Renovate or Build New: The Right Prescription
The healthcare industry is facing an epidemic of challenges to its business model. Its facilities as well as the baby boomer population, are aging concurrently, leading to a recent healthcare building boom that will continue for decades. Along with growth challenges are several other concerns: ever-increasing financial constraints, increased value placed on physician integration and patient satisfaction, and the problems of legal and quality issues facing the industry. With all of these headaches, many hospital leaders are questioning whether their existing facilities can be adapted to respond to these new demands or whether new construction is the prescription for future financial wellness.
Strategic direction and market dynamics
The demographic baseline: According to the U.S. Census Bureau, the segment of the population aged 65 and older will represent 19.7% of the population and a total of 71 million people by 2030, compared to only 12.7% (35 million) in 2000. This group is the largest user of healthcare resources, and thus a significant increase in the demand for healthcare services is anticipated.
The varying nature of the services being demanded will continue to change. More emphasis will be placed on wellness, convenient outpatient services, 23-hour interventional services, assisted living, and increasing shifts to oncology, neurosciences, orthopedics, and vascular service lines. In response, many healthcare facilities have shifted from a single monolithic hospital structure to a series of coordinated facilities that house different services on a large campus or sprinkled throughout a market.
Community location, access, and campus growth potential must also be jointly considered when deciding whether to funnel resources into an aging facility or to start from the ground up.
Facility and site constraints
As providers begin to define solutions to meet today's facility requirements, they increasingly find themselves out of options when developing existing space consistent with contemporary design standards and best practices. New types of spaces are necessary to keep pace with medical equipment, technological advances, and care delivery trends relative to privacy and flexible, functional space.
Many healthcare providers have developed short-term solutions to immediate problems, resulting in limited opportunity for rational expansion and fragmented facilities with dysfunctional space adjacencies. Retrofitting older facilities to current industry standards proves costly, if possible at all, and typically results in undesirable space quality variations in the facility. Older facilities may be bound by arterial roadways, residential development, and other business developments. Expansion or “replace-in-place” strategies are often hindered by these physical factors, as well as issues relative to zoning and community NIMBY (not in my back yard) opposition.
Even if the size of the site and the layout of current facilities are not barriers to renovation, building infrastructure elements frequently are. Post-tensioned structures severely limit the ability to effectively retrofit space for adaptive reuse. Elevator and vertical transportation cores are typically landlocked, with no room for significant upgrades or the additions required for increased patient, visitor and staff traffic. The shallow floor-to-floor heights of older facilities (10′6″ to 12′ versus the 15′ to 16′ required today) and outdated structural designs may not allow appropriate space or loading capacity for new medical technologies, efficient/safe MEP design, or information technology infrastructure.
The increased scrutiny on life safety, patient safety, and environments of care (EC) standards from The Joint Commission puts many facilities in need of upgrades to critical infrastructure components, which proves to be challenging, costly, and disturbing.
Functional and operational challenges of renovation
Operating a facility during a major modernization effort can prove to be disruptive. While difficult to quantify, their impact on operations is real. Replacing in place and modernizing facilities typically results in access/parking issues, service disruption to adjacent areas, infection control issues, temporary “band-aid” solutions, and general patient, visitor, and staff dissatisfaction. Higher operational costs, loss of revenue, and construction coordination/phasing challenges can all add time and cost to a project.
Capital and cost considerations
The cost of replacement facilities approaches $1.5 to 2 million per bed, depending on the scope of the project and regional construction cost variations. Considering the additional time needed for modernization, and factoring in escalation, renovations to an existing campus can be as costly, or even more costly, than a replacement facility on a green-field site. Renovation costs, asbestos abatement, window replacement, infrastructure upgrades, and other aspects of upgrading an existing facility may result in cost estimates per square foot that are essentially equal to the cost of a new building.
