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Becker Private Equity & Business Podcast
The Ongoing Shift to Outpatient Care: Key Trends and Investor Insights with Amber Walsh of McGuireWoods LLP 5-8-25
00:13:27
In this episode, Amber Walsh, Partner at McGuireWoods, joins Scott Becker to discuss the evolving move from inpatient to outpatient care. She explores its impact on real estate, private equity strategy, and the importance of understanding reimbursement...
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- [00:00]
Scott Becker
This is Scott Becker with the Becker Healthcare Podcast. I'm thrilled today to be joined by Amber Walsh. Amber's on the executive committee, McGuire Woods. She works at the intersection of health care and private equity and she joins us regularly to tell us what she's watching in sort of the private equity space, the health care space, and a lot more. Amber, let me tee it up and ask you, what do you have your eyes on currently that you're watching in health care or private equity?
- [00:29]
Amber Walsh
Hi Scott, thanks for having me on today. I am really thinking about and in particular because I've read a couple of articles and working on a couple of deals that have me thinking again about the shift to outpatient care from inpatient care. And as you and I both know, this has been a trend that has gone on for decades. There is nothing new with the move to outpatient other than I am constantly amazed that there are new factors driving the move to outpatient and there's more and new kind of repercussions and impacts of that move to the outpatient setting. And it really plays into a lot of investors decision making. So while there's nothing new about that shift, it almost feels like a permanent reality that's been going on for decades that has become relatively reliable. There's just these other interesting angles to it that I'm really interested in thinking about today.
- [01:41]
Scott Becker
No, thank you. And talk about some of those other areas like the impact on buildings and outpatient centers and what it means for real estate technology and spreading around of services with anesthesia where there's shortages. Talk about some of the other impacts that there are.
- [02:00]
Amber Walsh
Yeah. So I'll start with the building. It's really interesting. I mean, we're sitting here in the middle of 2025 when there's been a trend away from traditional commercial real estate space for the past several years, obviously triggered a lot by Covid. And yet at the same time, while that's the macro trend across commercial real estate, you see the proliferation of medical office buildings and that construction growth continuing to go up and seeing it more. JLL reports on this. Obviously one of the big brokers reports on this frequently and you're now even seeing off campus medical office buildings taking over on on campus medical office building development. And in large part it's this response to the increased opportunity for outpatient therapies, the move for so many things, not just traditional ASCs or elective surgery, but we're talking about drug administration in the form of infusion centers, talking about mental health outpatient programs, all sorts of things. And one of the interesting angles of that, and I'm dealing with this right now in a deal I'm working on, is a health system that is so confident that they're going to be able to fill up this massive mob that they're building. They don't have the tenants selected yet, they don't know exactly what's going to go in there, but they're so confident that there's enough community need on an outpatient basis that they're going ahead and making that mob investment, which I find really fascinating. It's just one of those aspects that this trend continues to push and impact other industries.
- [03:56]
Scott Becker
Yes, no, fascinating. And what is that? What does that mean for the big box hospital buildings? Those are still very needed still too. And what does it mean for growth outside the hospital where people seem to be, again, a little bit more careful again about building new things, unless they seem to be some of the wealthiest systems. What do you see there?
- [04:15]
Amber Walsh
Yeah, you do have hospitals repurposing spaces too, taking inpatient space and repurposing it to the extent that you can. And there are some states that the flexibility that they gave on hospital licensure and space use that they. They gave granted during COVID some states, when they returned to normal in a post Covid world, kept a little bit more flexibility for that. And it's actually allowed hospitals to repurpose some of their space for outpatient use. And that helps. And it's not perfect, and that's not the case everywhere in all states. But where it's an opportunity, it allows the hospital to keep that space that maybe isn't quite as needed for inpatient and repurpose it for different things 100%.
- [05:09]
Scott Becker
So a lot of that where people are trying to repurpose it and then they got to make sure that they can repurpose it, bringing lower acuity things outside the hospital and bring higher acuity things into the hospital and make sure they've got enough volume to make that all make work. And we've seen more and more systems make that transition over the last several years from a private equity perspective, where private equity is buying up practices, really trying to own real estate. Any thoughts on what this all means from a private equity perspective? Or does it just mean continuing to invest things that are outpatient even though the practice management world's been a little tougher lately?
