Skip to main content
Sister Publication Links
  • ESG: THE IMPLEMENTATION IMPERATIVE
Subscribe
  • Sign Up Free
  • Login
  • Subscribe
  • News
    • Current News
    • Providers
    • Insurance
    • Digital Health
    • Government
    • Finance
    • Technology
    • Safety & Quality
    • Transformation
    • People
    • Regional News
    • Digital Edition (Web Version)
    • Patients
    • Operations
    • Care Delivery
    • Payment
    • Midwest
    • Northeast
    • South
    • West
  • Unwell in America
  • Opinion
    • Bold Moves
    • Breaking Bias
    • Commentaries
    • Letters
    • Vital Signs Blog
    • From the Editor
  • Events & Awards
    • Awards
    • Conferences
    • Galas
    • Virtual Briefings
    • Webinars
    • Nominate/Eligibility
    • 100 Most Influential People
    • 50 Most Influential Clinical Executives
    • Best Places to Work in Healthcare
    • Excellence in Governance
    • Health Care Hall of Fame
    • Healthcare Marketing Impact Awards
    • Top 25 Emerging Leaders
    • Top 25 Innovators
    • Diversity in Healthcare
      • - Luminaries
      • - Top 25 Diversity Leaders
      • - Leaders to Watch
    • Women in Healthcare
      • - Luminaries
      • - Top 25 Women Leaders
      • - Women to Watch
    • Digital Health Transformation Summit
    • ESG: The Implementation Imperative Summit
    • Leadership Symposium
    • Social Determinants of Health Symposium
    • Women Leaders in Healthcare Conference
    • Best Places to Work Awards Gala
    • Health Care Hall of Fame Gala
    • Top 25 Diversity Leaders Gala
    • Top 25 Women Leaders Gala
    • - Hospital of the Future
    • - Value Based Care
    • - Hospital at Home
    • - Workplace of the Future
    • - Digital Health
    • - Future of Staffing
    • - Hospital of the Future (Fall)
  • Multimedia
    • Podcast - Beyond the Byline
    • Sponsored Podcast - Healthcare Insider
    • Video Series - The Check Up
    • Sponsored Video Series - One on One
  • Data Center
    • Data Center Home
    • Hospital Financials
    • Staffing & Compensation
    • Quality & Safety
    • Mergers & Acquisitions
    • Data Archive
    • Resource Guide: By the Numbers
    • Surveys
    • Data Points
  • MORE+
    • Contact Us
    • Advertise
    • Media Kit
    • Newsletters
    • Jobs
    • People on the Move
    • Reprints & Licensing
MENU
Breadcrumb
  1. Home
  2. Providers
March 18, 2017 01:00 AM

Consumers fueling outpatient construction

Joseph Conn
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Ambulatory-care sites offering an expanded array of services, such as the convenient-care centers operated by Memorial Hermann in Texas, are growing in popularity.

    The architects and construction companies who make their living designing and building healthcare facilities are bullish in their outlook on healthcare construction, despite the uncertainty surrounding healthcare policy in Washington, D.C.

    When asked to forecast their business prospects, half of these construction leaders predicted “slow but steady growth,” while another third foresaw a “strong” book of business ahead.

    Only one out of 123 architects, contractors and design/build companies that participated in Modern Healthcare's 38th Annual Construction & Design Survey reported a “declining” outlook, with that lone pessimist noting the “political climate is discouraging to healthcare construction.”

    “Demand for clinical care remains high,” said Stacy Rudd, healthcare market leader for Alberici/Flintco, a Tulsa, Okla., general contractor. Rudd hedged his robust assessment a bit in the survey by predicting slow but steady growth.

    His optimism was tempered somewhat by the uncertain political climate. “The new Trump administration has many healthcare leaders in a wait-and-see mode before they appropriate funds for new facilities,” Rudd said. “They've got a bill in front of Congress to repeal Obamacare, so healthcare leaders are worried and when they're worried they're going to pause and hold up on projects for a while.

    “If it shakes out by the end of the second quarter, the second half of the year is going to be strong,” Rudd said.

    Ankur Gupta, a lawyer who heads the real estate practice in the Chicago office of McDermott Will & Emery, said he “couldn't be more bullish on where the healthcare market is in the utilization of real estate.” Though his practice covers other industries, Gupta said he spends 90% of his time these days handling healthcare transactions.

    In the outpatient world and retail clinics, “I've seen nothing but excitement and support for expansion.”

    With inpatient facilities, “One thing we're seeing quite a bit of is taking hospital facilities and bringing them to the next level, to state of the art,” as opposed to building an entire hospital from scratch. “Wholesale building of a new hospital is cost-intensive,” Gupta said. “Our clients are being mindful of doing the best they can with existing facilities. No one is letting their facilities deteriorate.”

    In addition to political instability, survey respondents also mentioned other possible drags on future healthcare construction spending: soaring healthcare costs, cost-shifting to patients in the form of higher deductibles and out-of-pocket costs, payment reform and the advent of consumer-facing mobile health technology.

