2013 HCD Corporate Rankings: Industry Continues To Ride The Tide
“Uncertainty” defined the healthcare market in 2012. And yet expectations for clarity—thanks to both a U.S. Supreme Court decision to uphold the Affordable Care Act and a presidential election outcome that put to rest any lingering doubts—appear to have gone unfulfilled. According to responses to Healthcare Design’s 2013 Corporate Rankings Survey, industry professionals today remain just as uncertain as ever.
More than 90 architecture/engineering and construction firms took part in the survey. What they told us, in short, is that the landscape is much the same, but with a new twist. This time, unknowns hover around what’s next in a post-reform environment: Where will hospitals and health systems spend the limited capital they have and how can the A/E/C community play a role in the process?
Business for 2012 illustrates that state of limbo, with few concrete signals that the industry progressed much over the past year. However, some results—particularly an uptick in contracts signed—may just be a glimpse of potential growth ahead. (To view charts and graphs summarizing results of the 2013 Corporate Rankings Survey results, please view the Image Gallery in this article.)
Overall, respondents reported that 10,339 healthcare contracts were signed in 2012—an average of 115 per responding firm compared to an average of 99 per responding firm in 2011 (To see the full version of 2011 results, go here). Of those who provided numbers of contracts, 47 percent said it was more than they’d signed in 2011, while 39 percent said it was about the same. Only 10 percent reported seeing less business than the prior year.
Contract values, however, showed little change over 2011. The majority of respondents (35 percent) reported contracts in the $100 million-to-$500 million range, which also lead the pack in 2011, when 45 percent reported a majority of contracts at that value. The second highest range for 2012 was seen at the more-than-$1 billion mark (14 percent), followed by $10 million to $50 million and $50 million to $100 million—both at 13 percent. Results were very similar in 2011, with 2012 growth primarily seen in the $50 million-to-$100 million zone, which rose by 7 percent.
Requests for proposals (RFPs) continued their steady rise, too, up to 130 per responding firm from 119 per responding firm in the prior year, repeating the upticks noted in both 2010 and 2011. Fifty-one percent of respondents confirmed the trend, reporting that they received more RFPs in 2012 than in 2011, and 27 percent said the number was about the same. Nineteen percent reported receiving fewer RFPs compared to 2011.
The year saw a surge in projects coming off the books, too, with an average of 87 completed projects per responding firm compared to an average of 61 per responding firm in 2011. Total healthcare billings dipped slightly year-over-year, with $9.2 billion reported for 2012, an average of $98 million per responding firm. Comparatively, $10.5 billion in billings were reported in 2011, an average of $100 million per responding firm. Of 2012 billings, on average, 36 percent represented completed projects compared to an average of 39 percent in 2011.
What’s on tap
Projects underway continued to show progress in 2012 with an average of 120 projects reported per responding firm, up from 82 per responding firm in 2011 and almost doubling the 62 per firm seen in 2010. While the number of projects was on the uptick, no major shifts were noted in terms of size, as smaller-scale projects continue to represent the bulk of work being done. Projects of less than 5,000 square feet lead the results at 34 percent of those reported, up slightly from 30 percent in 2011. Next highest is the 5,000-to-20,000-square-feet range at 29 percent (26 percent in 2011), followed by 20,000 to 50,000 square feet at 18 percent. Just 79 projects (1 percent) are more than 1 million square feet.
Few major changes were reported in the value of projects underway in 2012 versus 2011, with growth of just 2 percent seen in the less-than-$500,000 range and the $1 million-to-$5 million range. Overall, the bulk of projects have construction
costs of less than $500,000, with 34 percent in 2012 and 32 percent in 2011. For the second year, high price tags were virtually unseen, with less than 1 percent of respondents reporting projects upwards of $500 million.
