Hous­ton’s en­ergy boom fu­els hos­pi­tal rush to burbs

Modern Healthcare - - NEWS - By Bob Her­man

Hous­ton-area health­care providers are pig­gy­back­ing off the rapid growth of the city’s en­ergy in­dus­try.

Big en­ergy com­pa­nies in the area are post­ing record earn­ings, prof­it­ing from shale and nat­u­ral gas re­cov­ered through hy­draulic frac­tur­ing. They are of­fer­ing gen­er­ous health­care cov­er­age to their grow­ing em­ployee ranks, and many en­ergy work­ers are mi­grat­ing to sub­urbs in­clud­ing Katy, Sugar Land, Cy­press, Spring and The Wood­lands, which were pre­vi­ously agri­cul­tural towns.

The four largest health sys­tems in Hous­ton—Memo­rial Her­mann Health­care Sys­tem, HCA, Hous­ton Methodist Hos­pi­tal and CHI St. Luke’s Health—all have made sig­nif­i­cant in­vest­ments in re­sponse. Dom­i­nant player Memo­rial Her­mann has made mul­ti­mil­lion-dol­lar in­vest­ments in its hos­pi­tals in Katy and Sugar Land. It also bought a 32acre site this month in Cy­press to con­struct in­pa­tient and out­pa­tient fa­cil­i­ties. Those projects come on top of its $650 mil­lion ex­pan­sion and ren­o­va­tion plans for its flag­ship, Memo­rial Her­man­nTexas Med­i­cal Cen­ter.

“They want to ex­pand out to those ar­eas be­cause that’s where the wellinsured peo­ple are mov­ing. (They be­lieve) there’s go­ing to be in­creased de­mand for health­care in Hous­ton,” said Vi­vian Ho, a pro­fes­sor in health eco­nomics at Rice Univer­sity.

But while health sys­tems have been stak­ing out turf in Hous­ton’s pe­riph­ery com­mu­ni­ties, the real es­tate race may be leav­ing the unin­sured be­hind. Roughly one in four Tex­ans has no health in­surance, the high­est rate of any state, and Texas is not ex­pand­ing Med­i­caid un­der the Pa­tient Pro­tec­tion and Af­ford­able Care Act. In Har­ris County, which in­cludes Hous­ton, nearly 30% of its res­i­dents, most of whom are Latino, are unin­sured.

“You tend to have a large amount (of unin­sured) in­side the 610 loop,” Ho said, re­fer­ring to the 40-mile in­ter­state that en­velops down­town Hous­ton. “But these hos­pi­tal sys­tems are build­ing in these well-to-do sub­urbs.”

Last month, CHI St. Luke’s Health— for­merly St. Luke’s Epis­co­pal Health Sys­tem be­fore its ac­qui­si­tion by Catholic Health Ini­tia­tives—said it would build a $110 mil­lion out­pa­tient med­i­cal com­plex near ExxonMo­bil’s new cam­pus in The Wood­lands to com­ple­ment its hos­pi­tal a few miles fur­ther north. That cam­pus is ex­pected to open next year and house 10,000 em­ploy­ees.

In May, Hous­ton Methodist an­nounced it would build a 193-bed, $328 mil­lion hos­pi­tal in The Wood­lands, to be com­pleted in 2017. Memo­rial Her­mann al­ready has an in­pa­tient fa­cil­ity in that af­flu­ent com­mu­nity whose pop­u­la­tion has grown al­most 70% since 2000.

In an era when many hos­pi­tal sys­tems are pump­ing the brakes on new in­pa­tient projects and large-scale in­vest­ments, Hous­ton’s boom­ing en­ergy econ­omy cre­ates op­por­tu­ni­ties for health­care providers, who are pour­ing mas­sive cap­i­tal into new fa­cil­i­ties. Memo­rial Her­mann plans to in­vest $1.6 bil­lion over the next four to five years, said Mar­shall Heins, the sys­tem’s chief fa­cil­ity ser­vices of­fi­cer. “We have this gi­ant eight-county ser­vice area. It’s only nat­u­ral to take some of the care out closer to some of the pa­tients who will then use that care closer to home.”

Nashville-based HCA, mean­while, has spent more than $70 mil­lion to build a hos­pi­tal in Pear­land, Texas, set to open in 2015. It also in­vested more than $90 mil­lion last year to ex­pand Clear Lake Re­gional Med­i­cal Cen­ter in Web­ster, Texas. And ear­lier this year, CHI St. Luke’s said it plans to spend more than $1 bil­lion to beef up the re­gion’s health­care in­fra­struc­ture over the next five years.

In ad­di­tion to its new venture in The Wood­lands, Hous­ton Methodist in Fe­bru­ary ac­quired two area hos­pi­tals from Irv­ing-based Christus Health. A new $540 mil­lion in­pa­tient tower at its flag­ship within the Texas Med­i­cal Cen­ter is the cen­ter­piece of the sys­tem’s three-year $1 bil­lion plan to ex­pand and ren­o­vate fa­cil­i­ties through­out the Hous­ton re­gion.

Dr. Marc Boom, pres­i­dent and CEO of the $2.6 bil­lion Hous­ton Methodist, said his sys­tem has a strat­egy to in­crease pa­tient ac­cess to all its ser­vices, es­pe­cially am­bu­la­tory care, while rein­vest­ing in its down­town hub. “As we can­ni­bal­ize our vol­ume out to the com­mu­nity, we’ve been re­plac­ing that with a crit­i­cally in­ten­sive type of care in an aca­demic­type en­vi­ron­ment,” Boom said.

Health sys­tem of­fi­cials con­firmed that the en­ergy boom has been a driv­ing fac­tor in sub­ur­ban in­vest­ments and has given them a leg up on the rest of the coun­try to build fa­cil­i­ties closer to pa­tients. But they deny that their devel­op­ment plans are a form of keep­ing up with the Joneses. Memo­rial Her­mann’s Heins said his sys­tem’s ad­mis­sions and out­pa­tient vis­its in­creased 4.4% and 9.6%, re­spec­tively from 2012 to 2013.

“We’re be­ing driven by strate­gic de­ci­sions to pro­vide good-qual­ity care, and we don’t care what the com­pe­ti­tion is do­ing,” Heins said.

Hous­ton Methodist Hos­pi­tal plans to build a $328 mil­lion fa­cil­ity to open in 2017.

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