Healthcare Project Construction: Now or Never?
Back in March, I attended a PDC Healthcare Summit session that spelled out the state of healthcare infrastructure in a very stark way. The presenter was not an architect and was involved in the Certificate of Need (CON) review for New York state, so he had no direct vested interest in whether hospitals were built or not. His statement was:
There are two classes of medicine in the market today: hospitals who already made upgrades and are on the cutting edge of care, and those biding their time milking the system, and in effect, waiting to go out of business.
I scribbled down those words and filed them away, for at the time they seemed shrill and pessimistic.
Then in May, I was discussing the market for replacement facilities for rural hospitals in the Midwest, critical access hospitals specifically, with a state director of rural health. This man’s job is to assist critical access hospitals and other rural community hospitals in his state with their operational needs, and facilitating construction projects is a big part of his responsibilities.
He commented on the condition of his state:
There are two types of rural hospitals: those looking to build a replacement hospital, and those that will close.
Once again, harsh commentary from someone in the trenches, yet very connected to the day-to-day reality of the healthcare market.
Hearing this a second time within three months, I felt the first message was not an isolated incident, and now quite legitimate.
Interestingly, this is only a message that can be sent by someone who has nothing to gain by new healthcare projects, as these two gentlemen did. A designer or builder cannot court new clients with pressure tactics like "If you don’t build a new hospital, you’ll be doomed." No administrator wants to hear that, even if it is accurate.
Nevertheless, there is some nugget of truth to communicate about aging healthcare facilities in the above do-or-die predictions. To keep public confidence and a healthy revenue stream, hospitals of the Hill-Burton era, and some even younger than that, will need to beg, borrow, or steal, so to speak,to get a replacement facility or major upgrade built.
On the procurement side, there are additional, hard-to-ignore conditions. In this market when so many designers and builders are hungry, it is doubtful a hospital will get a more attractive price on a new hospital than right now. That is my opinion. Coupled with the immutable fact that commodity prices always go up in the long-term, and we are bracing for some form of inflation in the near future.
I will reiterate a phrase mentioned to me: It will never be more affordable to build than right now. This is a fact.
Like all else, administrators need to understand their specific business case and weigh the consequences of delaying a capital project yet another year, or not doing one at all. At least they should know what is being thought and discussed, in a not so subtle way, by those whose job it is to understand and advise healthcare facilities.
Lee writes on healthcare design, project, and strategy topics in his blog, “Owner’s Toolbox” at http://www.poechmann.com.