Go west, young man," was the advice to generations in search of their fortunes.
Translate that now for hospitals and it might be, "Build in the 'burbs."
With populations around them exploding, some suburban Chicago hospitals are in the midst of a building boom.
New outpatient centers, medical office buildings, clinics and fitness centers are cropping up all around communities that ring the Windy City. That's especially true in more-affluent, fast-growing suburbs.
This construction isn't just about adding new structures; it's about adding new services.
"The center of gravity in advanced medical procedures . . . is no longer the monopoly of the big medical centers downtown," says Jim Unland, president of the Health Capital Group of Chicago, a consulting firm.
Adding services adds profits to a hospital's bottom line.
"They want to capture that patient and that revenue," Unland says.
Hospitals on a tear. Since last year, the Illinois Health Facilities Planning Board has approved more than $390 million in new construction and expansion projects at suburban hospitals in the Chicago metropolitan area.
Statewide, hospitals spend about $1 billion on capital projects annually, says Ray Passeri, secretary for the state planning board.
The state reviews between 30% and 40% of those expenditures because the projects exceed certain financial thresholds and trigger certificate-of-need approval. Hospitals need CON approval for construction projects that exceed $2.6 million and equipment purchases of $1.3 million or more, Passeri says.
This wave of construction is happening while hospitals around the country are pleading for relief from Medicare spending restrictions imposed by the Balanced Budget Act of 1997.
But not even Medicare reimbursement cuts can put the kibosh on projects, even when they seem to stray from a hospital's traditional core businesses.
For example, construction is under way on two state-of-the-art wellness/fitness centers at 255-bed Good Samaritan Hospital in west suburban Downers Grove and at 154-bed Good Shepherd Hospital in northwest suburban Barrington, both part of eight-hospital Advocate Health Care.
The 90,000-square-foot center at Good Samaritan, which is scheduled to open in November, has an $18 million price tag, and the 68,000-square-foot center at Good Shepherd, which will open next year, will cost $17 million.
"Yes, there is the Balanced Budget Act, and it is impacting all healthcare providers. But at Advocate we have factored those Medicare reimbursements into both our long-term and short-term financial planning," says Lloyd Dean, executive vice president of operations for the Oak Brook, Ill.-based system. "We can continually make strategic investments within the context of some of the constraints that reimbursement brings about."
Provena Health, a seven-hospital system headquartered in south suburban Frankfort, says it is prudent about the projects it undertakes given the economic realities of the times.
"(We) make sure we don't build too much overhead that can't be supported by the population," says John "Jack" Barto, president of Provena's hospitals division.
The system has more than $90 million of planned or recently completed construction projects at three of its suburban hospitals. They are in Aurora, Elgin and Joliet.
The projects run the gamut from basic infrastructure improvements to a new medical office building and clinics to new and renovated space for outpatient services and a cardiac catheterization laboratory.
Serving a growing population. The Chicago metropolitan area encompasses nine counties, according to market profile data supplied by the Chicago-based SMG Marketing Group.
The metro area, which includes the city of Chicago, has 90 acute-care hospitals, of which 80 are not-for-profit.
Fueling the hospital construction is the explosive population growth in the Chicago suburbs.
West suburban DuPage County saw its population surge 60% to nearly 782,000 in 1990 from 1970. The population is expected to swell by another 26% by 2010 and top 985,000.
The population in south suburban Will County has grown by almost 29% to about 459,000 since 1990. Estimates show the population there could grow by as much as 76% more to 806,000 by 2020.
Lake County, which includes the northern Chicago suburbs, has watched its population shoot up 17% to 605,000 between 1990 and 1998.
But the boom in hospital construction isn't limited to the suburbs; the city of Chicago is also seeing big-ticket hospital projects.
Chicago hospitals are keeping pace by constructing buildings and expanding services.
* Northwestern Memorial Hospital in May opened its $580 million 492-bed replacement hospital, and then in July announced plans to build a new hospital for women on its Chicago campus. The new specialty hospital, with an estimated price tag of $100 million to $150 million, is expected to be completed in 2004.
* Construction is continuing on a new $551 million Cook County Hospital. The 464-bed replacement facility is expected to open in 2002.
* A new $100 million outpatient center is set to open in August at the University of Illinois at Chicago Medical Center.
Population growth in Cook County, which includes the city of Chicago, pales in comparison with that of the surrounding counties. Since 1990, the county's population has grown less than 2% to almost 5.2 million people.
Diversification. As Unland, the consultant, sees it, the construction taking place in the suburbs falls into three areas.
* Hospitals improving their basic inpatient infrastructure.
* Hospitals expanding into related businesses beyond inpatient care, such as satellite medical centers and physician clinics.
* Hospitals moving into peripheral business lines, such as health clubs, which Unland says "are basically attempts to diversify revenues."
The latter is the riskiest of the three types, Unland says, because such ventures are not natural lines of business and hospitals typically have little management expertise in them.
In June, Elmhurst (Ill.) Memorial Hospital in DuPage County opened its new $50 million outpatient center.
The center, about four miles from the hospital, was built after the hospital witnessed a 50% growth in demand for outpatient services over a five-year period, says Laura Ferris, the hospital's vice president for the continuum of care.
"We wanted to respond to that," she says.
In its first week, she says, the center performed more than 800 procedures.
"At this point, we need to sit back and see if indeed it's as successful as we believe it will be," Ferris says. "If the first week is any indication, it definitely will be."
One organization that can't seem to break ground fast enough for new construction projects is 155-bed Edward Hospital in west suburban Naperville.
The hospital is the flagship of Edward Health Services, headquartered on a 50-acre campus in the booming, affluent DuPage County community that's one of the fastest-growing cities in the state.
Edward's capital projects now total almost $200 million, since it announced in July plans to build an $80 million heart hospital in a joint venture with area physicians.
The 71-bed specialty hospital will be a separate for-profit corporation from the hospital, which will continue as a not-for-profit.
Pending CON approval from the state, the heart hospital is expected to be completed in 2002.
Once it's open, the heart hospital will help relieve the patient glut at Edward Hospital, freeing up beds, executives say.
The news about the future heart hospital comes just five months after Edward got permission from the state for a $90 million expansion project.
That massive project includes outpatient services, conference facilities, a health information center and a new 900-space parking deck.
Edward also is building an $11 million women and children's pavilion, which is set to open next year. The hospital is spending another $7 million on three new operating rooms, which are expected to open in September.
How times have changed since Pam Meyer Davis, Edward's president and chief executive officer, first came to the hospital 12 years ago.
"It was a tiny little hospital," Davis says. "Let's just say it was sleepy."
But Davis says she recognized the hospital's potential. Every year now, Davis says, 650,000 individuals come to the Edward campus for healthcare services.
"It's no wonder the carpeting is dirty occasionally," she says.
The high volume has been kind to Edward's bottom line. The system posted net income of $21.2 million on total revenues of $152.1 million for the fiscal year ended June 30, 1998, according to data provided by the hospital. That's a 26% increase compared with the previous year when Edward reported net income of $16.8 million on revenues of $142.9 million.
"I thought Edward was a diamond in the rough that just needed a jump-start, and boy, it started," Davis says.