Despite the uncertainty posed by healthcare reform and reimbursement changes, hospitals appear to be bullish on healthcare facility projects.
A strong majority of hospitals anticipate starting projects in the near future to renovate or add size or services to their facilities, according to recently released results of a survey of the nation's hospitals.
However, responses to the study, by the law firm of Waller Lansden Dortch & Davis LLP, came before credit markets were affected by the effects of the sub-prime mortgage crisis, which is roiling financial markets. Executives of Waller Lansden said restricted access to credit may affect some of the optimism expressed in the survey.
About 75 percent of all facilities say they plan to renovate current facilities, according to the Waller Lansden survey, which drew responses from 464 hospital executives. Tax-exempt facilities were more likely to be planning expansion projects - some 55 percent of not-for-profit facilities were anticipating expansion programs, compared with 33 percent of investor-owned facilities, perhaps indicating the advantage of tax-exempt financing for such large projects.
In addition, some 49 percent of not-for-profit hospitals said they were planning to add satellite campuses or clinics, compared with 35 percent of investor-owned facilities. The Northeast region of the country leads all others in almost all kinds of anticipated capital investments.
In terms of technology, 79 percent of tax-exempt organizations reported they were planning to acquire or upgrade equipment, compared with 69 percent of investor-owned facilities. Some 70 percent of tax-exempts said they were planning investments in information systems or innovation, compared with 34 percent of investor-owned hospitals.
While the survey looked at financing sources, it was conducted in the summer of 2007, before the effects of the subprime mortgage crisis caused credit to tighten, said Reggie Hill, a partner at Waller Lansden who heads its healthcare industry practice.
Hospitals planned to rely on traditional forms of financing, including cash reserves, grants ans tax-exempt bond financing for not-for-profits, and intercompany financing for investor-owned hospitals.
"It struck us as a healthy sign that there was a high percentage of hospitals that think they can finance capital needs from cash reserves," Hill said. "While there are a large number of possible sources for funds, the results indicate that most are not widely used."
However, Hill said facilities might need to explore other funding sources if traditional lending options come under pressure.