25th, 2014 By Virtual Paralegal Services

In a post-recession market, the real estate industry – commercial real estate included – has suffered. Businesses across multiple sectors have struggled to recover from the recession. Many have downsized or closed their doors altogether, resulting in higher vacancy rates. However, some lenders of commercial real estate have nevertheless weathered the recession due to the growth of the healthcare industry.

The Centers for Medicare and Medicaid Services projects that healthcare spending will increase approximately 6.2% annually through 2022. However, there are several laws in place that dictate certain restrictions on healthcare facilities. These include:

  • The Stark Law, which regulates physician referrals;
  • The Health Insurance Portability and Accountability Act (HIPAA), which requires healthcare providers to ensure that they properly protect patient health information. This requires that healthcare providers maintain office space with proper storage and protection of patient records; and
  • The Anti-Kickback Statute, which prohibits the exchange of something of value for a healthcare referral.

Although the above laws may not directly regulate the physical spaces of healthcare providers, their provisions have an impact on where healthcare providers may lease space to remain in compliance with those laws.

The implementation of the Affordable Care Act will also likely contribute to an increase in the healthcare industry and therefore increase the need for commercial real estate. Among its objectives, the Affordable Care Act seeks to decrease barriers to Americans seeking health care. It includes provisions which:

  • require certain individuals to have health insurance;
  • remove pre-existing conditions exclusions for children ;
  • extend coverage for young adults under their parents’ health insurance until age 26;
  • provide preventative care without copays; and
  • allow individuals to seek emergency care at hospitals outside their insurance network.

These changes to healthcare law are designed to increase access to medical care for millions of Americans. In a recently released white paper, consulting firm Deloitte discussed the potential impact for growth in commercial real estate due to the Affordable Care Act. One potential challenge to growth is if existing commercial space is suitable for the healthcare industry’s increasing need. If commercial real estate space does not meet the immediate demands of the healthcare industry, necessary investments in time and money may diminish potential gains for the commercial real estate market.

In addition to medical facilities and doctors’ offices, growth in the healthcare industry may increase the need for commercial real estate for other healthcare-related businesses, such as:

  • pharmacies;
  • walk-in clinics;
  • insurance company offices;
  • occupational therapy centers and other types of therapy;
  • administrative offices;
  • manufacturing space for healthcare-related products; and
  • retail space for medical supplies.

In addition, projected growth of 5.2% this year in the pharmaceutical industry due to the Affordable Care Act may also have an effect on the commercial real estate market.

Virtual Paralegal Services provides a variety of services in commercial real estate matters. We negotiate and manage leases, manage claims and disputes, and prepare and file corporate documents. Contact us today to discuss your commercial real estate needs.

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