Another trend that's been on hyperdrive since the CON repeal: land banking. That's where hospital operators buy up large acreages that they build up gradually over a decade or so.
Health systems of all sizes and ownership types have announced multiuse campuses in different parts of the state. Others are quietly buying land with only loose plans. Free-standing emergency departments tend to go in first, followed by physicians' offices and finally, once demand is high enough, a full-blown hospital.
"Everybody is sort of staking out their territory, if you will," said Gary Davis, a partner in McDermott Will & Emery's healthcare group.
The rationale is twofold: generate revenue for the company and control a big plot of land that no one else can build on, said Chad Costello, managing principal with Healthcare Realty Advisors, a South Florida commercial real estate firm.
"They can control a large municipality," he said, "and they don't want their competition coming in and buying that site, which is zoned for hospitals."
Some systems have expanded the concept into what they hope will be a destination for not only healthcare services, but stores, restaurants and even housing. Some of the developments will have parks and walking trails.
"They realize they are really a civic anchor and have the ability to be, rather than just a place to go when you're sick, a place to go when you're well," said Schuck of Catalyst Healthcare Real Estate.
Flagler Health+ is going all-in on its own version of this concept. In the past two years, the not-for-profit system has stood up two such campuses, which it calls health villages, one in northwest St. Johns County and another in a planned community called Nocatee in Ponte Vedra. In addition to primary, specialty and urgent care, the developments have parks, coffee shops and community-based programming, like yoga classes and amphitheaters. Those two campuses will not have acute-care hospitals.
Flagler has two more such developments planned, with groundbreakings slated for this summer. One is in Durbin Park in St. Johns County. This one will eventually have a hospital. The other will be located on a six-acre site in Palm Coast that Flagler bought in 2019. The system is also under contract for 71 acres in southern Palm Coast, where it plans to build an acute-care hospital. That one is likely years out.
That's a lot of growth for a small system with just one acute-care hospital currently. Flagler's Barrett said top-line revenue has grown 31% in the past three years because of the health villages. Planning for the complexes happens in partnership with local organizations like councils on aging and community advisory councils, he said.
"These are burgeoning communities," Barrett said. "They're looking for a sense of identity and we think we can play a role in helping establish that."
Similarly, Baptist Health South Florida submitted plans in St. Johns County to add a hospital to a broader development covering a few dozen acres it owns that will eventually have a surgery center and retail offerings like a bank, gym and childcare center. The health system did not return requests for comment.
Healthcare changes by the day, so it's important that future sites have flexibility, said Taylor of Orlando Health.
"Most of our campuses—if not all—to date have been set up that way, where we buy enough property that would allow us to build a future hospital at that site with medical pavilions," he said.
Orlando Health has just over $1 billion in active construction underway, the largest expansion in the system's 103-year-old history. The 10-hospital system will open a free-standing ED southeast of Orlando in June and another southwest of Orlando—not far from Walt Disney World—in early 2022. Both sites will eventually have acute-care hospitals and medical clinics, Taylor said.
Orlando Health also is sitting on large plots of land it plans to develop in the future, including a 51-acre site it owns northwest of Orlando in Apopka. The system in fall 2020 closed on an 80-acre site in Lakeland, which is between Orlando and Tampa. Construction on those is still several years out.
By and large, providers aren't itching to build the 500-bed hospitals of the past, instead sticking to scaled-back facilities with fewer inpatient beds.
When Florida's CON repeal passed, AdventHealth realized it needed to build hospitals for less money, said David Banks, chief strategy and organizational transformation officer of the Altamonte Springs, Fla.-based system.
To that end, AdventHealth has created standardized designs for 50-, 100- and 200-bed hospitals. That saves money because new facilities don't have to be designed from scratch every time, Banks said. Its forthcoming hospital in Riverview is the first facility to roll out under the new design template. It will have 80 beds when it opens in 2023 but can grow to 100.
"Basically our goal was, 'Can we build a hospital for $1 million a bed?' " Banks asked. Hospital construction has gotten close to $2 million a bed. Based on CON going away, we felt competition would be increasing and we needed to be more efficient with how much capital we were putting into hospitals."