Colliers: Fast-Growing IRF Sector Represents ‘Attractive Investment Option’ in Post-Acute

The inpatient rehabilitation facility (IRF) represents the fastest-growing asset class within the post-acute care spectrum, according to a new report from real estate services firm Colliers International — thus making it a prime target for investors in the overall real estate space.

“Freestanding IRFs tend to have a healthy operating margin, and help expedite the patient out of GACs [general acute care hospitals] and into a lower cost of care setting, and hopefully, better patient outcomes,” Colliers executives Michael Cummings and John Wadsworth wrote in the first part of their report on post-acute care, released earlier this month. “IRFs are an attractive investment option in the health care real estate spectrum”

Cummings and Wadsworth identified the IRF — a specialized care setting that generally provides more intensive therapy and physician services than a traditional skilled nursing facility — as a key area of health care investor interest. Among freestanding post-acute care sites, IRFs saw the greatest new construction numbers between 2015 and 2018, representing 62 of the 117 new facilities built during that span, according to Colliers.


“IRFs play a vital and expanding role in today’s acute care health care continuum, especially as new delivery models evolve,” Cummings and Wadsworth wrote. “The transition from hospital to home is critical for patient recovery as hospitals look to avoid readmissions, which can incur financial penalties.”

Despite the report’s focus on IRFs, Wadsworth told SNN in an interview that the entire post-acute continuum represents an intriguing investment target for real estate investors that may be looking to diversify their portfolios.

“There’s a full continuum of different post-acute facilities, but I think in general, they’re paying more attention to the space because of the role that post-acute’s going to play going forward — whether that’s IRFs or something else,” Wadsworth said.


Wadsworth, who serves as senior vice president of health care services at the global firm, compared the current post-acute landscape to the medical office building (MOB) market at the turn of the millennium. Back then, there wasn’t a lot of data around the asset class, and it was generally viewed as an also-ran behind other, flashier types of properties — but that has changed, Wadsworth said.

“Post-acute is a good alternative, but not for everybody — and back in the early days of the MOB space, the MOBs weren’t for everybody either, and now it seems like everybody wants to play in that space,” he said.

The post-acute world has seen a fair share of skepticism from the greater investment world, with reductions in SNF exposure generally seen as a positive among analysts who cover the publicly traded real estate investment trusts (REITs). While Wadsworth acknowledged that reimbursement pressures and legislative uncertainty remain major stumbling blocks for some investors, he also noted that as the MOB space becomes even more saturated and competitive, health-savvy investors may increasingly look to place their dollars in post-acute.

“Are there going to be more these facilities built? The answer is yes,” he said. “Are they going to become more interesting to investors? And I think the answer is yes.”

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