Recovering construction industry banks on outpatient growth

Dr. Steven Safyer, CEO of the Montefiore Health System in New York, calls his system's new $152 million Hutchinson Campus the first “bedless” hospital.

It provides most hospital functions, but has no overnight beds and no emergency department. Instead, it has 12 operating rooms, four procedure rooms that can be converted to ORs, 64 recovery bays, a pathology lab, imaging, a pain center and a “headache suite.” It also has offices for primary care, pediatrics, plastic surgery, cardiology, dermatology and other medical specialties.

Jason Lee, northeast region studio director for Array Architects in Conshohocken, Pa., which designed the hospital, said the 12-story, 280,000 square-foot, multispecialty facility illustrates the industry's larger shift to ambulatory care.

Surgery patients use a dedicated elevator that takes them from the valet parking area to the surgery waiting room. Recovery bays are along exterior walls so the rooms receive natural light, a contrast to recovery rooms' traditional placement in the center of the floor away from windows. “The patient's experience—from arrival to departure—is an important metric for success,” Lee said.

The Montefiore project is a prime example of the healthcare construction industry's recovery from the Great Recession—and the takeaway message from Modern Healthcare's 36th Annual Healthcare Construction & Design Survey. Construction and design firms' new focus on outpatient facilities further suggests they are adjusting to a broader transformation in the healthcare industry.

Another indication of that transformation: healthcare construction industry professionals and their clients no longer look to bed counts as a good indicator of a facility's financial viability. Now, “a person lying in a bed raises your risk profile,” said Andrew Quirk, senior vice president and national director of Skanska USA's Healthcare Center of Excellence in New York. “It's completely reversed itself.”

Sixty-three percent of this year's survey respondents characterized the current state of the healthcare construction industry as experiencing “slow but steady growth,” while 26% described it as “strong,” 8% called it “flat” and 2% said it was in decline.

“The Affordable Care Act is pushing healthcare toward outpatient and retail care, and there have been fewer and fewer supertanker projects,” said Henry Chao, principal and healthcare design director for HOK architects in New York. “In the past—even just three, four years ago—these dominated the healthcare construction scene.”

Quirk characterized the industry's single-digit growth rate as slower, more calculated and more sustainable. He said his company is “cautiously optimistic,” adding that “we had a good year, and there's no reason to think that won't happen again.”

Survey respondents were split on the most important construction opportunities for 2015, with 28% saying that freestanding outpatient facilities would attract the most work and an equal percentage advocating hospital-based ambulatory-care facilities. Twenty-two percent of those surveyed said the biggest opportunities are in inpatient acute care, 10% said assisted living, and 4% said wellness and primary-care centers. Other construction sectors mentioned included behavioral-health centers and psychiatric hospitals (2%), and retirement communities with a healthcare component (2%). Subacute-care facilities, rehabilitation hospitals and centers, and system or campus master plans were cited by 1% each.

Quirk said the construction sector must keep moving forward regardless of how battles over national health policy—which could affect provider revenue—play out. “Whatever happens politically, the industry has changed the way healthcare is being delivered,” he said.

Those changes have meant fewer and smaller construction projects. But Quirk said that is not necessarily a negative trend, because it forces the sector to be innovative and develop facilities that can adapt to the new care-delivery models. “It's almost re-energizing the industry,” he said. “It's driving efficiency into the way healthcare is delivered.”

Even so, a few huge projects have just been completed or are wrapping up. Construction was finished in October on the $1.2 billion Parkland Hospital in Dallas. The 862-bed facility and its 2.5 million-square-foot campus were scheduled to open in May, but that date has since been moved to Aug. 20. The $1.1 billion, 446-bed University Medical Center in New Orleans also pushed back its scheduled May opening and will now accept its first patients Aug. 1.

Delays and cost increases also are slowing work on Veterans Affairs Department hospitals under construction near Denver, Las Vegas, New Orleans and Orlando, Fla. A January report by the U.S. Government Accountability Office said costs for those projects have risen between 66% and 144%, while delays have ranged from 14 to 86 months.

But not all large projects have been delayed or gone over budget. A “topping-off” ceremony was held Jan. 14 to mark installation of the highest steel beam in the $1.1 billion, 521,000-square-foot expansion of Lucile Packard Children's Hospital Stanford in Palo Alto, Calif. The project is still expected to open in 2017 as scheduled.

The University of Texas Southwestern Medical Center's $800 million, 460-bed Williams P. Clements Jr. University Hospital opened Dec. 6 in Dallas. The $750 million Ohio State University Comprehensive Cancer Center—Arthur G. James Cancer Hospital and Richard J. Solove Research Institute opened Dec. 15 in Columbus. And the $1.5 billion University of California San Francisco Medical Center at Mission Bay complex opened Feb. 1 in San Francisco.

The UCSF project includes hospitals for children, women and cancer patients, and a 207,500-square-foot outpatient building expected to handle 1,500 patient visits a day. It has received gold-level certification in the U.S. Green Building Council's Leadership in Energy & Environmental Design (LEED) program recognizing environmentally friendly construction and operations.

The rule of thumb says it typically costs $2 million per bed to build a hospital in California. But the $1.5 billion Mission Bay project has only 289 beds that cost more than double that amount—almost $5.2 million per bed. Project leaders argue that the old rule of thumb is no longer valid.

Stuart Eckblad, UCSF Medical Center's director of design and construction, cited the cancer hospital's bone-marrow transplant unit as an example of the system's highly complex care delivery that doesn't fit into the old per-bed cost projection. Mission Bay's project manager, Ray Trebino of DPR Construction, also noted that the cost includes a central utility plant to service all the project's hospitals, outpatient building and future growth.

Like Montefiore's Hutchinson Campus, Tenet Healthcare Corp.'s Resolute Health campus in New Braunfels, Texas, exemplifies outpatient-driven innovation. The 56-acre site includes a 158-bed hospital that has room to expand to 300 beds. But its lead architect, Kevin Harney, said the development's primary focus is outpatient care and wellness. “The inpatient component is kind of behind the scenes,” said Harney, senior project designer and project manager with Earl Swensson Associates in Nashville. “It's more hospitality driven.”

The LEED silver-certified Resolute campus, completed last June, includes medical offices, a fitness center, retail spaces, walking and jogging trails and community gardens. “The very first thing we did was to align the design team around a shared vision of who we were designing the campus for,” said Resolute Health CEO Tess Coody-Anders. “We call her 'Chief Health Officer Mom.' We talked about her wants and needs, which we uncovered through focus groups and design thinking sessions with our end users.”

Coody-Anders said the community's response to the new campus has been “tremendous,” adding that community residents enjoy coming there to “eat, work, exercise, relax, walk their dogs, meet and, oh yeah, get care.”

Still, Harney pointed out that the healthcare industry “can't solve everything with bricks, sticks and mortar.” He noted that Coody-Anders frequently promotes the importance of a healthy lifestyle through talks at schools and other community organizations. Without that, the new campus would be just another pretty building.

“You could place (this building) in another community,” Harney said. “But you need to have the story behind it, and have someone out there preaching and teaching it.”