U.S. population shifts create opportunities for healthcare providers

In this series, we examine industry-specific drivers for changes in American healthcare delivery and how that change drives real estate needs around the country. We started with an examination of how healthcare providers are responding to the various pressures of consumerism, and an integral part of the equation when forming strategic responses is the need to understand where consumers are geographically located now and where migration patterns predict they will be in the future.

Even more specifically, providers and investors agree on a need to understand where the population is aging most dramatically. According to a 2019 study from the Kaiser Family Foundation, people 55 and older accounted for 56% of total healthcare spending in the U.S. even though they represented 30% of the population. In contrast, people under age 35 comprised 45% of the population but accounted for just 21% of the healthcare spending. 

Much attention was given to the overall migration patterns during the COVID-19 pandemic, but has that migration been as remarkable as media reports have portrayed it? And does it represent a change from previously known population shifts that favored Sun Belt states? These are essential topics for healthcare real estate professionals to understand when considering asset locations and specifications. Let’s explore.

Changes in latitudes

According to data from the U.S. Census Bureau, the total U.S. population grew by almost 49 million (or 17%) from 2000 to 2020, topping out at 335 million. More than 70% of that growth occurred in the 18 Sun Belt states. Perhaps even more astounding is the fact that just six of these states – California, Arizona, Texas, North Carolina, Georgia, and Florida – accounted for 26 million (or 54%) of the overall population growth in that 20-year period. While the population also grew in the rest of the country – only West Virginia and Puerto Rico recorded net decreases in their population from 2000 to 2020 – the growth in the Sun Belt states is the most noticeable theme when looking at overall population growth and migration since the turn of the century.

Simultaneously, the U.S. population has been aging considerably as you can see in the chart below.

Just as they were outsize contributors to total population growth, California, Arizona, Texas, North Carolina, Georgia, and Florida together accounted for 40% of the overall increase in this age cohort. Although most of this growth occurred in the Sun Belt States, several colder-weather states with large metropolitan areas including New York, Pennsylvania, Washington, Illinois, Ohio, Michigan, and Virginia also experienced significant growth in the age 55-and-over population. This suggests that there is still good reason for investors and providers alike to continue focusing on these locations, even when all other eyes are on Sun Belt growth.

Recency bias?

At the onset of the COVID-19 pandemic, while most U.S. white-collar workers were working from home, many seized the moment and began what appeared to be a different type of shift, often described as a retreat from the largest cities into suburbs, smaller nearby cities and other parts of the country entirely. However, the latest estimates from the U.S. Census Bureau show the population changes between 2020 and 2022 were thematically very similar to the shifts from 2000 to 2020, with a few notable exceptions. The total U.S. population increase from 2020 to 2022 is estimated to be 1.7 million, which represents an annual growth rate of 0.25%, compared to 0.79% from 2000 to 2020. Population in the Sun Belt States grew by more than 2 million from 2020 to 2022, meaning the rest of the states collectively experienced a net population decrease. And within the Sun Belt states, only California and Louisiana decreased more than 0.5% from 2020 to 2022. The States with the largest increases from 2020 to 2022? Arizona, Texas, North Carolina, South Carolina, Georgia, and Florida.

Age cohort estimates are not yet available for 2022 from the U.S. Census Bureau, but based on what we know about overall population trends, there is no reason to expect the trends from 2000 to 2020 for the age 55 and over cohort to suddenly change.

While the pandemic seemed to signal a significant movement in population migration, early data from the U.S. Census Bureau suggests the population shifts were largely a more intense continuation of the population migration patterns that had been at work for more than two decades. Barring any major shifts in migration patterns, we should expect the population to continue surging in the southern third of the U.S.

Granular data is the key

Knowing broadly that population growth has been and will continue to drive the need for additional healthcare real estate in the U.S. is not precise enough for investors to successfully target specific communities for further development; nor is it precise enough for healthcare providers to target specific neighborhoods with unmet demand for their specialties. Investors need granular data on which specialties have the most unmet demand at each of their locations to properly understand the highest and best uses and to inform acquisition and divestiture strategies. Similarly, granular and predictive data will be required to drive location strategies for healthcare providers of all sizes. Health systems need to identify clusters of population growth to further their primary and specialty care efforts and to identify potential new acute care hospital locations. Specialty providers will need to prioritize and compare locations in multiple markets as they pursue growth into territory they don’t know as intuitively as they do their own markets

Luckily, there are readily accessible tools, like Avison Young’s AVANT suite, that leverage demand and competition while simultaneously tracking and optimizing footprints for stronger and more transparent decision making. Interested in learning more? Let’s start a conversation.