Meanwhile, the margin between the number of new construction projects and renovations continued to narrow in 2012, with new construction representing 53 percent of projects and renovations 47 percent. In fact, new construction has seen a steady decline over the past three years, representing 57 percent of projects reported in 2011, down from 64 percent in 2010.
In a further drilldown, results show the bulk of work is remaining in hospital spaces at 56 percent, followed by ambulatory care at 18 percent, medical office buildings at 8 percent, clinics at 7 percent, infrastructure/technology/campus upgrades at 6 percent, and long-term care at 5 percent.
As for specific project type, 90 percent of firms that took part in the survey reported doing work in acute care hospitals in 2012—but an industry push toward outpatient care was well documented: 86 percent reported work in both medical office buildings and ambulatory surgery centers, 79 percent in ambulatory treatment centers, and 53 percent in ambulatory “other.”
Another growing niche was captured in specialty hospitals, with 84 percent of respondents designing and building those projects in 2012. Specialty facilities seeing the bulk of work were children’s hospitals at 65 percent, cancer hospitals at 60 percent, and women’s/infants hospitals at 59 percent.
Work was spread throughout facilities, but patient areas took the top spot with 50 percent of projects being done there; 20 percent were in staff/clinical spaces and 15 percent were in both back-of-house and public/family zones.
Of projects focused on patient rooms specifically, those surveyed weighed in on design elements they incorporated, with the most popular feature being abundant daylighting at 85 percent. Other popular features include in-room sinks and views to nature, both at 81 percent, family zones at 78 percent, and wireless technology, specialty lighting, and hospitality finishes each coming in at 77 percent.
From threat to opportunity
Looking ahead, respondents offered a variety of potential opportunities for the healthcare design industry this year, but health reform, shifting reimbursements, and restricted capital were identified as ongoing stressors. “When healthcare providers don’t know where their revenue will come from, they slow down on renovations and almost completely stop new construction. Regardless of the source, once hospital management can anticipate revenue, they are able to budget for construction, both upgrades to existing facilities and investments in new facilities,” one respondent notes.
And threats remain in the professional realm, too, as competition continues to flare among firms, both large and small, and fees become more and more commoditized.
“There appear to be fewer large projects, which creates a trickle-down effect that forces larger national firms to seek smaller projects that regional healthcare architects have been accustomed to receiving commissions on,” says another survey respondent. “In turn, regional firms take on more small renovations that they might not have pursued during busier times. Margins become tighter on the smaller and more difficult renovation projects than simple freestanding buildings of new construction. We believe tha
t more A/E firms are getting into the field of healthcare due to the general stability of the market. More competition, smaller projects, and smaller fees all contribute to the threats that we see in our business.”
However, as healthcare organizations begin to pursue more projects and seek solutions to new challenges created by reform, respondents say there are a variety of avenues the design and construction industry might pursue to help bring more value to the table for clients and more work for themselves: specifically, helping to bring the efficiencies that will be necessary to cut costs and improve care.
“Clients are coming to see the need for improved and new facilities, and to identify design firms that can help them develop facilities that can truly help improve quality and efficiency,” a respondent states.
And as the healthcare paradigm continues its shift from a volume-based business to a value-based one, some firms see those opportunities only growing. Beyond operations, A/E/C firms can play a role in a new patient-focused model of care, by serving as advisers and assisting in master planning, designing for technology integration, or building outpatient centers and other patient-centric projects.
Asks one respondent: “What innovations and meaningful solutions can we as designers and planners offer the healthcare sector during this unprecedented time? We anticipate continually evolving community models, including healthcare delivery in varied retail settings, to become increasingly the norm.”
Jennifer Kovacs Silvis is managing editor of Healthcare Design. She can be reached at firstname.lastname@example.org.
To see rankings results of the survey, please read "2013 HCD Corporate Rankings: Complete Results."
*All figures used in these reports were self-reported by 94 industry firms who submitted responses via Healthcare Design’s online survey form. They have not been verified by the publisher, nor does the publisher guarantee accuracy.