As aging baby boomers spur the need for new inpatient beds and consume more specialty services, hospitals continue to jostle for a piece of their business, especially in suburban markets.
It's about keeping up with the Mayo Clinics, builders say. Specialized medicine close to home is an area of expansion that hospitals hope will lead to better profit margins or help them get a jump on the competition. And services such as cancer care and cardiac care can give hospitals a market focus for their brand name and image.
Whatever the motivation, hospital systems built more acute-care hospitals in suburban communities last year, say respondents to Modern Healthcare's 2002 Construction & Design Survey. Meanwhile, systems expanded or renovated urban hospitals to house new technology and more patient beds, or to comply with building codes and security issues.
Flexibility was the key word in preparing for the future, whether it was in dealing with tighter budgets, working around shrinking numbers of nurses and physicians or accommodating patients who are increasingly smarter consumers.
Numbers stay strong
Architects and design/build firms that responded to this year's survey saw their total square footage in completed construction projects grow 3%, while spending for healthcare projects increased 9%. Although the overall number of completed domestic projects and costs fell in this year's survey compared with last year's, the number of completed acute-care hospital projects and hospital expansion projects rose slightly. Overall domestic projects dropped 13% to 3,362, and spending fell 10% to $15.8 billion. The 2001 results were drawn from 175 firms that participated in the survey, down from 198 last year. Respondents included 123 architects, seven design/build firms, 18 construction-management companies, 13 general contractors and 14 developers.
The smaller pool of respondents this year might account for the overall drop in completed projects, despite a healthcare building boom that top firms say they are experiencing. One reason for the decrease in participants this year is that many firms fell short of the 100,000 square feet of completed healthcare projects in 2001 necessary to qualify for the survey.
In the survey questionnaire, respondents reported construction data including project volume and costs, divided into projects that were completed, had broken ground or were in design phases. Firms also had the option of reporting healthcare trends that most affected their hospital construction and design projects.
This year the nation's top builders say that after a lull in new construction and a trend toward outpatient centers in the 1990s, hospitals again are adding inpatient capacity. Limited relief from reimbursement constraints of the Balanced Budget Act of 1997 has loosened some purse strings, but hospitals still are keeping a close eye on profit margins and balance sheets. Though acute-care projects increased 5% to 82 completed in 2001, construction costs for those projects declined 25% to $1.8 billion.
Demographic changes are driving the need for more beds in states such as Arizona, Florida and Texas. And as more people continue to move to the suburbs, hospitals continue to cater to them by offering better services.
Community hospitals are embracing new concepts of care such as the "universal" room model, where patients receive all forms of treatment from intensive care to acute care in the same room. Moving care teams and equipment rather than the bed means better care for the patient while allowing more flexibility and greater use of space for the hospital. Building flexibility into the design helps to keep costs down.
Building for efficiency
"There are fewer people to do what needs to be done," says Jean Mah, a principal at Chicago-based Perkins & Will architects. She says planners now consider all aspects of business and marketing plans in conjunction with the physical layout when building a hospital. Staffing shortages and slim operating margins play a big role in planning for efficiency. Hospitals also must anticipate and accommodate new technology, such as centralized databases and changes fostered by the Health Insurance Portability and Accountability Act of 1996.
Amenities at new hospitals include more private rooms and homelike environments. A children's hospital built last year by Dallas-based HKS architectural firm, 100-bed Texas Scottish Rite Hospital for Children in Dallas, even has a popcorn machine in the lobby to recreate the smell of a movie theater, making it more inviting to children.
Younger families in the suburbs are spurring the growth of children's hospitals and women's centers there. Often the two are tied, Mah says, allowing more continuity of care as a family grows. She says hospitals also offer convenience to suburbanites by sprinkling satellite facilities throughout the communities.
"Specialization is really hot right now," Mah says.
Specialty facilities such as children's hospitals and heart centers yield better reimbursements and lure the best physicians, Mah says. They also provide opportunities for hospital systems to spread their brands. By tying their names to specialty services in consumers' minds, hospitals can capture new market share.
According to this year's survey, builders completed 133 heart centers, broke ground on 91 more and designed 119 centers, with a total price tag of $1.8 billion for all three phases of construction. Cancer centers were also popular projects, with 82 built last year and 91 more in the design phase, also costing $1.8 billion for three phases.
One example of the trend in new heart centers is a 240,000-square-foot, $57 million project being built by HKS. The 128-bed Minneapolis Heart Hospital is an expansion of Abbott Northwestern Hospital, part of Allina Health System.
Cardiovascular surgeons pitched the idea of a freestanding heart center to the hospital, saying the facility could offer more comprehensive heart services. The center would have its "own identity and its own front door," says Joseph Sprague, senior vice president and director of health facilities at HKS. Physicians believed the approach would lead to better and more efficient treatment. For the hospital, expanded heart services would net better reimbursements, attract talented staff and create a market niche.
Specialty hospital construction remained stable in 2001, according to respondents, with 60 projects valued at $1.1 billion, compared with 61 projects at $1.1 billion the previous year. Projects in the pipeline will yield a steady stream of specialty centers in the next few years: 55 projects worth $2.1 billion broke ground last year and another 93 projects worth $2.9 billion are in the design phase.
Safety and security
Concerns about security also drove decisions on new construction as well as expansion and renovation projects, according to this year's survey respondents. In urban areas, hospitals are working to anticipate threats of bioterrorism and other preparedness concerns. Many city hospitals are converting outdoor areas such as parking lots for decontamination space.
Other safety issues have spurred plans for new hospitals as well as expansions of existing hospitals. Laws mandating tough seismic codes in California are forcing hospitals to make their buildings "life-safe" during an earthquake by 2008. And by 2030, hospitals must be able to remain operational during a quake. In Oregon and Portland, hospitals are working on a voluntary basis to strengthen their buildings in preparation for natural disasters.
Of San Francisco-based Anshen+Allen's $1.1 billion in designed projects last year, two are replacement hospitals in California. Faced with the decision to build hospitals or work with existing buildings to meet new seismic standards, hospital officials chose to think long term and incur the greater expense. That's the big decision in dealing with the new laws, says Marc Harriman, marketing manager at the firm.
Seismic laws make new earthquake safety standards mandatory, but no accompanying legislation exists to fund the changes, says John Pangrazio, a partner at NBBJ, a Seattle-based architectural firm. Lack of ready funding for the projects leaves many to wonder what the building codes will do to healthcare costs in California.