Data by Suzanna Hoppszallern
|Health Facilities Management assembled this report from a survey conducted in cooperation with the American Society for Healthcare Engineering, data supplied by Reed Construction Data/RSMeans and extensive interviews with leaders in the hospital planning, design and construction fields.|
Health care organizations are upping the ante in their bet on baby boomers, pouring ever more resources into new and expanded hospitals as they await a demographic wave counted on to send a huge surge of business their way. Several years into a historic hospital construction spree, the buildup kept apace in 2007 despite a credit crunch and recession fears that shadowed the economy and put residential housing and consumer confidence on the skids.
Sun Belt suburbs buzzed with construction activity, specialty hospitals continued to rise from Midwest cornfields and elsewhere, and a full slate of drawing-board activity for the years ahead suggested no sign of an imminent letup from Northeast to Southwest. A total of $41 billion in hospitals and clinics was under construction in the fourth quarter of 2007, according to Reed Construction Data/RSMeans—almost double the activity of two years earlier.
Health care construction growth is likely to continue in the low double digits through 2009, Reed Construction economist Jim Haughey forecasts.
“That’s not the extraordinary growth of a few years ago, but it’s definitely substantial,” says Jayne Talmage, principal of RSMeans Business Solutions. For new construction, she notes, more than 3,000 medical projects representing $35 billion and 378 million square feet became active in the planning pipeline. Major renovation accounts for another $12 billion.
The high level of activity was borne out by the annual construction survey by the American Hospital Association’s Health Facilities Management (HFM) magazine and American Society for Healthcare Engineering (ASHE). About three-fifths of those participating in the October 2007 survey either had hospital projects under construction (33 percent) or planned new or replacement facilities or expansion/renovation projects within three years (26 percent).
The fact that the hospital market continues to sizzle after a long torrid stretch prompts some surprise and anticipation among observers. Whenever ASHE President John Wood, CHFM, SASHE, talks with peers in the industry, he says, “the conversation always gravitates toward, ‘When’s it going to end?’ ”
No one knows exactly when a true slowdown will occur. For now, the factors that led to the boom remain in place: obsolete facilities, technological advancements that drastically improve hospitals’ efficiency and quality of care, seismic code changes that necessitate replacement buildings in California, and the aging of the baby-boom generation.
Cost burdens are starting to weigh on projects, however, which could alter demand. Robert Levine, vice president and general manager of Turner Construction, the nation’s largest health care construction firm, says hospitals face tremendous upward pressure on budgets for a variety of reasons. These include not only the steep price tag on technology and other features on most organizations’ hospital wish lists, but also declining federal reimbursement for Medicare and Medicaid patients, which provides roughly 60 percent of most hospitals’ income. He already is seeing projects being put on the back burner or sent back to architects/designers to reduce the total tab. “The giddiness is disappearing, and we are being faced with escalating costs, no question about it,” Levine says.
A bit of wariness appears to be taking its place as more expansions and new facilities are completed and the number of beds nationwide jumps accordingly. Some peers of Wood, who is director of facilities management at Mercy Medical Center in Roseburg, Ore., don’t see increasing bed totals matching up with hospital census counts any time soon. “The question is, are we overbuilding or are we just ahead of the curve?” he says. “I would like to think we’re just ahead of the curve.”
Hospitals heard similar concerns about a glut of beds in the 1990s, only to find out they didn’t have too many after all. So plenty of megaprojects and smaller ones are queued up for the coming years that will confidently add to the overall amount. Last fall, Reed Construction Data/RSMeans cited 89 projects of over $100 million, 97 of $50 million to $100 million, and 652 for lesser amounts in the planning stages.
“Bed demand is still a major driver” of all the construction, Levine says. “Getting new imaging and interventional rooms and all that, that’s fine. But the need for new beds is what’s driving getting new ‘greenfields’ in place.”
Sprawl and specialties
More efficient, hospitable, digital, specialized and market-aware—the typical new or renovated hospital shows that hospital organizations “get it” when it comes to meeting changing technology and patient demand. And in many cases, they are moving to locations where more consumers are.
Sprawl outside growing cities now includes many new hospitals in the Sun Belt and beyond as older flagships located in downtown areas add facilities in nearby bedroom communities in search of a better payer mix. “I call them ‘new market’ hospitals,” says Brad Barker, senior vice president for the health science practice at the RTKL architectural firm in Dallas. “There was no market there previously—it was a cornfield.”
The growth goes beyond cornfields. Talmage says the smart-growth movement that is producing a mix of apartments, condos and green space in near suburbs of U.S. cities, especially in the Northeast, will drive the need for future health care facilities.
An increasing number of them are specialty hospitals—not only a sign of the demographic times but also a reflection that they do better financially. Some are joint ventures with physicians’ groups, securing the doctors’ loyalty and helping to ensure that new facilities are well-utilized. “Cancer, orthopedics and cardiovascular hospitals—those are your big drivers, your big moneymakers,” Barker says.
