If you suspect that the local hospital industry has done a lot for the health of commercial builders since the recession hit metropolitan Kansas City, you?re probably right.
Local hospitals and other health care institutions have invested $1.25 billion since 2009 building annexes, adding floors, renovating obsolete space and opening new facilities in expanding suburban areas.?It?s been a base load of construction for us, a reliable source when other sectors like retail or office space have been volatile,? said Don Greenwell, president of the Builders? Association in Kansas City. ?It was kind of our safety net. It kept the volume from completely draining out.?The projects over the last four years range from the new $330 million Mid America Heart Institute at St. Luke?s flagship campus near the Plaza to a $2.5 million project to upgrade the helipad at the University of Kansas Hospital.Coming up soon: a $121 million expansion of Overland Park Regional Medical Center.Hospital officials say the projects are being driven by the need to modernize, accommodate new equipment, offer more outpatient services and respond to shifts in the local population. And with all the money flowing into health care ? accounting for 18 percent of the U.S. gross domestic product ? construction financing is much easier to obtain than for other commercial projects.?A lot of it is to make sure we?re staying current with the best health care for our clientele,? said Jerry Husman, vice president of facilities at North Kansas City Hospital. ?We also want to keep our physical plant updated to best serve our customers, patients and physicians.?But Scott Lakin, director of the regional health care initiative at the Mid-America Research Council, also observed there?s ?sort of a nuclear arms race for hospitals? to outdo one another.That competition has played a role in rising health care costs, he believes.Lakin served as Missouri insurance director under Gov. Bob Holden and as a legislator was chairman of the certificate of need committee during the late 1990s that reviewed hospital capital improvement requests.?The competition between hospitals is creating a lot of this and the competition for doctors,? he said. ?If they can get a doctor group, that brings patients. Whether it?s the building itself or larger pieces of equipment, they want the latest and greatest.?Todd Krass, CEO of the Belton Regional Medical Center off U.S. 71 in Cass County, said his facility, which opened 25 years ago, was losing patients to newer medical centers along the nearby Interstate 435 and 470 corridors. That helped prompt its owner, HCA Midwest, to invest $39.2 million to expand the facility.?When I got to Belton in 2005, it hadn?t had any capital infusion since it was built in 1984,? he said. ?It was adequate for 1984, but north Cass County had grown explosively.?People began leaving the area to get the health care they needed.?One big shift that Belton had to catch up with was the trend toward treating more people as outpatients at clinics as opposed to keeping them in hospital rooms. That has driven a need for more space to provide those outpatient services.?Our hospital was built for inpatient treatment,? Krass said. ?We didn?t have the space for outpatient services. This entire project focused on that. We needed an office building to attract specialists so people can stay in the county.?An aging facility also prompted a $116 million reinvestment at the Shawnee Mission Medical Center in Overland Park that included a 265,000-square-foot expansion.?The hospital is 50 years old this year and, for the volume we were serving, our intensive care unit was old, we had an undersized emergency department and we just had the need for additional beds,? said Trevor Wright, senior vice president and chief operating officer.Shawnee Mission Medical Center is one of 43 hospitals owned by the Adventist Health System of Orlando, Fla. Being part of a large group of hospitals helped when it came to obtaining financing for the improvement project. ?When you have a system of that size, you have resources to draw upon,? Wright said. As for a competition between hospitals to build facilities to attract more patients and doctors, the Shawnee Mission executive believes that approach peaked in the 1990s.?There was a technological arms race, but that was primarily 10 or 15 years ago,? Wright said. ?I don?t think it?s a big factor now. ?One thing hospitals are doing is trying to take costs out of the system. Before, if you didn?t have the latest, greatest thing, you would lose patients. Now there?s less of that and more focus on marketing? good results.Compensating for years of underinvestment in its physical plant is one of the big reasons driving the construction boom at the University of Kansas Hospital.Officials there say it was difficult to get funding when the hospital was operated by the state. That changed in 1998 when KU Hospital became independent.From 1993 to 1998, KU Hospital spent about $33 million on capital expenses, according to executives. During the five-year period after that, the amount jumped to more than $150 million. And since 2009, projects totaling more than $175 million have been completed, including a 214,000-square-foot medical office building.?As we focused on patient satisfaction and outcome, we?ve gotten a lot more patients coming to us for care,? said John Jackson, senior vice president and chief administrative officer. ?It?s been a scramble to keep up with demand.?When we were part of the state, even though there were no tax revenues, we still needed our capital needs authorized. That limited our ability to reinvest in the infrastructure.?Jackson said his hospital, like other nonprofits, was able to go to the bond markets to get financing.That was an option unavailable to most developers, who need to secure financing for shopping centers, office buildings and other endeavors through conventional mortgages.?Even during the recession, when lenders were not willing to lend to business, they were willing to lend to health care because it?s traditionally seen as a safe investment,? Jackson said.North Kansas City Hospital has invested more than $53 million since 2009 upgrading and expanding. One of the major drivers has been the need to create space to accommodate increasingly sophisticated medical equipment. Husman, the vice president of facilities, said the days were long gone when you could simply wheel in a new piece of equipment to replace its obsolete predecessor and not worry about whether there?s room.?There?s no such thing as plug and play,? he said. ?The manufacturers like to build a better mousetrap and change the manner it?s configured in the room.?Husman said his hospital also was anticipating more patients because of the new federal Affordable Health Care Act. He projected the expanded insurance coverage under the program would cover an additional 45 million people nationwide.In response, North Kansas City Hospital is adding 24,000 square feet to its emergency room department. The hospital is projecting that the number of people coming to its emergency room will increase from the current 65,000 visits annually to 85,000 because of the health care act.Health care construction has been a big part of the portfolio at J.E. Dunn Construction Co., averaging $723 million in business a year from 2009 to 2011, the latest years available.?About one-third of our business has been health-care-related work, and that?s been steady for several years,? said Jim Miller, J.E. Dunn regional president for health care.?Basically, the main reason we?re seeing the expansion is the need to modernize for technology and new procedures, and to keep up with population growth.?Greenwell said the Builders? Association expects continued growth in health-care-related construction for the foreseeable future.?Health care keeps building out,? he said. ?With the aging of the population, we believe it will be in play for another decade.?To reach Kevin Collison, call 816-234-4289 or send email to kcollison@kcstar.com. Follow him on Twitter at kckansascity.
Source: http://www.kansascity.com/2012/11/05/3902457/health-care-building-boom-fuels.html
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