Capital Fueling Hospital Expansion Boom

Jeff Elliott for HealthLeaders Media, September 20, 2010

Is the industry turning the financial corner, is it "do or die" situation for healthcare providers?

If you're seeing cranes hoisting steel girders and cement trucks delivering their nine yards of aggregate and water, there's a good chance a hospital's going up in your neighborhood. From Dallas to Detroit, San Francisco to Sarasota, a building and renovation boom is underway.

The Denver metro area alone is gearing up for more than $2 billion in new construction and expansion projects, according to a report in The Denver Post. Even providers in Detroit, an area whose dire economic straits have been well chronicled, will spend $1.3 billion on capital improvements in coming years, according to the Center for Studying Health System Change (HSC) and the National Institute for Health Care Reform (NIHCR).

This certainly is an indicator that capital spending is on the rebound as of 2010, spurred on by a number of factors including pent-up demand for additional beds, stronger institutions' growing cash reserves and certain favorable bond conditions outlined in the stimulus package.

But does it mean that wholesale financial security has returned in healthcare? Not necessarily. Experts estimate that up to 1,500 healthcare facilities could shut down in the next few years because of their precarious financial situation.

So to what do we owe the building boom? Largely, we can attribute it to the pre-recession healthcare environment. During that period, providers started to make their facilities conform to new consumer-centric healthcare models and federal regulations that tie reimbursements with outcomes, according to according to Niklaus Fincher, vice president of purchased services sales and capital, VHA Inc.

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