    “In response to the Affordable Care Act, healthcare is being delivered outside of the hospital more and more,” said Andrew Quirk, senior vice president and national director of the Nashville-based Healthcare Center of Excellence for Skanska, a multinational construction company headquartered in Sweden. “It's being driven to medical clinics and outpatient surgical centers.”

    In the survey, only 1 in 8 (13%) respondents cited acute-care hospital construction as their biggest opportunity. But nearly 1 in 4 firms (24%) reported having an acute-care hospital renovation or expansion project on their books.

    In contrast, more than 83% of survey participants reported that their biggest business opportunities are in designing and building outpatient facilities. More than half (54%) mentioned construction projects in “ambulatory care” in general. Seventeen percent specifically mentioned medical office buildings, 7% cited stand-alone emergency departments and 6% cited urgent-care centers as key opportunities.

    MH TAKEAWAYS

    Construction leaders continue to see their biggest opportunities in outpatient care, but providers still face challenges delivering levels of customer service that patients have come to expect.

    With an outpatient facility, in some cases, it's built to a lower-cost “business occupancy” level of building codes, design and construction, Quirk said. “If you built a typical hospital, it's built to an institutional occupancy” set of regulations. “Life-safety codes are higher and the costs typically go up with that, which is one of the reasons healthcare facilities are so expensive.

    “That does change construction,” Quirk said. “Instead of building typical hospitals, we're asked to look at different building types” with more modest construction costs.

    That shift to lower-cost healthcare venues will be permanent, no matter what happens in Washington, Quirk predicts. “Independent of Obamacare, a lot of moving healthcare out of the hospital was due to reduction of hospital expenses and costs, making it leaner, getting better access,” Quirk said. “Taking all politics and positions aside, no one can argue with that. Hospitals have leaned their processes. They're not going to go back to pre-ACA conditions (even) if they do repeal Obamacare.”

    Behavioral health centers and an assortment of projects for seniors—ranging from senior housing and assisted-living to so-called “memory care” facilities for patients with Alzheimer's disease and other forms of dementia—rounded out the top six construction hot spots. Each received backing from about 15% of respondents.

    One of the more popular ambulatory-care projects is the free-standing healthcare “convenience” center. An example of the species is the newly opened, 30,000-square-foot Memorial Hermann Convenient Care Center in Spring, Texas, situated on Grand Parkway, what Jud Jacobs described as “the outermost ring road of Houston.”

    Jacobs is executive vice president of Caddis Partners, a Dallas real estate developer that built and owns the convenience center's structure. Caddis leases it long-term to Memorial Hermann, which staffs and operates the clinic housed there.

    The facility sits on 9.3 acres, with another 3 acres set aside for possible future expansion. It offers patients access to Memorial Hermann's primary-care physicians and specialists; a 24-hour emergency room; CT, X-ray and 3D mammography scans; a lab; and a sports medicine/rehabilitation center.

    “They've done it both ways,” Jacobs said. “They've built them and owned them, (but) right now their favored approach is to let the developer bring all of the capital to fund the construction of the project. As a developer, that's great for us. We would love to do more.”

    From the healthcare system's perspective, “it started a couple of years ago when Memorial Hermann was looking at our growth strategy and how we could go into the markets that we felt had coverage gaps and were medically underserved,” explained Teal Holden, the system's vice president of operations for ambulatory services.

    Memorial Hermann now has five convenience centers, with three more under construction. Typically, the convenience centers are within a 10-mile radius of an existing Memorial Hermann hospital.

    “It's definitely a convenience thing,” Holden said. “We want to make certain that we're serving communities with a high growth rate. We wanted to make sure we had enough coverage out there from a primary-care perspective and an emergency-care perspective to take care of those patients as well.”

    A small number (7%) of healthcare architects and designers saw promising opportunities in “micro-hospitals,” a step up from the convenience center. A micro-hospital typically includes eight to 12 inpatient beds to go along with the ER, radiology labs and rehab facilities.

    Emerus Holdings is a pioneer of the micro-hospital concept, opening its first in 2007 in Sugar Land, Texas. The privately held company, based in the Woodlands, Texas, has 21 micro-hospitals and another seven to open by year-end, giving it locations in Colorado, Idaho, Nevada and Texas.

    All but two of them operate under joint venture agreements with major healthcare providers, including Baylor Health Care System in Dallas, Baptist Health System, San Antonio, and others. Under the joint venture model, Emerus is responsible for site selection, design and other management responsibilities, said Jason Lisovicz, the company's senior vice president of marketing.

    “The name brand prestige of our national health system partners helps draw new customers and ensures competitive pricing from suppliers and other vendors,” Lisovicz said. “The partnerships benefit patients with quicker healthcare services, and better access to quality referrals or transfers.”

    Emerus' micro-hospitals range from 15,000 to 50,000 square feet. They cost $7 million to $35 million to build and are staffed with 50 to 100 people. A typical facility opening today will have eight ER bays and eight inpatient beds.

    While construction spending is trending toward outpatient care, many of the larger systems building them are at sea when it comes to turning them into cost-competitive centers from a consumer perspective, which is increasingly important in an environment where people find themselves in high-deductible health plans and are responsible for the first $1,000 or more of hospital expenses.

