...Partners of San Antonio. “San Antonio has been fortunate in that we have been slower in decline and benefited from a diverse economy.”
Skittishness in the industry
“There is a substantial rethinking in the industry about where they spend their dollars,” says Kregg Elsass, director of health-care services for PageSoutherlandPage’s Austin office. “We’re not hearing they are killing jobs or stopping jobs. They are putting them on an indefinite hold.”
PageSoutherlandPage designed the new $337-million 474,000-sq-ft, six-story, 112-bed Methodist West Houston Hospital in the Katy area for Methodist Hospital System in Houston, which has more than $1 billion in expansion projects under way.
Austin Commercial of Dallas broke ground in April 2008 on the West Houston Hospital. Hensel Phelps Construction Co. in Austin continues work on the $331-million Methodist Outpatient Center at the Texas Medical Center, with completion set for mid-2010. Vaughn Construction of Houston is building a $250-million expansion at Methodist Willowbrook Hospital in northwest Houston, set to wrap up later this year.
Randhir Sahni, president of Llewelyn-Davies Sahni, a Houston architecture and urban design firm, also reports health systems are cutting back, but smaller projects are proceeding.
Dedman adds that more owners are opting for design-build contracts.
“People are thinking out of the box about how they will deliver projects and be as efficient as they can be,” Dedman says.
Multiple industry experts report concern among owners about health-care reform plans circulating in Congress, which has hospitals fearful about how it might affect their revenue.
“We have been through these dips before, and this one has been similar to ones we have seen in the past, where there is a slowdown in the health-care market, generally, created when the government starts talking about health care,” Crane says. “Everybody goes on hold, and the activity seems to be more planning. We’ve had more requests for proposals this year than we have had in the last two or three years combined.”
Crane says private hospitals, typically, rely on endowment funds for many capital projects, which were hurt badly in the stock market fall.
“They are looking for other financing vehicles because the bond market is not attractive to them right now,” Crane says.
Elsass says, “A lot of the successful institutions can get money, but they are not willing to compromise the bond ratings. They know, ultimately, things will turn around.”
Lakeway Regional Medical Center in Lakeway, now in design by PageSoutherlandPage, worked with its lender to obtain U.S. Housing and Urban Development guarantees on the loan for the $250-million, 270,000-sq-ft, 103-bed greenfield facility. Hoar Construction of Birmingham, Ala., received the construction contract.
“If the facility defaults, the loan will be paid off by the government,” Elsass says. “There are available dollars, but you have to be crafty and know how to find them.”
Elsass says some hospitals have turned to private developers to build medical office buildings. For instance, PageSoutherlandPage was working on an emergency department and surgery expansion at Scott & White Healthcare in Temple, but the facility put it on hold. However, it is proceeding with a medical office building with a developer from Minnesota.
Keith Guidry, vice president with RTKL, also has noticed a trend toward third-party ownership. However, Crane says he has not seen that happening, citing developers’ difficulty with securing financing.
Castorina says evidence-based design has always been a part of good design, and those elements that enhance the bottom line continue, if proven cost-efficient and beneficial.
Barger adds that the military has incorporated evidence-based design and LEED Silver standards into its requirements.
Sahni says health systems often delete healing gardens and other soft features from plans as they try to conserve costs, but Mark Meyer, managing principal of the Dallas office of TBG Partners, says hospitals have not abandoned healing gardens and are securing donations so they can include those amenities in their projects.
“They work through their foundations,” Meyer says. “They found people are more likely to fund a garden people see than a bed in a trauma room.”
TBG Partners designed a 1-acre healing garden at Children’s Medical Center of Dallas, adjacent to its...