Hospital and health-care owners around the nation, midway into capital construction programs that were envisioned and budgeted in less-dour economic times, are nervously watching Wall Streets woes as they race to meet growing demand for high-performance, patient-friendly, rapidly delivered facilities. Industry analysts forecasts that earlier this year projected strong hospital starts until 2009 based on unprecedented demand, reversed course by fall when owners began to balk at new plans and projects as stock markets tanked and bond rates soared.
Health-care project owners this year expected challenges such as record-high materials costs, limited labor availability, and changing market demands. But the global financial crisis has trumped those concerns, as rising bond rates hit some owners hard. Projects contingent on variable-interest hospital bonds were particularly affected because those rates have exploded, throwing an unforeseen crisis at many construction programs, says Jim Connelly, chief financial officer at Henry Ford Health System, Detroit. Its variable-rate bonds rose 6% in September due to the “unprecedented catastrophe in the credit market,” says Connelly. Ford is midway into a $360-million facility project in West Bloomfield, Mich., financed in part through adjustable-rate bonds, which could expand the budget by $20 million.