Spending on hospital and health facility construction is rising at a record pace and could exceed $60 billion annually by 2010, according to a report released Tuesday.
Construction by 2010 is expected to double the amount spent in 2004, according to "Construction Trends and Capital Implications," issued by the Healthcare Financial Management Association and GE Healthcare Financial Services.
However, such projects face long timelines, and many facilities face a variety of factors in implementing construction initiatives, the report said. As a result, from the time a plan is begun until the project is completed, the facilities' modalities could be outdated, the report said.
Researchers surveyed key industry leaders to identify the trends and issues that are affecting future healthcare construction. The findings show a combination of factors is driving rehab and construction costs for the hospitals of the future, including the continued shift of care to ambulatory care settings, an inability to retrofit aging facilities to meet needs; an increase in patient volume due to the influx of aging Baby Boomers, changes and demand for new technology, increasing competition from physicians and retail providers, new opportunities for hospital-physician alignment and changes in patient populations.
Hospitals also are taking steps to become more environmentally responsive, the report said. Not only are many new facilities more energy efficient, but new materials and smart designs are healthier for patients and staff and can lower utility costs 20 percent to 50 percent.
The construction boom is raising questions about where facilities will get funds necessary to pay for the projects.
"Some hospitals are lucky enough to be able to pay for major construction projects out of pocket," said Randy Waring, hospital segment leader at GE Healthcare Financial Services.
Waring said many credit-worthy organizations will turn to tax-exempt financing, like revenue bonds. Others may examine financial options like joint hospital-physician ventures, public-private ventures, third-party developer involvement and private funding.
Organizations are feeling pressure to undertake new construction in order to remain competitive in their markets.