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After a brutal year that saw numerous projects put on the shelf, experts believe the healthcare construction industry is now on something of a rebound, but add that it probably won't be back in full swing until late this year at the very earliest.
They report that a lot of planning is taking place that won't result in actual construction for several months—if not until next year. When work starts up again, the new facilities being built will have a focus on flexibility, smooth workflow, “green” construction and “evidenced-based design”—which aims to create a healing environment while promoting patient and staff safety.
Among the top 10 construction management companies in
Modern Healthcare's 31st annual Construction & Design Survey, four companies reported reduced project dollar volume in 2009 compared with the previous year, and six of them reported a reduction in the square footage of their projects.
Another trend that experts saw last year was how healthcare helped prop up the ailing construction industry as a whole, and they say this should continue in 2010, but much of that aid is coming from the federal government building new Veterans Affairs and Defense Department hospitals.
View Construction & Design Survey chartsThe VA's fiscal 2011 budget request seeks more than $1.4 billion for healthcare construction and adds to the almost $1.1 billion previously funded through 2010 for major projects in Aurora, Colo.; Palo Alto, Calif.; and New Orleans. Partial funding is also requested for future projects in Omaha, Neb., and Alameda, Calif.
Construction on one of the more significant federal projects, the $995 million Southeast Louisiana Veterans Health Care System medical center replacement in New Orleans, is expected to get started in August. According to Columbus, Ohio-based NBBJ architects, the new facility will have 200 beds and 300 outpatient exam rooms, plus rehabilitation and mental health services. It will provide care for more than 2,000 veterans a day.
According to the 2011 VA budget request, a construction contract is scheduled to be awarded this June for a $800 million tertiary-care facility with 107 hospital beds and a 60-bed “community living center” outside of Denver. The project is scheduled to be completed in September 2013.
The active military healthcare construction plan for fiscal 2011 includes funding that totals $794.7 million for projects throughout the country plus clinics and hospitals in Germany, Guam and South Korea. (The 2010 plan had $964.7 million worth of projects.) The largest project on the list is $162.5 million worth of funding for a $608 million ambulatory-care center to support the new San Antonio Military Medical Center, South Campus, at Lackland Air Force Base. The ambulatory-care center will eventually replace the 1957-vintage Wilford Hall Medical Center, whose deficiencies, documents say, would cost more than $570 million to fix. Construction is expected to begin in March 2011 and be completed in April 2013.
“Those two agencies are investing billions of dollars,” says James Brownrigg, Turner Construction Co. vice president and healthcare director. “The number of projects in the public sector is buoying the private sector.”
That's one reason why building and design companies that hadn't been previously involved in healthcare construction are looking to get into it. Of the 186 companies participating in this year's Construction & Design Survey, 140 say they saw increased competition from companies not traditionally involved in healthcare.
Doug Wignall, national healthcare director for Omaha-based HDR Architecture, the highest-ranking architectural firm in the survey, reports that his company had its second-straight record-breaking year. The company finished with nearly $6.33 billion in work last year, which was up 7.1% from the almost $5.91 billion it performed in 2008.
Wignall credits the company's decision to diversify “at the right time in the right places” and winning the “largest commission in the country” last year for its success. The big domestic contract that HDR landed was for the new $1.27 billion, 862-bed Parkland Hospital in Dallas. Groundbreaking is expected to be in the fall, with the project to be completed around mid-2014.
“In general, the marketplace is down, and I'm not convinced it's coming back yet,” Wignall says, adding that Texas and the Mid-Atlantic region are “booming,” but the California, Illinois and Wisconsin markets are particularly depressed.
Wignall says HDR is also doing well with Defense Department contracts—working on a new medical complex at the U.S. Army's Camp Humphreys in South Korea, the $806.9 million Fort Belvoir (Va.) Community Hospital, and the $1.8 billion medical complex at Fort Bliss in El Paso, Texas. The firm is also active in Canada and with other international projects such as the 360-bed Cleveland Clinic Abu Dhabi hospital in the United Arab Emirates and a replacement for the Port-of-Spain General Hospital in Trinidad and Tobago.
Wignall adds that the Canadian economy is feeling the effects of a two-year, $55 billion government stimulus plan and that HDR now has four offices in the province of Ontario that hold 100 employees who “specialize in nothing but healthcare.”
