Healthcare building strong through 2008

May 01, 2007 |

Healthcare construction spending is projected to increase 16% this year, an additional 14% in 2008, and then continue expanding slowly for the next several years.

The funding surge has been ebbing for several years but it won't slow healthcare construction spending until after 2008. The growth rate of the sum of premiums from private health insurance and appropriations for public healthcare will decline for the fifth year in 2007 and fall to 6.6%, according to projections from the U.S. Department of Health and Human Services.

The value of hospital construction starts shows the same trend as construction spending, rising about 15% in 2006 through 2008 and then continuing to rise, but more slowly, according to Reed Construction Data. The residential healthcare market, such as nursing homes, will continue to expand faster than hospitals due to public funding changes and privatization, which provided access to more capital.

Hospital construction is scattered around the country, and is not directly proportional to either population or population growth—at least in the short term. For example, California and Florida account for 13% of the value of hospital project starts, but that percentage is far less than their share of U.S. population and population growth. States with rapidly growing populations, such as Arizona, Nevada, and Utah, account for a relatively small share of new hospital projects. Five states with declining populations—Michigan, Ohio, Illinois, New York, and Pennsylvania—accounted for 22% of hospital starts in the past year. Texas is the most active market, with more than 11% of U.S. hospital starts.

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