HFM/ASHE’s survey, which generated a 21 percent response rate and carries a margin of error of plus or minus 5 percent based on responses from 785 hospitals, found that specialty hospitals account for nearly 30 percent of hospitals under construction. For those planned in the next three years, that increases to about one specialty hospital for every two traditional hospitals.
Kirk Hamilton, FAIA, FACHA, associate professor of architecture and associate of the Center for Health Systems and Design at Texas A&M University, sees a new boom in children’s hospital design in New York, Denver, Dallas and elsewhere, including both replacements and updates. The survey confirmed that children’s hospitals have surpassed heart hospitals from a year ago as the most common type of specialty hospital under construction—one in every four.
New construction is only part of the mix. “We continue to be blown away by the activity in the Sun Belt, but there’s a steady flow of campus improvements everywhere,” says Russ Wenzel, vice president for McCarthy Building Companies Inc. in St. Louis.
EDs and imaging are key
The poll shows that many of the additions or modernizations focus on imaging—cited most frequently by respondents (19 percent) as a service being added in current projects—or emergency departments, the most common service (23 percent) in projects on the drawing boards. Architect and engineering expert Joseph Sprague, FAIA, FACHA, FHFI, director of health facilities for HKS Inc. in Dallas, says almost every project his firm does now has some kind of emergency department component. “The ED has become the front door of the hospital,” he says. “People go to use the emergency room and they end up using the hospital.” Among all-new facilities, cancer centers, ambulatory care, isolation/clean rooms and wellness all were named as priorities in at least 40 percent of projects.
Projects in planning call for single or private beds over semiprivates by a three-to-one margin. That trend is sure to accelerate with adoption of the most recent Facility Guidelines Institute/American Institute of Architects Guidelines for Design and Construction of Health Care Facilities, which advocates single beds for numerous patient care reasons. Several experts interviewed for this article were surprised that the disparity in the survey wasn’t greater given the industrywide turn away from semiprivates. But Stephen Dailey, vice president for hospital business development and strategic consulting services at HBE Corp., notes that semiprivates aren’t going away entirely, in part because of contingency planning.
“What we generally see is the intent to use the room as private except in unusual circumstances, and that then provides for peak census periods and things like that,” he says. “The room might have only one bed but two headwalls and in extreme circumstances could have another bed brought into it.”
Wireless capability continues to top the list of features being incorporated into patient room design, with 61 percent of surveyed projects using wireless technologies for staff and 39 percent for patients. Other features cited most commonly included individual in-room temperature control, in-room sink, computerized provider order entry and larger room size—200 square feet or more.
Bigger rooms are one feature of a 462,000-square-foot replacement hospital planned by Martha Jefferson Hospital in Charlottesville, Va., in part with patients’ families in mind. A mock-up done in connection with the project, which is scheduled to break ground in April, divides rooms into three parts—a caregiver area, patient area and patient’s family support zone. Staff considerations also are evident. Besides nurse servers outside, each patient room will have a medication drawer that pharmacy staff can stock from the hallway and nurses can open from inside the room. The goal is to decentralize nursing so nurses can spend most of their time at the bedside, which benefits both patients and staff.
“When we set out to build this hospital, one thing we wanted to do was support the caregiver,” says Barbara Elias, director of the replacement hospital project. “As the workforce ages, that becomes even more important.”
The most popular features being incorporated into hospitals for the purpose of flexibility are wireless infrastructure, extra cabling and conduit, and the use of hospital building codes throughout—meaning that administrative space can be converted to patient space because all the fittings and materials meet clinical codes. Power plant expansion capacity and larger operating rooms, reflecting the trend toward combining surgery and imaging, also are increasingly becoming part of the 21st-century hospital.
As with many hospitals, technology is at the heart of a new 385-bed, 1.2-million-square-foot facility due to open March 1 in Springfield, Ore. Sacred Heart Medical Center at RiverBend will be one of the nation’s most technologically advanced hospitals, boasting 25 “smart” ORs that include the use of high-definition screens for laparoscopy, heart and other much less invasive procedures; tracking systems for patients, staff and equipment; a video conferencing system; and a universal antenna system for voice and data that will ensure that communications over the emergency radio work everywhere, even in the bowels of the building.
Mike Severns, FASHE, manager of technology integration for parent organization Peacehealth, says technology ran up the costs of the nine-story regional medical center to about $380 million, but it was all necessary in today’s results-focused environment. “It’s a selling point, but it’s also essential. It’s what makes you unique to the competition if you have a facility that’s state of the art and has systems and technology that deliver accurate results and increase patient safety and deliver more satisfactory patient outcomes.”
Various features designed to please patients and their families are a growing factor in construction projects. Respondents to the HFM/ASHE survey cited closer proximity for related services (39 percent), family/social spaces on each floor (38 percent), transportation and ease of access (34 percent) and a health information resource center and library (29 percent) as included additions.
