Trends in Real Estate Investment Trust Ownership of US Health Care Properties

Against a backdrop of continued consolidation in US health services, real estate investment trusts (REITs) have emerged as an understudied force facilitating the financialization of the American health care system. Real estate investment trusts are corporate entities that invest in real estate assets. Like mutual funds, REITs facilitate collective investment and operate as pass-through vehicles for the benefit of investors.¹ In 2021, REITs owned more than $3.5 trillion in US assets, ranging from residential and retail real estate to specialty sectors like health care.²

Health care–focused REITs own a portfolio of income-producing real estate and generate profit by acquiring properties (eg, hospitals) and leasing the real estate back to the health care facility tenant (ie, a sale-leaseback). This transaction generally occurs through a 10-year, triple net lease in which the tenant is responsible for facility rent, maintenance, insurance, and taxes.³

To our knowledge, there is no research on the association of REIT acquisitions with health care delivery. Moreover, it is unknown if REITs are a minor or growing factor in the health care system. This study evaluates the prevalence of REIT-owned health care properties in the US health care sector and describes characteristics of REIT-owned hospitals.

We identified the number of health care properties in 2021 owned by REITs (eMethods 1 in the Supplement). We then located hospitals owned by REITs and identified the year during which their real estate was acquired. A multivariate logistic regression was then used to assess which hospital characteristics had the largest association with REIT ownership (eMethods 2 in the Supplement). Because information on most of the REIT-owned properties was publicly available, the data likely provide an accurate, aggregate count of REIT-owned properties, but the total properties within each subsector were estimates across various sources (eMethods 3 in the Supplement). This study did not include human participants and was not subject to an institutional review board. The study followed the Strengthening the Reporting of Observational Studies in Epidemiology (STROBE) reporting guideline for cross-sectional studies. Statistical analysis was conducted using R, version 4.1.0 (R Foundation).

In 2021, REITs owned 197 (3%) of all hospitals and 1870 (12%) of all skilled nursing facilities (Table). Real estate investment trust hospital acquisitions have increased during the past 15 years until the COVID-19 pandemic, during which acquisitions were minimal (Figure). In a multivariate logistic analysis, some of the characteristics most strongly associated with REIT ownership were for-profit status (odds ratio, 25.05; 95% CI, 14.69-42.70; P < .001) and urban status (odds ratio, 6.8; 95% CI, 1.61-28.67; P = .01).

Real estate investment trusts have substantial ownership of US health care real estate (8%) overall, with 3% of hospitals in the US owned by REITs. Urban and for-profit hospitals were most likely to be owned by REITs. Major REIT acquisitions occur regularly; thus, our data and estimates are limited to 2021.

There is concern that REIT ownership of health care facilities may divert capital away from investments in clinical care delivery toward generating high returns for investors instead. The immediate capital gained from a sale-leaseback could theoretically be used for facility investments. However, the capital is often diverted to a holding company. Following an acquisition of a hospital, some private equity firms have sold the physical property of the hospital and its ancillary real estate to an REIT as a way of monetizing their holdings.⁴ Income from the sale-leaseback flows as dividends to the private equity firm shareholders, generating immediate investor returns but leaving the hospital with burgeoning rental fees.⁵ Pressured by mounting financial obligations, some health care operators with REIT-owned real estate may choose to close, as observed in 2018 when one of the largest nursing home chains in the US closed after selling its real estate to an REIT.⁶

To our knowledge, there is no research quantifying the association of REITs with quality of care, costs to patients, and the financial security of health care operators. Policy makers and health care operators should ensure that the REIT business model is compatible with long-term priorities in health care delivery.

Accepted for Publication: March 24, 2022.

Published: May 13, 2022. doi:10.1001/jamahealthforum.2022.1012

Open Access: This is an open access article distributed under the terms of the CC-BY License. © 2022 Bruch JD et al. JAMA Health Forum.

Corresponding Author: Joseph Dov Bruch, PhD, Department of Health Care Policy, Harvard Medical School, 180 Longwood Ave, Boston, MA 02115 (jbruch@g.harvard.edu).

Author Contributions: Dr Bruch had full access to all of the data in the study and takes responsibility for the integrity of the data and the accuracy of the data analysis.

Concept and design: Bruch, Katz, Appelbaum, Tsai.

Acquisition, analysis, or interpretation of data: Bruch, Ramesh, Batt, Tsai.

Drafting of the manuscript: Bruch, Katz, Ramesh, Appelbaum.

Critical revision of the manuscript for important intellectual content: Bruch, Appelbaum, Batt, Tsai.

Statistical analysis: Bruch, Ramesh.

Obtained funding: Batt, Tsai.

Administrative, technical, or material support: Katz, Appelbaum.

Supervision: Tsai.

Other - background research, framing: Batt.

Other - research: Katz.

Conflict of Interest Disclosures: Dr Katz reported previous employment as an investment banker for the real estate investment banking group at Citi. Drs Appelbaum and Batt reported grants from the Institute for New Economic Thinking during the conduct of the study and grants from the Spitzer Trust outside the submitted work. Dr Tsai reports grants from the Massachusetts Consortium on Pathogen Readiness that were underwritten by the Massachusetts Life Sciences Center, Commonwealth Fund, Arnold Ventures, and William F. Milton Fund of Harvard University outside the submitted work. No other disclosures were reported.

Data Sharing Statement: The data that support the findings of this study are available from the American Hospital Association. Restrictions apply to the availability of these data, which were used under license. Data are available from Dr Bruch (jbruch@g.harvard.edu) with the permission of the American Hospital Association.