Access to capital is of course always a consideration—any major facility investment will require rigorous financial analysis and will likely result in additional debt incurred to finance the project (although hospitals that take on additional debt to fund projects that will improve healthcare delivery and quality might not necessarily experience harm to their credit ratings).
Case Study: The University of Texas M.D. Anderson Cancer Center
Over the past three decades, The University of Texas M. D. Anderson Cancer Center (figure 1; see also HEALTHCARE DESIGN April 2006), based in Houston, has developed its campuses into a combined total of more than 25 buildings that serve its proclaimed mission of “Making Cancer History.” But several of its facilities are ready for retirement. According to Susan Lipka, M.D. Anderson's executive director of capital planning and management services, its strategy for developing a campus can be summarized by two key words: adaptability (the ability to reconfigure a building within the short term in response to changes in user-group needs) and flexibility (the long-term ability to convert space to a different use, such as converting clinical space into hospital or office space).
The M.D. Anderson Cancer Center in Houston
When seeking additional patient care space in the late 1980s and early 1990s, M.D. Anderson considered remodeling its 1950-era Anderson Central building. Renovation would have required removal of every other floor and introduction of interstitial space. Based on a cost/benefit analysis, the renovation was determined to be impractical, so the Albert B. and Margaret M. Alkek Hospital was constructed on an adjacent site. Similarly, the organization recently evaluated the Houston Main Building (an office building also from the 1950s) for reuse as a multifunction facility to include clinical, research, hospital, and office space. Due to restrictive floor-to-floor heights and floor plate size, the building was rejected for reuse and is scheduled for future demolition. In each case, adaptability and flexibility were critical to M.D. Anderson when weighing the decision whether to renovate or undertake new construction.
Recently constructed facilities at M.D. Anderson continue to demonstrate that examining adaptability and flexibility is a useful strategy. The Lowry and Peggy Mays Clinic (figure 2), completed in 2004, was designed both for short-term adaptation as well as long-term flexibility. It provides for an average of 50% more live load capacity than required by code at every floor, while the north side of one level was designed for 325 psf live load to accommodate a range of current and future anticipated MRI loads. Similar allowances were made in the MEP infrastructure.
The Lowry and Peggy Mays Clinic at M.D. Anderson Cancer Center
By the same token, M.D. Anderson has determined that its existing buildings are candidates for reuse when the space can be converted to a less “intense” function, such as converting clinical and lab space into future hospital or office space.
In general, as M.D. Anderson maps its strategy for future renovation, reconstruction, and expansion, adaptability and flexibility are considered in this way:
Buildings are designed for varying life spans from 20 to 100 years, based on the value of the land and the strategic mission of the building
Typically, it is no cheaper to renovate than to build new
It is cost-efficient to oversize procedure rooms in anticipation of future medical equipment that will be heavier and have more stringent support demands
A willingness to invest capital up front (e.g., increased structural and MEP capacity) pays off down the road
The research field is changing more dynamically than the patient care field, causing increased demand on those facilities over time
Healthcare providers looking to solve their facility challenges have to consider a myriad of big picture issues. Coupled with sound operational and strategic planning activities, replacing an aging facility may result in improvements in market share, quality of care, operational efficiencies, patient throughput, bottom-line performance, and labor retention. In some instances, the availability of necessary capital required to construct a replacement facility will be questionable. But, with thoughtful analysis and careful decision making by administrative and physician leadership teams, healthcare providers can determine the best suited solution for renovating or constructing a new facility to meet their strategic needs now and in the future. HD
Kurtis A. Young, PE, is a principal in the structural engineering services group at Walter P Moore and leader of the firm's healthcare community of practice. He can be reached at
firstname.lastname@example.org or 713.630.7328. Curtis M. Skolnick, MHA, is a principal consultant with the healthcare strategy and facilities planning firm KLMK Group and can be reached at
email@example.com or 804.343.0177. Ethan Sims is a graduate engineer at Walter P Moore and can be reached at
firstname.lastname@example.org or 713.630.7437.