Rocky road ahead for the healthcare sector?

January 01, 2006 |

Healthcare construction spending has increased 10% year to date through October. Continued expansion at about the same pace is forecast through 2007, based on the 17% rise in healthcare construction starts so far in 2005.

Healthcare starts, and subsequent construction spending, are more regionally dispersed than other nonresidential buildings. Research and referral centers cluster in large metro areas and university towns, but the balance of healthcare facilities is distributed in proportion to population and income.

The extra funds for hospital, clinic, and nursing home construction come from the rapid rise in healthcare expenditures. Employer insurance plan receipts are being boosted by 200,000 new jobs every month and an 8% annual premium rise. Public healthcare spending is rising similarly as new ways are discovered to pay for the health costs of poor families.

So far, the various public and private efforts to cut healthcare costs have cut the annual health expenditure growth rate from 11% a few years ago to about 8.5%. Annual healthcare spending increases are expected to continue slowing gradually with a resulting slowing in healthcare construction spending beyond 2007.

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