An ongoing emphasis on hospitality means America’s hospitals are not just expanding and adding new services, they’re undergoing a personality change. The push to make them more inviting and establish a healing environment for patients and their families—using hotel-like features such as wood paneling, entertainment systems, light dimmers and softer wall surfaces rather than plaster ones in patient rooms to deaden the noise—is now widely seen as making sense for both care and competitive reasons. “All these things will really help the patient feel more at home, more comfortable, because feeling stress is not something that helps the patient one iota,” says Doug Erickson, CHFM, SASHE, deputy executive director at ASHE. “By removing stress, we have the opportunity to help the healing process.”
A new family birthing center built by St. Mary’s Health Care System in Athens, Ga., as part of a $40 million expansion embodies the strategy. Thomas Kruer, director of engineering for the system, says the patient count is up by more than half and the patients’ recovery process is stimulated by all the amenities, including wireless Internet in all rooms, round-the-clock room service, wood tones in hallways and lots of natural light in rooms. “Most patients, if they had their choice of staying in a cold, institutionally designed room versus one that’s more like a hotel, they would take the hotel,” he says. “We’ve tried to design it so it’s a pleasant experience for the whole family.”
Similar to the survey results a year ago, advanced security/lockdown systems are the most common feature (53 percent) among those being incorporated into facilities design to address disasters, terrorism and mass casualties. Additional generator capacity and expanded emergency communications systems follow, in order of frequency. Sprague says a new Joint Commission mandate as of Jan. 1 will draw more attention to disasters in future project designs, requiring systems to take a multidisaster approach and focusing on how a hospital relates to community resources after a disaster hits.
Evidence-based design concepts continue to draw solid interest, but the HFM/ASHE survey results also reflect some caution and even indifference. Fifty percent of those responding were using it in their health facilities projects, and 35 percent said they didn’t know whether their projects were incorporating such concepts.
Count St. Joseph’s Hospital and Medical Center in Phoenix, which incorporated few evidence-based features in its new $149 million addition, among those in the “wait-and-see” camp. “It sounds all well and good, but we need to be able to make it more data-driven and less subjective,” says Nicholas Dalba, director of facilities development. “You’d think it would work, but I’ve seen too many times where people can’t justify the effort and expense with the return on investment.”
Hamilton, an expert on evidence-based design, says organizations still don’t realize that despite the higher front-end cost, evidence-based models don’t really cost more in the long run. “Evidence-based design is pretty much a promise of getting higher quality because you’ve studied it,” he says.
Other professionals said the jury remains out somewhat, with more data needed from the impact of features like same-handed rooms.
Green design, meanwhile, is attracting ever-stronger support. Twenty-eight percent of survey respondents said they were using it in all projects, up from 19 percent a year earlier. Leo Gehring, CHFM, FASHE, 2007 ASHE president and vice chancellor for campus operations at the University of Arkansas for Medical Sciences, hears anecdotally of more facilities in the industry going green, including his campus’ planned new cancer center. “I think this will rise as time goes on,” he says. “We see this as an emerging trend. It’s not just energy efficiency anymore.”
Traditional design/bid/build continues to be by far the most commonly used project delivery model, cited by 46 percent of organizations. But McCarthy’s Wenzel says the growing buzz in recent months shows an increasing following for integrated project delivery, where the shared-rewards approach provides strong motivation for all to save project costs and work collaboratively. “For the first time in 30 years, it looks like the industry wants to do something more progressive about its delivery methods,” he says. Other experts said the “lean” approach also is gaining in popularity.
Money and time
Project costs are putting tremendous pressure on budgets, with all the popular new features adding significantly to price tags. The highest cost of hospital construction is currently in the cities of San Francisco, New York, Chicago, Boston and Philadelphia, based on 2008 cost data released recently by RSMeans Business Solutions. But the squeeze is on virtually everywhere. “As you continue to fight reimbursement issues at a facility and you’re trying to upgrade, it becomes difficult,” says Donna Craft, executive director of support services, NorthEast Medical Center in Concord, N.C. “It is getting much harder to elevate the aesthetic standards and the bottom line.”
The fluctuating cost of materials also poses an added challenge, according to Talmage, who advises using professional cost estimators during planning to limit overall expenditures. Difficulties are likely to grow; Turner Construction expects annual cost escalation of 7 percent to 8 percent through 2010.
Still, 57 percent of survey respondents said their recently completed construction projects managed to keep to or exceed budget and schedule goals. The primary challenges in keeping to budget were, in order of frequency among responses, end-user/department-requested changes, architect/engineer/documentation errors and omissions, administration-requested changes, initial budget development/estimating and regulatory requirements.
But however they’re managed, plenty of construction projects continue to be built, showing that the hospital building business has a life of its own that no slowdown in the overall economy has yet been able to dampen.
Dave Carpenter is a Chicago-based freelance writer who frequently covers health care industry topics. Suzanna Hoppszallern is senior editor of data and research for Health Facilities Management’s sister publication, Hospitals & Health Networks magazine.
This article first appeared in the February 2008 issue of HFM magazine.
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