Further evidence that healthcare is not totally recession-proof came last week with the announcement that economic factors prompted providers such as Atlanta-based Emory Healthcare to put big-ticket construction projects on hold.
Economy puts construction on shaky footing
In Emorys case, the stalled economy led to the delay of a new hospital and other projects costing about $1.5 billion. In addition, Beech Grove, Ind.-based St. Francis Hospital and Health Centers said it is postponing $265 million worth of renovations at its Indianapolis campus, and Waukesha, Wis.-based ProHealth Care indicated it would delay building a planned hospital costing between $75 million and $90 million in the town of Mukwonago.
Due to the current economic situation, Emory Healthcare is temporarily suspending the major design and construction of planned new inpatient and outpatient healthcare facilities including a new hospital and outpatient facilities on its main campus and a new medical inpatient/outpatient tower at its midtown Atlanta campus, according to an e-mail attributed to Emory Healthcare President and Chief Executive Officer John Fox.
The plans included about $1.1 billion for hospitals and clinic facilities, with the addition of 300 combined beds, and the balance for added medical research capacity, the e-mail stated, adding that larger projects will resume only when our resources and the economy allow.
According to Modern Healthcares annual Construction & Design Survey, this is a national trend and not limited to Georgia, Indiana and Wisconsin (See p. 24).
The economy is being cited as the reason for delaying the St. Francis projects, which include a new six-story, 221-bed patient tower, an eight-suite outpatient surgery area, new emergency department with 68 treatment rooms, and a two-story cancer-care building. Traditionally, hospitals have been recession-proof, but many hospitals and health systems are now entering strange and new territory with this economy, said St. Francis spokesman Joe Stuteville.
ProHealth spokeswoman Sandra Peterson said the Mukwonago hospital is expected to be delayed, but not stopped by the economy. We are still hoping to break ground on the project some time this year, she said. It depends on what happens with the bond market.
Representatives from the Georgia and Wisconsin hospital associations were not surprised by the news, as both said their organizations recently completed surveys in which members indicated that spending on capital projects would take a hit. In a survey of 63 Georgia hospitals and health systems conducted Jan. 12-21, 60% of those surveyed said they were postponing or reconsidering new building or renovation projects.
So, what Emory did is certainly not uncommonunfortunatelyat least for the last six months, said Georgia Hospital Association spokesman Kevin Bloye. It shows you how difficult the circumstances are right now.
The Atlanta healthcare picture was made even murkier last week with the citys safety net facility, 667-bed Grady Memorial Hospital, announcing that it was cutting about 150 jobs.
In addition to ProHealth, SSM Health Care of Wisconsin announced Feb. 17 that it was putting on hold construction of a planned 50-bed, $140 million hospital in Janesville. System spokesman Steve Sparks said the project will go forward eventually, noting that a groundbreaking ceremony was held in November 2008, and that a hospital president has been hired who has already moved into the community.
This is a delay, not a cancellation, Sparks said. We are fully committed to do this. At this time, however, the bond market is just too prohibitive. But this is considered a top priority of the system, and so its just a matter of moving the timeline.
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