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Ecmweb 3742 706ewmifig1
Ecmweb 3742 706ewmifig1
Ecmweb 3742 706ewmifig1
Ecmweb 3742 706ewmifig1

Health Care Construction Prognosis: Industry Appears to Be in Top Form

June 1, 2007
Comprised of approximately 545,000 establishments, today's $41 billion health care industry is one of the country's fastest-expanding institutional sectors second only to education. By the decade's end, yearly health care construction put in place could reach as much as $60.1 billion, says FMI Corp., a management consulting and investment banking firm headquartered in Raleigh, N.C. Figures released

Comprised of approximately 545,000 establishments, today's $41 billion health care industry is one of the country's fastest-expanding institutional sectors — second only to education. By the decade's end, yearly health care construction put in place could reach as much as $60.1 billion, says FMI Corp., a management consulting and investment banking firm headquartered in Raleigh, N.C.

Figures released earlier this year by Norcross, Ga.-based Reed Construction Data support this forecast, showing that monthly spending on health care construction projects is 20% higher compared to a year ago. For 2008, Reed Construction Data anticipates health care construction to jump another 14%.

Helping to spur these numbers are aging medical facilities, advances in technology, shifting environmental requirements, and the increasingly older population — a generation of Americans born between 1946 and 1964 commonly referred to as “baby boomers.” According to the study “When I'm 64: How Boomers Will Change Health Care,” from First Consulting Group, Long Beach, Calif., the over-65 population will triple by 2030 to more than 70 million Americans. Moreover, the study predicts that by 2030 more than six out of every 10 baby boomers will be managing more than one chronic condition, such as diabetes, hypertension, arthritis, or obesity. As a result, demand for health care services will increase considerably (see Figure).

Hospitals and residential health care facilities, such as nursing homes, are two segments likely to experience the adverse side effects of this need. In response, residential health care construction starts have escalated — doubling from 2004 to 2006 and are expected to double again by 2008. Furthermore, many leading hospital chains have undertaken significant capital expansion programs over the past several years, which have boosted construction activities, reports New York City-based McGraw Hill in its “Construction Outlook 2007.”

“The record-setting stock market has been helpful for private hospitals that are either conducting capital campaigns or have an endowment that has been going up with the stock market,” confirms Ken Simonson, chief economist for The Associated General Contractors of America (AGC), Arlington, Va. “Those factors have been supportive of more construction spending.”

Although Simonson agrees that the aging population will influence construction of health treatment buildings, he believes there is a tendency to overestimate how rapidly demographic changes affect demand for such medical facilities. For example, information from Reed Construction Data shows that Michigan, Ohio, Illinois, New York, and Pennsylvania have declining populations yet accounted for 22% of hospital starts in the past year. On the other hand, the burgeoning states of Arizona, Nevada, Idaho, and Utah claimed a comparatively small share of new hospital projects. “I think technological or regulatory changes are much more important,” says Simonson.

Results from a survey conducted by the American Hospital Association (AHA), Washington, D.C., corroborate this statement. According to the AHA survey, “almost half of all responding community hospitals reported moderate or high use of health IT [information technology] in 2006, compared to a response of 37% in 2005.” A further 51% of respondents reported significant increases in the use of computerized alerts to prevent negative drug interactions. In addition, President Bush's plan to ensure that most Americans have electronic health records by 2014 is fueling the IT movement.

“Hospitals are having to extensively remodel to accommodate diagnostic and treatment equipment and to get more wiring and piping throughout the buildings,” observes Simonson, noting that hospitals are being required to provide private rooms for recovery in place of semi-private rooms, due in part to patient demand as well as the new privacy laws.

Another trend influencing health care construction includes evidence-based design, which takes into account the effect the surroundings have on patients and staff. The goal is to create an environment that focuses on wellness, is sensitive to patients' family members and caregivers, is efficient for staff performance, and is curative to workers in stressful jobs. In an effort to lower energy costs, lessen the spread of infection, and reduce the carbon footprint of health care facilities, the health care industry is also championing the use of sustainable or “green” design.

Moreover, Simonson points out that immigration legislation will shape the future of health care construction. “Both the construction industry and the health care industry have a lot at stake in immigration legislation to assure that there is an adequate supply of skilled labor,” he says. “This is a big question mark hanging over the industry — what kind of legislation will be enacted.”

About the Author

Stefanie Kure | Content Producer - EC&M

Stefanie Kure is the senior associate editor of EC&M magazine. She holds a Bachelor of Arts degree from the University of Kansas and has more than 20 years of experience in the B2B magazine industry. In addition to EC&M, Stefanie has worked on Transmission & Distribution World magazine, Broadcast Engineering magazine, and Power Electronics Technology magazine.

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