At Turner Construction, Brownrigg says the domestic market appears to be picking up this year after a disappointing 2009.
After breaking ground on a combined 6.3 million square feet of construction in 2008, Turner saw its activity decrease to 5.5 million square feet in 2009, Brownrigg says. However, its dollar volume increased some 5.5% to more than $2.77 billion in 2009 from almost $2.63 billion in 2008.
Brownrigg notes that eight Turner projects were put on hold in 2009, though two have restarted: the Cleveland Clinic's $96 million, 190,000-square-foot Twinsburg (Ohio) Family Health and Surgery Center and the $190 million Clarian Saxony Medical Center campus in Fishers, Ind., an Indianapolis suburb.
The Cleveland Clinic is building another family health and surgery center in the town of Avon, Ohio. San Francisco-based URS Corp. is providing planning, architecture and engineering services for the $95 million project. Both the Twinsburg and Avon facilities are expected to open next year. In all, Cleveland Clinic has some $848 million in construction and renovation projects planned.
The Saxony project is one of two in the Indianapolis area that shut down in early 2009, only to restart later in the year. The other was the $265 million St. Francis Hospital and Health Centers in Beech Grove, which restarted construction last September.
In Atlanta, Emory Healthcare reports that its package of $1.5 billion worth of construction projects that it put on hold in March 2009 remains in limbo and will probably remain that way through 2010.
“It's still on hold for the indefinite future,” Emory spokesman Lance Skelly says. “They haven't been canceled; they've been shelved in response to the economy.” Emory does plan to go forward with a $90 million pediatric research and autism-care center it's building as a joint project with Children's Healthcare of Atlanta.
Also in the Atlanta area, four-hospital Piedmont Healthcare system restarted construction on its 143-bed Piedmont Newnan (Ga.) Hospital, where work had stopped soon after a fall 2008 groundbreaking. Piedmont officials announced that, during the downtime, it had rebid several parts of the project resulting in about $30 million in savings, and they expect to reduce the cost by at least $5 million more, taking the project's cost down to about $162 million from $193.6 million.
“A lot of projects that were put on hold in 2008 will be released in 2010, and I'm more optimistic about how much the healthcare sector will rebound than I was three months ago,” Brownrigg says. “Something has changed in the last several weeks, and the activity in the market has significantly improved. Around Dec. 15, the gates opened, and there are now a number of projects on the street we are angling for.”
Of the 186 companies participating in this year's survey, 116 say they had projects stall in 2009. In all, 575 projects were reported stopped and, of those, 135 restarted during the year.
Except for Defense Department projects, which tend to use the design-build method, which results in a quicker start time, Brownrigg says the construction outlook for 2010 is basically flat, but “a possible uptick” is being forecast for 2011 as construction work begins on projects designed this year. Otherwise, Brownrigg says, most of the projects completed this year will probably be at the $250 million-and-under level, which is fine with him.
“We as an industry would rather see it come back in a smooth fashion rather than a spike,” Brownrigg says, adding that a spike could result in a shortage of the skilled labor that hospital construction requires.
When asked where the greatest opportunities for work are in 2010, 71.9% of
Modern Healthcare survey participants say renovation and expansion projects, while 27.6% say new or replacement hospitals; only 0.5% cited code compliance upgrades.
HDR's Wignall says he's seeing a higher-than-normal number of requests for proposals for bids on healthcare campus master-planning projects.
“It's a great day for an owner; it's more competitive and fees are going down for designers,” Wignall says. “As crazy as it sounds—with all the uncertainty—it's probably one of the most financially good times to build in a long time. For a dollar value, it's a good time to build—the problem is getting the money to build.”
Although the trend toward new hospitals having only private rooms continues, Turner's Brownrigg notes that some flexibility is being worked in so some single rooms can be used as double rooms if a short-term increase in capacity is needed—during flu season, for example.
That said, Cyndi McCullough, a senior healthcare consultant and vice president with HDR, says private rooms are not only here to stay, they are getting bigger as more hospitals recognize the value of providing space for patients' family members.
Along with wider doorways, better noise reduction, more “positive distractions” such as art and windows, and more advanced air filtration systems, McCullough says room standardization and “adjacencies” have each become a focus in design.
