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International real estate consulting firm Cushman & Wakefield has identified medical care centres (MCCs) in Germany as a promising asset class for investors. In the report "Medical Care Centres" published today, the authors discuss, among other things, the general framework and future of medical care. Furthermore, they provide insight into and the outlook for MCCs in Germany.

Medical care undergoing structural change 
"Socially, economically and politically, medical health care is one of the central subjects of contention in Germany," the Healthcare Advisory Team of Cushman & Wakefield begins its report "Medical Care Centres". An aging society and, in a European comparison, the second-highest healthcare expenditure per capita in relation to the gross domestic product after France are just two of the reasons why the two authors, Simon Jeschioro (Head of Investment Advisory) and Jan-Bastian Knod (Associate), predict structural change for medical care. Germany currently ranks twelfth in the "Euro Health Consumer Index" (EHCI). The Scandinavian countries, in particular, occupy the top ranks, however "Germany's healthcare system has the strongest parameters of medical care in quantitative terms. These include the fact that the Federal Republic is the European leader in terms of practicing physicians and medical nursing staff per 1,000 inhabitants," Jeschioro and Knod note. The qualitative parameters could be strengthened, for example, by expanding the prevalence of medical care centres (MCC). This could also reduce health care expenditure, according to the authors: "By closing loss-making hospitals, merging hospitals in rural areas and expanding medical care centres, it is possible to bundle medical personnel and expensive equipment to provide better treatment.” 

MCCs as part of the medical infrastructure, but not without inpatient care 
According to the German Social Security Code (SGB), in Germany the motto is "outpatient before inpatient". This means that patients only have a right to full inpatient treatment - for example in a clinic - if outpatient treatment is unsuccessful. MCCs have been an essential component of outpatient treatment by SHI-accredited physicians in Germany since the law to modernize the statutory health insurance system (GMG) came into force on January 1, 2004. "It is in the interests of both the people paying health insurance premiums and the state that outpatient care is preferred to inpatient care. On average, inpatient treatment costs 4,298 euros per patient per year, whereas outpatient treatment costs only 475 euros per patient per year," Jeschioro and Knod point out. According to the authors MCCs are more economical to operate due to synergies. In concrete terms this means, among other things, that the various specialists can share rooms, equipment and personnel. Complementary amenities such as pharmacies can also be incorporated. "In our experience the area of medical care centres is between 2,000 and 15,000 square metres. On average, up to seven physicians share the rooms," the authors of the report predict, forecasting that MCCs will become ever better established in Germany. Expressed in figures: According to the "Kassenärztliche Bundesvereinigung" (KBV), the number of MCCs rose steadily to more than 2,800 by 2017. "Medical care centres can certainly be an efficient component of a functioning supply network - but only in combination with inpatient medical care," summarize Jeschioro and Knod. 

MCCs as an asset class for investors 
The legislators have stipulated that only hospitals, physicians in private practice and municipalities may establish MCCs. Accordingly, special hospitals act as institutional and professional operators. "To date, the MCC operator landscape is characterised/shaped by its largely fragmentary nature, but with an increasing trend towards consolidation , is the analysis of the report’s authors, pointing out that in particular private equity companies have large interests in dental as well as radiological MCC. As an example, Jeschioro and Knod point to the acquisition of the companies Ober Scharrer Group (ophthalmology), SFE Beteiligungsgesellschaft (owner of Zahnstation) and DPH Dental Partner Holding by Nordic Capital in 2018. According to the German Medical Association and the Kassenärztliche Bundesvereinigung (National Association of Statutory Health Insurance Physicians), there were about 130 takeovers in the MCC sector between 2013 and 2018 - 15 % of these by foreign investors. "Medical care centres, structured as classic operator properties with a general lease, are currently developing towards becoming core investment products in the German healthcare properties market," note Jeschioro and Knod, who observe MVZs as a highly sought-after and distinct asset class in countries such as the USA and the UK. The authors expect that this will also become prevalent in the German market in the medium and long term. "To date, there are unfortunately few meaningful figures on annual investment volume. The range of prime yields varies considerably, depending on the location of the properties and the creditworthiness of the operators, as well as the structure of the general leases, between 3.5 % (top-7 cities), 4.0-4.5 %(medium-sized cities) and up to 5.0 % (rural regions)," explain Jeschioro and Knod in conclusion.

>> Download report in English or in German


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