7 keys to ‘Highest value, lowest cost’ for healthcare construction

The healthcare design and construction picture has been muddied by uncertainty over the new healthcare law. Hospital systems are in a bind, not knowing what levels of reimbursement to expect. Building Teams serving this sector will have to work even harder to meet growing client demands.

A patient room at Methodist Women’s Hospital, Omaha, Neb. HDR Architecture desig
A patient room at Methodist Women’s Hospital, Omaha, Neb. HDR Architecture designed the 116-bed facility and nearby medical office building using thin-brick precast concrete construction to save first costs for the client. Healthcare systems are under intense pressure to keep budgets for capital projects in line while still providing the highest level of care.
March 01, 2012

Planning, designing, financing, and constructing healthcare projects has never been more onerous for hospital administrators and boards. Capital dollars are scarcer than ever, and reimbursements from Medicare, Medicaid, and private insurers are getting squeezed. In such an environment, capital projects had better come in under budget and ahead of schedule to get badly needed revenue streams flowing.

“It’s all about providing the highest value at the lowest cost,” says Philip Tobey, FAIA, FACHA, senior vice president at SmithGroupJJR and an editorial advisor to this publication.

Overshadowing all this is the Patient Protection and Affordable Care Act of 2010—or, as its detractors call it, Obamacare. For hospital administrators, the healthcare law is something of a black hole. Will new federal regulations kick in as planned in 2014? How would a Republican victory in the upcoming election affect the law? What level of reimbursement can hospitals expect to receive under the new law? Will payments be pegged to better patient outcomes?

Throw in the unknown effect of new technologies, protocols, and procedures, and it’s easy to see why the nation’s hospital systems are desperate for ways to save money while trying valiantly to maintain quality.

Such a climate of uncertainty “forces decision makers to predict a future state that is inherently unpredictable,” says David Watkins, FAIA, chair and founding principal of WHR Architects, Houston.

Fortunately, the AEC industry has developed new tools and techniques to ease the burden on beleaguered healthcare administrators. Let’s take a look at these strategies.

1. Move less critical functions to lower-cost space

Main lobby at Beatrice (Neb.) Community Hospital. Less intense spaces like this were serviced with ductless plenum air returns and lower-cost fire-suppression equipment, which helped bring construction costs down to $223/sf, according to Loren Lamprecht, AIA, president of Altus Architectural Studios.

Many 20- or 30-year-old facilities are short on the latest technology and long on high-cost inpatient bed capacity. “Healthcare systems are building more integrated care spaces, combining, say, outpatient surgery and chronic disease management,” says Patrick Duke, senior vice president with KLMK Group, a Richmond, Va., firm that advises healthcare systems on capital planning. Instead of locating such facilities in an expensive downtown campus, they often wind up in a lower-cost suburban strip mall—in what Duke calls “a nice 30-year building, instead of a 50-year monument.”

Methodist Hospital System, in Houston, has put a planned expansion of its downtown space on hold, even as it has been pursuing a suburban expansion strategy in recent years. “Methodist decided that they need to live within the buildings they have for the next five to eight years,” says Watkins. By consolidating functions, reallocating space more efficiently, and making use of unused shell space, the hospital will wring as much use out of its current footprint as possible.

WHR is advising Methodist management on which departments, if any, can be moved or consolidated. Not every option will turn out to be feasible. “We may end up with areas that cannot move because of scheduling and cost issues,” says Watkins. “Sometimes the disruption and lost revenue from a move are not worth it.”

Some greenfield projects and expansions create lower-cost space within the same building. The recently opened Beatrice Community Hospital in Beatrice, Neb. (2009 population: 12,564) is divided between an institutional zone—for inpatient, intensive care, and diagnostic services—and lower-cost space for administrative, lab, physical therapy, dining, pharmacy, and other less intense functions.

Omaha-based Altus Architectural Studios designed the 144,000-sf facility to save money by equipping the institutional zone with ducted air returns to each room and a high fire rating, while the low-intensity zone has plenum air returns (no ducts required) from the drop ceiling and lower-cost fire-suppression features. “Mechanical systems typically make up 45-50% of the cost of such a building,” making them a high opportunity area for savings, says Loren Lamprecht, AIA, NCARB, Altus’s president. Altus was able to bring in the project’s construction cost at $223/sf, compared to a similar project in Nebraska that came in at $268/sf—a 17% difference.


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