The once steady 10% growth rate in healthcare construction spending has slowed, but hasn't entirely stopped.
Spending is currently 1.7% higher than the same time last year when construction materials costs were 8% higher. The 2.5% monthly jobsite spending decline since last fall is consistent with the decline in materials costs. A 7% decline is expected in the next six months, consistent with the year-to-date drop in the value of healthcare construction starts, which includes a 66% plunge in June.
The June drop is partly random but also reflects concern by healthcare project managers about how the outcome of the current healthcare debate in Congress will affect their operations. Specifically, they are concerned about reimbursement rates from federally operated or regulated insurance plans. With no final plan ready for a vote in early August, expect the cautious spending to continue through the summer.
Healthcare construction spending is currently 1.7% higher than the same time last year, led by hospital work, which is 14% higher than a year ago. |
All options being considered in Washington envision expanded healthcare services that would require additional facility capacity by 2011—but financing for the expanded services remains fuzzy. Half the added cost appears to be vague promises of $40 billion plus annual fee cuts by hospitals and drug companies. Significant growth in healthcare construction will not resume until the healthcare financing arrangements are final and judged to be realistic.
Hospital construction spending is currently 14% higher than a year ago, while spending for other healthcare facilities, including specialized office buildings and residential care facilities, is off 25% from last year. The developers of these buildings react to a recession much as developers of commercial buildings do: They pull back when they see falling rental and occupancy rates. By this time next year, expect spending for medical office buildings and possible residential care facilities to be expanding again in a growing economy while spending for hospitals is expected to still be stuck at current levels.
Related Stories
Healthcare Facilities | Sep 5, 2017
Home away from home: Children’s hospitals that soothe, support, and distract
Building Teams help children’s hospitals create a sense of normalcy for patients and their families.
Healthcare Facilities | Sep 1, 2017
Caring for caregivers
Many healthcare organizations are increasingly focused on designing amenities, policies, and workplaces to better support their clinicians, health providers, and administrators.
Healthcare Facilities | Aug 30, 2017
Proactively addressing population health while improving access to care
The Golisano Center for Community Health offers integrated care to adults and children.
Giants 400 | Aug 29, 2017
Top 110 healthcare construction firms
Turner, McCarthy, and Skanska top BD+C’s ranking of the nation’s largest healthcare sector contractor and construction management firms, as reported in the 2017 Giants 300 Report.
Giants 400 | Aug 29, 2017
Top 80 healthcare engineering firms
WSP, AECOM, and KJWW top BD+C’s ranking of the nation’s largest healthcare sector engineering and EA firms, as reported in the 2017 Giants 300 Report.
Giants 400 | Aug 29, 2017
Top 125 healthcare architecture firms
HDR, HKS, and Perkins+Will top BD+C’s ranking of the nation’s largest healthcare sector architecture and AE firms, as reported in the 2017 Giants 300 Report.
Sponsored | Healthcare Facilities | Aug 28, 2017
McCarthy Building Companies helps make Marin County healthier
McCarthy will continue to lean on Bluebeam solutions to help solve the most critical issues, and to keep their information safe, secure, and organized.
Healthcare Facilities | Aug 28, 2017
5 elements for a healthy medical lounge
When done right, medical staff lounges are an essential part of the healthcare workplace.
Healthcare Facilities | Aug 24, 2017
7 design elements for creating timeless pediatric health environments
A recently published report by Shepley Bulfinch presents pediatric healthcare environments as “incubators for hospital design innovation.”
Healthcare Facilities | Aug 23, 2017
The future of healthcare architecture: obstacles and opportunities abound
Our current political drama has made our healthcare clients view the future of their business environment in much the same way most of us approach the latest weather report, with skepticism, writes David H. Watkins, FAIA.