Health Care Construction Healthy

February 13, 2004
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GRAND RAPIDS — A growing and aging population, aging facilities, and evolving medical technology and techniques are combining to keep health care one of the few sectors demanding construction.

According to new U.S. Census Bureau statistics, health-care construction grew 6.9 percent nationwide in 2003, to $29.4 billion, as construction in many other sectors declined. While about half the growth rate of 2002, health-care construction remains one of the few categories showing strength.

Census figures indicate that the growth rate for health-care construction was second only to residential, which increased 10.3 percent in 2003. Construction on health-care-related facilities is expected to remain strong.

“I don’t see it stalling at all,” said Lorissa MacAllister, the new health-care studio leader for Progressive AE.

“Health care is continually evolving and there’s a need for expansion and to continually update the facilities and re-looking for opportunities for internal efficiencies.”

Seeing the growth continuing nonstop, the Grand Rapids architectural and engineering firm recently created a new position to lead its health-care business and better target the health-care sector, which now accounts for about 15 percent of annual revenues.

Progressive AE, through its design and planning services, hopes to grow that to 20 percent by the end of the year by focusing on the “hot areas” of emergency, surgical and ambulatory care provided at hospitals with 100 beds or fewer.

“We know it’s a growth market,” said Mike Perry, executive vice president of Progressive AE. “It’s really a logical move.”

The growth in health-care construction is readily seen across West Michigan, where virtually every hospital or health system is undertaking a major expansion or planning a sizeable capital project.

Partly driving the trend is a need for health-care providers, in an era of rising costs and tight finances, to generate operating efficiencies through new, modern facilities. At the same time, care providers need to accommodate today’s changing medical technology and equipment and rising patient volumes.

“Our physical facilities are becoming obsolete in terms of the new medical technology and population growth,” said Harry Veenstra, president of Zeeland Community Hospital. “Now it’s obvious we have to bring on things to be able to be in touch with the technology for the future.”

Zeeland Community is planning to develop a new $36.1 million hospital to replace an aging facility that’s inefficient and sits on a land-locked campus that, after several additions over the decades, provides no more room for growth.

Many hospitals were hesitant to embark on major capital projects for several years, hoping for a better financial environment in which to build, Veenstra said. As trends that affect the industry accelerate, they cannot wait any longer, he said.

Among the more notable health-care construction projects in the Grand Rapids area are: Spectrum Health’s $86 million heart hospital going up on the Butterworth Campus downtown; Saint Mary’s Mercy Medical Center’s new $42 million Lacks Cancer Center now under construction; and Metropolitan Health Corp.’s plan for a $150 million hospital in Wyoming with a surrounding health-care village that will draw millions more in investments.

Spectrum Health is also planning new cancer and children’s hospitals, and recently joined with the physician group MMPC on a new $4.6 million outpatient surgical center. Spectrum also is continuing renovations to its Butterworth Campus E.R.

“It’s a steady market all over, and if you look at Kent County you go, ‘Wow,’” said Russell Hinds, branch manager in Grand Rapids for Skanska USA Building Inc.

The drivers behind the buildup involve more than just industry trends. Many care providers that were planning, then delaying, upgrades or new construction decided to take advantage of the low interest rates of recent years, and finally “pulled the trigger” on projects involving profitable clinical services — medical imaging, for instance, Hinds said during the Alliance for Health’s First Friday Forum in January.

“It’s a pretty economic time to finance projects,” he said.

Elsewhere in West Michigan, Holland Community Hospital is planning a $40 million expansion, and North Ottawa Community Hospital in Grand Haven is preparing for a major upgrade after withdrawing a $12 million renovation plan last year because it didn’t go far enough.

In Muskegon, Mercy General Health Partners last year opened a new $9 million emergency department, and Hackley Hospital is presently constructing a new $9.9 million E.R.

Across the rest of Michigan and throughout the nation, health-care construction is “very steady,” Hinds said.

In addition to the big-ticket medical projects, Skanska USA is now seeing health-care clients undertaking upgrades to internal systems such as electrical, mechanical, and heating, air conditioning and ventilation — projects that hospitals in the past “virtually put on hold and said, ‘Let’s put a Band-Aid on it,’” Hinds said.

He also sees the increased development of long-term care facilities in response to the aging population.     

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