Careful frugality has taken root in the aftermath of the recession that jolted the industry out of its decade-long building boom two years ago.

A slight uptick in construction is likely in 2011, based on results of an annual survey by Trustee sister publication Health Facilities Management and the American Society for Healthcare Engineering. However, new construction volume remains down from 2008 levels, many projects still are being deferred and spending plans are being subjected to tough scrutiny.

Wariness was evident on several fronts as the year began.

Dip in new construction. The estimated $24.9 billion of new hospitals and clinics under construction in the fourth quarter of 2010 reflects a 10 percent decline from $27.8 billion a year earlier, notes Reed Construction Data/RSMeans Business Solutions. The planning pipeline has more on the boards than a year ago—$27.7 billion, up from $26 billion—because of projects put on hold, but was down 24 percent from $36.3 billion in 2008.

Renovations the rule. Renovation or expansion accounted for 73 percent of construction projects. That reflected a move to address needs while avoiding the high cost and debt of new construction. Roughly two-thirds of current renovation projects are for less than $3 million, according to RSMeans.

Focus on infrastructure. Infrastructure is getting more attention than in the past. A third of the 598 hospitals surveyed were in the process of replacing or upgrading their air handlers or ventilation systems; 26 percent were doing the same to building services systems to meet IT infrastructure needs in conjunction with the shift to electronic health records; and one in five was either upgrading a data center or planning to, a higher percentage than a year ago.

Hesitancy because of reform legislation. Hospital organizations still are assessing the combined impact of what's coming: bundled payments, lower reimbursement, incentive-based pay and more patients. With a surge of patients expected when coverage expands in 2014, there is not only an increased need to find cost savings in hospital construction and elsewhere, but also an ongoing debate about how best to achieve it.

By no means is the hospital building industry in a tailspin. About 63 projects valued at more than $100 million apiece were under construction as of late 2010, according to RSMeans. Another $20.8 billion of new megaprojects is in the planning process, albeit with no assurance when they will go from drawing board to shovel. The continuing momentum reflects a stable industry determined to keep pace with technology and baby boomers' demands as their medical needs increase.

For more information, go to

Article Images