The health-care sector saw construction spending beat year-earlier totals for all but one of the first 11 months of 2000. After two years of decline, the sector was growing by 11.9 percent through November, with publicly funded work up 7.3 percent and privately funded work besting year-earlier levels by 13.2 percent.
Prior to 1998, the construction of hospitals and other health facilities-including additions, renovations and new construction-had grown for six consecutive years, but consolidation and cost containment led to small spending declines in 1998 and 1999. Growth returned in a big way during 2000, however. Privately funded construction, representing about 78 percent of the total, fared a bit better than publicly funded work. Spending for private facilities totaled an estimated $14.12 billion through the first 11 months of 2000, while public health construction spending reached $3.89 billion.
Long-term demographic trends remain unambiguously positive, so it's unlikely that the "negative growth" of 1998 and 1999 will be repeated in this decade. Still, until cost-cutting pressures ease and the U.S. government sorts out long-term Medicare funding and other elderly care priorities-including home health care and prescription drug coverage-only moderate annual growth in health facilities construction work is likely.
Our current forecast calls for growth to slow to 2.2 percent this year-still a much better performance than during 1998 and 1999-before gaining a solid 5.4 percent in 2002.