While many construction industry firms and lobbying groups are chagrined the U.S. Supreme Court has upheld President Obama's Affordable Care Act, a number of companies that design and build in the health-care sector are more upbeat.
"Over the last couple of years, one of the biggest challenges in health-care construction has been the high level of uncertainty, which has caused a majority of providers to stay in a wait-and-see position, put projects on hold or cancel them altogether and not spend money," says Hamilton Espinosa, national health-care group leader for DPR Construction, Los Altos, Calif. He says that with the high court's June 28 upholding of the law's constitutionality, "health-care systems have a moment of clarity on the direction, and we expect that many will quickly move forward to put in place the facilities and infrastructure needed to meet the future demand of a nation where everyone has coverage."
Jennifer Coskren, senior economist at McGraw-Hill Construction, the parent unit of ENR, notes that health-care construction starts have dropped in recent years. For example, they were down 24% in square footage in May, compared to a year earlier. She thinks the ruling may help jump-start projects, even while the economy continues to struggle.
"We feel that the industry will be able to move more confidently ahead with capital expenditure plans," Coskren says. "Demand for health-care services is expected to increase, thanks to the over 30 million people who now will have access to health-care insurance." According to Brian Garbecki, vice president and healthcare unit leader at Providence, R.I.-based Gilbane Building Co., the lack of certainty in the sector created by the reform of health care and insurance has made it tough for hospitals and health-care systems to obtain bonds. "There should be more clarity about where the revenue is coming from," Garbecki says.
Andrew Quirk, senior vice president and national director of Skanska USA's health-care center in Nashville, says one element of the law stipulates reimbursements to hospitals should be based on "quality outcomes." This has driven many hospitals "to take health care to the patient" by providing large outpatient centers and emergency departments that include primary care, educational components and other services. "This has been a trend in health care for the last 1.5 years, and the court's decision is confirmation that these industry clients have been heading in the right direction," he says.
Chip Cogswell, vice president and national director of Turner Construction Corp.'s national health-care group, says the health-care industry has been moving in a leaner, more cost-conscious direction for the past several years and, even without the health-care law, would have continued to do so. The strategy is driven partly by economics and partly by philosophy, he says. "A lot of our clients have this lean mentality," Cogswell says. "We really believe smart contractors are going to carry that over to their projects" with lean construction practices and integrated project delivery, he says.
Hospitals may choose to renovate and expand rather than build replacement hospitals, Cogswell adds. These projects may not have amenities such as large atriums, fountains and courtyards.
However, some industry executives are more circumspect, as uncertainty remains. Congressional Republicans have vowed to repeal the law, and although President Obama would certainly veto such a measure, a Republican president might not. "It seems as though the uncertainty surrounding the impacts of the Affordable Care Act will continue through the election and well into 2013—timetables for enactment or executive legislative-branch actions being what they are," says Bob Nartonis, senior vice president of Minneapolis-based Mortenson Construction Co. While the act itself has the potential for "substantial economic impact to the health-care industry," he says, "these are overlapped by tenuous overall economic conditions in the U.S., Europe and China."