Providers wary as build­ing firms see more out­pa­tient growth po­ten­tial

Modern Healthcare - - CONSTRUCTION & DESIGN - By An­dis Robeznieks

Com­bine un­cer­tainty and pent-up de­mand and you get a sense of the cur­rent un­easy state of the health­care con­struc­tion in­dus­try.

Health­care providers have been cau­tious with their con­struc­tion dol­lars, but de­mand continues to climb and some projects—such as switch­ing from semi-pri­vate to all pri­vate rooms—can­not wait.

The weak eco­nomic re­cov­ery continues to dampen health­care con­struc­tion projects. Out of the 151 com­pa­nies par­tic­i­pat­ing in this year’s Mod­ern Health­care Con­struc­tion & De­sign Sur­vey, 47% re­ported work­ing on a project that stopped or was stalled for at least three months in 2013. Of those, 58% said the stalled project restarted again last year.

Rea­sons cited for these work stop­pages in­cluded loss of mar­ket de­mand, health--

care re­form and lack of con­fi­dence be­cause of the weak eco­nomic re­cov­ery.

“Health­care re­form caused clients to pause,” said Richard Galling, pres­i­dent and chief op­er­at­ing of­fi­cer of Brook­field, Wis.-based de­vel­oper Hammes Co. Still, there was sig­nif­i­cant con­struc­tion vol­ume with large legacy projects.

Projects now go through more ex­ten­sive pre-con­struc­tion plan­ning from the ar­chi­tec­ture, mar­ket­ing and fi­nan­cial sides. All that plan­ning has high­lighted the need for more out­pa­tient fa­cil­i­ties.

“The real high level of growth is go­ing to be on the am­bu­la­tory side, with more physi­cians join­ing group prac­tices and more group prac­tices join­ing hos­pi­tals,” Galling said.

Oth­ers agreed that more up­front plan­ning is here to stay. “Projects are more busi­ness-driven and met­rics-driven,” said Jim Ea­ton, vice pres­i­dent and health­care di­vi­sion leader at Jack­sonville, Fla.-based Haskell. “The days of ‘build it and they will come’ are over.”

An­other health­care sys­tem trend is to build a free-stand­ing emer­gency depart­ment in a new mar­ket and see if it will grow into a hospi­tal. That was the ori­gin of the new St. Vin­cent Fish­ers (Ind.) Hospi­tal. The in­pa­tient fa­cil­ity opened last April; it started as a free­stand­ing ED and med­i­cal of­fice build­ing opened by St. Vin­cent Health, part of the St. Louis-based Catholic sys­tem As­cen­sion Health, in 2008. “They waited un­til there was a de­mand for in­pa­tient ser­vices and it worked,” said Deeni Tay­lor, an ex­ec­u­tive vice pres­i­dent with In­di­anapo­lis-based Duke Realty.

The Amer­i­can Hospi­tal As­so­ci­a­tion re­ports that there were 303 free-stand­ing EDs af­fil­i­ated with com­mu­nity hos­pi­tals in 2012, up more than 60% from 2006.

While many clients have been cau­tious, some firms re­ported a strong 2013. “We had a ter­rific year,” said Andrew Quirk, se­nior vice pres­i­dent of Skan­ska USA and na­tional di­rec­tor of its Health­care Cen­ter of Ex­cel­lence.

For Skan­ska, work con­tin­ued on the $1.2 bil­lion Univer­sity Med­i­cal Cen­ter in New Or­leans, with con­struc­tion costs bud­geted at $696 mil­lion. It also con­tin­ued work on a $450 mil­lion ren­o­va­tion of Stam­ford Hospi­tal in Con­necti­cut.

Quirk said one of his com­pany’s in­no­va­tions is pre­fab­ri­cat­ing more build­ing com­po­nents off site. Some­day, he pre­dicted, build­ings will be de­liv­ered to sites com­pletely fur­nished.

Mean­while, U.S. com­pa­nies con­tin­ued to take on health­care con­struc­tion projects in other coun­tries. Forty com­pa­nies, or 26% of this year’s sur­vey par­tic­i­pants, worked in­ter­na­tion­ally, com­pared with 25% last year. Eleven com­pa­nies re­ported work­ing on projects in China, eight did work in Canada, eight in the United Arab Emi­rates, and five in Saudi Ara­bia.

There is no ques­tion, how­ever, that the trend to­ward cau­tious de­vel­op­ment is likely to con­tinue. “Clients are clearly an­tic­i­pat­ing that their mar­gins are go­ing to be squeezed by (health­care) re­form,” Galling said.

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