How Changing Reimbursement Models Impact Medical Real Estate Valuations

Medical real estate doesn’t exist in a vacuum. It’s tied directly to the financial health of the healthcare providers who occupy the space. And few things impact that financial health more than how providers get paid. As reimbursement models shift—from fee-for-service to value-based care—the ripple effects are being felt in medical real estate valuations.

For decades, fee-for-service was the norm. Providers were reimbursed based on the number of services they performed. More tests, more procedures, more appointments meant more revenue. For medical real estate, this often meant larger facilities with higher patient volumes and steady cash flow. But with the move to value-based care, the focus has shifted from quantity to quality. Providers are now being reimbursed based on patient outcomes, efficiency, and cost savings. This change doesn’t just affect how care is delivered—it impacts where and how healthcare providers choose to operate.

Outpatient facilities, telehealth hubs, and specialty clinics are growing in demand as providers seek cost-effective ways to deliver care while meeting value-based benchmarks. Medical real estate in these sectors often sees rising valuations, as investors recognize the stability and growth potential. But properties tied to older models—like large, hospital-based practices or sprawling specialty offices—may face challenges if they can’t adapt to the new reimbursement landscape.

Appraisers are paying close attention to how these changes affect tenant financials. A property leased by a provider struggling with reimbursement cuts or declining patient volume is inherently more risky. On the other hand, facilities housing providers who’ve successfully adapted—through partnerships, tech adoption, or operational efficiency—hold stronger value.

Location matters too. States with Medicaid expansion or progressive reimbursement policies often see increased demand for healthcare services, boosting property values. Conversely, areas with slow policy adoption or high uninsured rates may see more volatility.

Even lease structures are being influenced by reimbursement trends. Healthcare providers are negotiating more flexible leases, anticipating that their needs may change as payment models evolve. Appraisers have to consider whether a lease is structured to withstand these changes or if it adds to the property’s risk profile.

At the core, changing reimbursement models are forcing the medical real estate market to evolve. Properties that can support cost-efficient, outcome-driven care are thriving, while those stuck in outdated models are facing tough questions.

If you’re evaluating medical real estate and want to understand how reimbursement models impact value, reach out today. I’ll help ensure your appraisal reflects the realities of today’s healthcare market.