- [05:48]
Amber Walsh
I think there's a couple of different angles to it. I mean, you can look at it in a really simplistic basis of which particular specialties and therapies or are growing at the fastest rate. I think there's a pretty significant focus on endocrinology with the development of GLP1 that's the fastest growing right now. But then you have all of these other outpatient therapies I mentioned earlier, the infusion centers. That is a big one as well. That's looking at it simplistically of just what is kind of hot and growing right now. But there's the additional angle to it which is the outpatient therapies, not just as a direct investment and not just outpatient therapies, I should say the surgery centers and all of the outpatient provider world. There's not just the direct investment, there's the additional angle of how do you bring those providers into your existing platform growth strategy either in a contractual relationship where you have more bundled payments and value based care to if you're not making a direct investment, you can partner with them to lower the cost and take risks together. How you develop those additional ancillaries as an alignment strategy with your employed physicians. If you are a private equity investor looking at different revenue streams and also different cost centers, you can look at it from the angle as a private equity investor, look at it from the angle of employee and staff and staff physician retention. There's a lot of data around employee satisfaction when they get to make moves and have personal flexibility and work in different environments like we're talking about. And then you can look at it from the angle of how it can increase and provide an opportunity to adhere to an entirely new patient base. Because these outpatient location developments often help create access points for patients that otherwise were not. They simply were not going to get a particular diagnostic or treatment because they had to travel too far or they had a fear of going to the hospital. There's all sorts of impediments for why patients don't receive the care that they may have the right to receive. You can look at it as an investor from all these different angles. But it starts with just embracing the almost constant reality that there's a move to the outpatient setting that you need to understand where it's really happening, where it's happening hot and where you might also expect a little volatility maybe in the reimbursement for that. Because that's a whole other angle where there's some reimbursement that's been really steady on an outpatient basis, other that's been more spiky. It's been really attractive for a couple years and then Payers have kind of gotten a handle on it and brought the reimbursement down. So there's all these different elements to it and it's a, it's a big concept, but it's really interesting and exciting and an opportunity for investors to constantly be thinking about.
- [09:19]
Scott Becker
Yes, but I love your last point on. There may be this macro move towards outpatient, but to be an effective investor in it, you really got to understand the different pieces of it in a million different places. You know, it's not just generally, it's got to be specific and really understanding it. I think that's right on.
- [09:41]
Amber Walsh
Exactly. And really honing in on what you're going to do, what you're going to do well and what you can expect in terms of, you know, competition, but also in terms of reimbursement in those areas and how you can make sure that it's going to be sustainable. That's a, that's a very interesting angle on this because as you have some of the very expensive procedures, diagnostics and procedures, both that used to be inpatient only, and as they move to the outpatient setting and as they continue to move through the continuum of outpatient from an ASC to an office based procedure room, you will sometimes have these periods of really attractive or really stagnant reimbursement that you have to be prepared for and really understand. Is what you're looking at on a recent income statement and payer mix, is that sustainable? Obviously that's what investors do across the board all the time. But looking at it at a micro level, at a specific CPT code, because some of them are so vulnerable and they kind of pop off a page when you really think about it and kind of dig in as to how sustainable it is. Often when it's making that move from inpatient only to a different lower acuity setting.
- [11:13]
Scott Becker
No 100%. And that's always been one of the concerns for health systems, that they lose things to a lower acuity setting and take them out of the, out of the main hospital where they got paid higher rates. But then there's always the issue of whether they'd lose it anyways or whether they can backfill it with more expensive stuff.
- [11:30]
Amber Walsh
Yeah, that's exactly right. And clearly there's an impact on health systems in this move and you get very different reactions from health systems over it. You know, some that embrace it, use the opportunity. Like I mentioned, the health system I'm dealing with right now, that's building mob kind of of a. If we build it, it will come. They know they're going to be able to fill it. They're confident versus resisting it. You know, embracing more of a joint venture model, embracing more bundled care, you know, some unique approaches because they know it's going to come out of the inpatient setting anyways. But it obviously causes some financial strain for a lot and you see impatient days going down over time and that can be hard to manage, hard to deal with. That's just, it's one of the realities of this move.
- [12:25]
Scott Becker
But you have to, it's a system. If you're going to do the build it and they will come thing, you need to control enough your integrated delivery system to know that you can make that work. So there's not enough independent everything out there to backfill something things do you sort of like they must be doing it with a decent amount of confidence that they know they'll be able to fill it because they have enough local strength and resources and the assets that they'll be able to work through things.
- [12:51]
Amber Walsh
Absolutely. And of course it's geography dependent. You see a lot more confidence in the sun belt with growth in both the baby boomer population. I mean there's all sorts of different factors that go into it, but you're absolutely right. I mean I think that's how this particular system is feeling and I Hope they're right.
- [13:15]
Scott Becker
100%. Amber, thank you so much. You're always a remarkable guest on the Becker private equity and business podcast. Thank you very, very much.
- [13:24]
Amber Walsh
Thank you. Scott.
- [13:28]
C
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