Health care facility construction has a history of staying strong through economic slowdowns. This time, however, the recession, credit crisis and concerns about reform muffled a nearly decade-long building boom in 2009.
If the economy recovers strongly, experts say the best the hospital construction industry can hope for this year is a push on renovation rather than new buildings. Projects that were halted or postponed may have to wait until next year's budgets—caution is the byword for 2010.
The caution is reflected in many ways:
Less construction planned. A shrunken total of $33 billion in hospitals and clinics was in the planning pipeline at the start of the fourth quarter, according to RSMeans Business Solutions—down 26 percent from the average for 2007 and 2008 at the same point.
Projects suspended or scaled back. One of every six hospitals surveyed by Health Facilities Management and the American Society for Healthcare Engineering in October and November stopped a construction project in progress in 2009 because of economic conditions.
Another 36 percent of those responding to the annual survey said they scaled back projects planned or in progress, while 32 percent decided not to move forward with planned projects not yet started. The numbers of those altering construction plans for 2010 was only slightly lower.
Reduced budgets. Budgets for both new construction projects and facility modernization are down this year. Among those responding to the survey, an average of just 16 percent of fiscal 2010 capital budgets were allocated for new construction and 18 percent for modernization—down from 2009 targets of 21 percent and 24 percent, respectively.
Waiting on health care legislation. About 29 percent of respondents said the discussion on reform impacted their future facilities development plans, and another 34 percent said it had somewhat of an impact.
An improving economy and a revived stock market eased the pressure on hospitals in the closing months of 2009. Financing was again available through the bond market as credit issues faded. But hundreds of projects remained idled indefinitely and building designers' phones were hardly ringing off the hook with business for new projects. Even the most optimistic scenarios don't foresee a pickup in activity until the second half of 2010 at the earliest.