    “Health systems have never run the outpatient side of the business like a business, even though it accounts for half the revenue,” said Zachary Hafner, a Chicago-based national partner in the strategy consulting practice at the Advisory Board Co.

    “They're making the investments to create the access points, to create what consumers are interested in and being relevant in the market where consumers are going to be spending their money.” But these health systems still need to improve on customer orientation and service, he said.

    “We'll do secret shopping for clients,” calling their competitors at free-standing clinics or surgery centers, asking for the cost of a certain procedure, he said. “Not only can't the health systems supply that data, when you call the free-standing facility, they tell you not only what the costs are, but also when there are openings on the schedule and they ask, 'When can we put your down?' ”

    “Until the industry learns to run that part of the business and creates a value proposition, there's going to be a race to the bottom competing,” Hafner said.

    Letter
    to the
    Editor

    Send us a letter

    Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.

    Recommended for You
    373837936 (1).jpg
    New guidelines aim to limit trans healthcare at Catholic hospitals
    InDepth: Private Equity
    Legal questions surround private equity-backed Noble Health
    Most Popular
    1
    More healthcare organizations at risk of credit default, Moody's says
    2
    Centene fills out senior executive team with new president, COO
    3
    SCAN, CareOregon plan to merge into the HealthRight Group
    4
    Blue Cross Blue Shield of Michigan unveils big push that lets physicians take on risk, reap rewards
    5
    Bright Health weighs reverse stock split as delisting looms
    Sponsored Content
    Modern Healthcare A.M. Newsletter: Sign up to receive a comprehensive weekday morning newsletter designed for busy healthcare executives who need the latest and most important healthcare news and analysis.
    Get Newsletters

    Sign up for enewsletters and alerts to receive breaking news and in-depth coverage of healthcare events and trends, as they happen, right to your inbox.

    Subscribe Today
    MH Magazine Cover

    MH magazine offers content that sheds light on healthcare leaders’ complex choices and touch points—from strategy, governance, leadership development and finance to operations, clinical care, and marketing.

    Subscribe
    Connect with Us
    • LinkedIn
    • Twitter
    • Facebook
    • RSS

    Our Mission

    Modern Healthcare empowers industry leaders to succeed by providing unbiased reporting of the news, insights, analysis and data.

    Contact Us

    (877) 812-1581

    Email us

     

    Resources
    • Contact Us
    • Advertise with Us
    • Ad Choices Ad Choices
    • Sitemap
    Editorial Dept
    • Submission Guidelines
    • Code of Ethics
    • Awards
    • About Us
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Modern Healthcare
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • News
      • Current News
      • Providers
      • Insurance
      • Digital Health
      • Government
      • Finance
      • Technology
      • Safety & Quality
      • Transformation
        • Patients
        • Operations
        • Care Delivery
        • Payment
      • People
      • Regional News
        • Midwest
        • Northeast
        • South
        • West
      • Digital Edition (Web Version)
    • Unwell in America
    • Opinion
      • Bold Moves
      • Breaking Bias
      • Commentaries
      • Letters
      • Vital Signs Blog
      • From the Editor
    • Events & Awards
      • Awards
        • Nominate/Eligibility
        • 100 Most Influential People
        • 50 Most Influential Clinical Executives
        • Best Places to Work in Healthcare
        • Excellence in Governance
        • Health Care Hall of Fame
        • Healthcare Marketing Impact Awards
        • Top 25 Emerging Leaders
        • Top 25 Innovators
        • Diversity in Healthcare
          • - Luminaries
          • - Top 25 Diversity Leaders
          • - Leaders to Watch
        • Women in Healthcare
          • - Luminaries
          • - Top 25 Women Leaders
          • - Women to Watch
      • Conferences
        • Digital Health Transformation Summit
        • ESG: The Implementation Imperative Summit
        • Leadership Symposium
        • Social Determinants of Health Symposium
        • Women Leaders in Healthcare Conference
      • Galas
        • Best Places to Work Awards Gala
        • Health Care Hall of Fame Gala
        • Top 25 Diversity Leaders Gala
        • Top 25 Women Leaders Gala
      • Virtual Briefings
        • - Hospital of the Future
        • - Value Based Care
        • - Hospital at Home
        • - Workplace of the Future
        • - Digital Health
        • - Future of Staffing
        • - Hospital of the Future (Fall)
      • Webinars
    • Multimedia
      • Podcast - Beyond the Byline
      • Sponsored Podcast - Healthcare Insider
      • Video Series - The Check Up
      • Sponsored Video Series - One on One
    • Data Center
      • Data Center Home
      • Hospital Financials
      • Staffing & Compensation
      • Quality & Safety
      • Mergers & Acquisitions
      • Data Archive
      • Resource Guide: By the Numbers
      • Surveys
      • Data Points
    • MORE+
      • Contact Us
      • Advertise
      • Media Kit
      • Newsletters
      • Jobs
      • People on the Move
      • Reprints & Licensing