“It's understanding what needs to be next to each other—with the fewer steps, the better,” says McCullough, a nurse. “A lot of it comes from tracking the distances nurses travel.”
Rather than “flexibility,” Andrew Quirk, senior vice president with Skanska USA Building in Nashville, uses the term “adaptability.”
“Developing buildings for a singular use or a limited lifespan should be a thing of the past,” Quirk says. “New projects should have the ability to change, be revised, added on to, without much effort or overexpenditure.”
Skanska finished fourth on the construction management ranking as its dollar volume increased 12.9% to $1.37 billion in 2009 from almost $1.22 billion in 2008 —even as the square footage of the projects it worked on fell 24.1% to almost 3.88 million square feet in 2009.
“We're doing pretty well, although last year we saw a little bit of a slowdown,” Quirk says. “I think we're expecting 2010 to pick up.”
Quirk sees two related trends emerging stronger than ever this year: the increasing use of building information modeling technology, which will lead to more prefabrication of hospital parts that are assembled off-site and then plugged into the new facility, such as piping connections, patient room headwalls and even entire bathroom units
(Read related story on the use of building information modeling).
“Elements can be built ahead of time,” Quirk says. “There can be parallel activity and you don't have to wait for something to be built before the electricians and plumbers walk in.”
The technology also shows builders where design conflicts appear—such as electrical conduit, plumbing or ventilation ducts all fighting for position in the same space. Because it can eliminate these problems and help make more efficient use of the space above the ceiling, Quirk says he believes it could lead to reduced ceiling heights and reduce the overall height of the building, which could lead to more savings.
Quirk says Skanska and NBBJ architects have made great use of the technology while building a new $135 million, 180-bed heart tower at Miami Valley Hospital in Dayton, Ohio. For the 484,000-square-foot, 12-story structure, headwall, footwall and bathroom mechanics were consolidated in a single wall so 180 units could be preassembled off-site. A similar approach was used to assemble above-ceiling mechanical, electrical and plumbing racks.
He says the technology is leading to safer and cleaner construction sites generating much less waste. Quirk notes that construction crews filled only one large trash bin with garbage while installing the Miami Valley facility's bathrooms. The project is about 75% complete and the cost of waste removal has been estimated at $91,000 so far. In comparison, Quirk cites two similarly sized facilities in Florida where the total waste-removal costs totaled $200,000 and $490,000.
Waste reduction and recycling are getting more attention than ever.
Among the more significant “green” construction projects was the recently completed $189 million Aurora Medical Center in Summit (Wis.). The 110-bed regional medical center, which opened March 1, included energy-efficient lighting and heating/cooling systems in its design. During construction, Aurora reports that 8,857 tons of construction materials were recycled, as were 151 tons of cardboard and office paper, and 690 tons of wood.
The project is the 14th hospital in the Milwaukee-based Aurora Health Care system, and was developed by Hammes Co. (Hammes was the top-ranking developer in this year's Construction & Design Survey, reporting project dollar volume of $1.2 billion in 2009, a 21.2% increase from the $979.3 million for 2008.)
The effort earned the project the Big Diverter Award from WasteCap Resource Solutions, a private, not-for-profit organization that assists companies in waste reduction and recycling initiatives.
One expert thinks this type of focus on the environment is becoming standard.
“I think the good news is that it has hit its stride in terms of spanning the not-for-profit and for-profit and public hospitals,” says Gail Vittori, co-director of the Austin, Texas-based Center for Maximum Potential Building Systems and co-coordinator of the Green Guide for Health Care. “I think the range of interest and follow-through is much greater today than a few years ago.”
Vittori is also the founding chair of the U.S. Green Building Council's LEED for Healthcare Committee. The council offers varying degrees of certification for its LEED program, which stands for Leadership in Energy and Environmental Design, with Platinum being the highest. So far, only one hospital has achieved LEED Platinum designation, 168-bed Dell Children's Medical Center of Central Texas in Austin, which opened in July 2007.
In addition to the environment-friendly construction that its designers say will yield a multitude of savings, Vittori says the environment of the hospital itself has already helped generate another benefit: low nurse turnover. She says the national average nurse turnover rate is between 10% and 15% and it's not uncommon for new hospitals to experience a 30% turnover rate. But Dell's turnover rate for its first year was only 2.4%, which is significant because she says it can cost more than $70,000 to replace one nurse.
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