Construction, Renovation Part of Capital Plans

, March 11, 2013

In speaking recently with healthcare executives about their capital spending plans for 2013, I have heard a lot about construction and renovation projects, which rank second only to IT initiatives for where hospitals and health systems plan to invest over the next 18 months, according to HealthLeaders' recent Buzz Survey on capital funding priorities and drivers.

Nearly half (47%) of the 125 respondents say they plan upgrades to existing facilities, while 26% say new facilities are in their future.

There are a few core reasons for the focus on brick and mortar assets, one of which is the conservative approach many organizations took toward their capital budgets during the recession. Although the economy continues to be dicey, hospital administrators know that buildings must be cared for—and sometimes replaced—in order for their business to remain operational.

"A lot of places are holding off as long as they can, but you get to a place where you just have to move forward," says Susan Doliner, vice president for development at Maine Medical Center, a 600-bed hospital in Portland. "Capital projects are very important, particularly on the East Coast where facilities are much older. At Maine Medical Center, we have buildings that are as old as the 1900s. … Eventually, you wear those buildings out and you need to build new buildings."

Doliner says that new construction offers a chance to redesign the hospital with all private rooms—a move that satisfies stricter infection control regulations and the demands of the average patient who does not want to share a room with a stranger.

Private hospital rooms generally make for more satisfied "customers." However, there is also a legitimate health advantage for patients who have their own room, and a significant financial benefit for hospitals that provide them.

Patients who have a private room "tend to heal faster and go home faster," Doliner says—an important factor in light of the shift toward value-based purchasing. "As you look to the future to the way hospitals will be reimbursed, it will depend on how healthy their community is."

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