Hospital Construction Costs

Hospital construction costs continue to rise every year, alongside demand for increasingly complex designs and projects. Determining hospital construction costs can be a vexingly complex topic that is influenced by a number of factors ranging from budget considerations to desired patient health outcomes. In this article, we’ll dive into some of the complexity surrounding hospital construction costs by looking at some of the main factors affecting hospital construction costs today. In doing so, we’ll outline some of the ways that medical center construction practices have changed the design and bidding phase of a hospital construction project.

Unique Challenges Facing Hospitals

There are a number of factors that influence hospital construction costs. Many of these factors are unique to hospitals themselves and the role that they play in our communities. Hospitals are a critical component of our local infrastructure. In an age of heightened security concerns, hospitals must contend with the fact that they are increasingly being relied on for mass-casualty incidents or during environmental disasters. At the same time, the healthcare industry itself is changing. In the United States, hospitals are increasingly beginning to recognize the large influx of patients they will begin seeing in coming years as the “Baby Boomer” generation continues aging. Hospitals must balance these concerns, and many others when determining a design strategy for new buildings or renovations of aging buildings. In this section, we’ll spend some time coming to understand the current challenges that hospitals face. In the next section, we’ll tie this together with hospital construction costs to show how these two forces are intertwined.

Resilience

Although it can seem hyperbolic to argue that we live in exceptional times, natural disasters seem to be occurring more and more frequently in the United States. Hospitals are recognizing this, and in response are incorporating a stronger emphasis on resiliency during the design process. Integrating disaster planning into the hospital building process is nothing new. However, hospital design teams are recognizing that past efforts have failed to achieve necessary levels of resilience. Events that can threaten either the structure of a hospital or impact the level of service it can provide must be accounted for and mitigated as much as possible during the design phase. The scale of unprecedented floods, fires, hurricanes, and other types of natural disasters has only continued to increase in recent years. Given the effect of manmade climate change on extreme weather, this pattern is expected to increase in the coming years and a good design team will focus on preparing for these climate changes.

Resilience isn’t just important for hospitals in terms of natural disasters. Today’s hospitals must be prepared for the unexpected. Things like epidemics can quickly overwhelm local medical resources, increasing waiting times and decreasing the level of care that patients receive. An unprecedented flu season can place an enormous amount of strain on an unprepared hospital. As such, it is important for hospitals to consider resilience in terms of being able to accommodate a wide variety of situations without adversely affecting levels of patient care.

Patient Outcomes and Satisfaction

Two key factors that modern hospitals must balance when considering new building projects or renovations are patient outcomes and satisfaction levels. Hospital design decisions are now being considered from the ground-up with patient satisfaction in mind. Facility design can have a significant effect on patient outcomes. Hospitals with poor design may experience overcrowding, leading to heightened stress for both staff and patients. Beyond overcrowding, there is a myriad of other issues that can affect patient outcomes, from lighting to layout, each factor is now being considered in light of how it positively or negatively affects patient outcomes. A 2016 survey from Health Facilities Management (HFM) magazine found that 86% of hospitals considered patient satisfaction very important when making design decisions. This underscores the crucial way in which hospital design choices are changing to incorporate patient satisfaction.

Future Technology

Unlike most other industries, hospitals must be designed in such a way that they are able to incorporate future technologies. The rate of technological change in the healthcare industry is staggering. This trend is forecast to continue for the foreseeable future. As such, hospitals must be flexibly designed to incorporate future technologies that assist in patient care. Hospitals must incorporate cutting-edge technology into current designs, given that construction of a new hospital can take many years. At the same time, future technology must have the infrastructure in place to support it. This means hospitals must incorporate considerations such as power usage, generator placement, plumbing, and HVAC systems to accommodate future technology that may place a strain on these systems.

Patient Population and Needs

A central concern for modern hospitals is accommodating patient needs adequately. Hospitals are traditionally used for serious medical situations like surgery or emergency services. In the past, hospitals attempted to centralize many of their services into one central location, making hospitals a hub for patient services. Modern hospitals are moving away from this trend, as hospitals are quickly becoming overcrowded serving a wide variety of patient needs. This is compounded by the fact that large numbers of people in the “Baby Boomer” generation are aging. The Pew Research Center estimated that there were over 74 million Baby Boomers in 2016, but that this number is steadily declining. According to the same estimate, the Baby Boomer generation peaked in 1999 at roughly 78 million people. By midcentury, there will only be approximately 16 million Baby Boomers left. The decline in population for Baby Boomers, while not rapid, will put a strain on hospitals. The extremely large population of aging individuals is already being anticipated by hospitals when assessing designs for health care and patient care facilities. Continuing care services, and long-term care facilities will begin to take the forefront in the coming years as Baby Boomers transition from retirement to convalescence.

Many Baby Boomers have chronic health conditions that need continuous care, such as diabetes, yet, the Baby Boomer generation isn’t the only population group that has chronic diseases. Rather, the proportion of the population that has chronic conditions is increasing every year. While care for individuals with chronic conditions is important, it is not the primary purpose of hospitals themselves. As such, many hospitals are beginning to explore ways to divert both Baby Boomers and those suffering from chronic conditions to smaller facilities offsite that cater to their specific needs. This in effect streamlines modern hospitals by allowing them to focus on providing emergency care and other services such as surgery.

Impact on Construction Cost

Each of the challenges hospitals are grappling with has an impact on hospital construction costs. Before we dive into how these challenges are affecting hospital construction, let’s first layout where hospital construction is currently. According to the 2018 HFM survey, found here, funding for construction has been steady between 2017 and 2018. In contrast to this, according to a quarterly report from Fails Management Institute (FMI) construction projects in the healthcare industry as a whole have increased 5% over 2017, or encompass roughly $42 billion dollars of additional spending.

As a whole, hospital construction has been increasing steadily alongside a robust economy. This trend is expected to continue over the coming years. So, we know that hospital construction is continuing at a steady pace, but how are hospitals changing and how does that impact cost? The most important way that hospitals are changing to meet demands is by spreading out their services. Rather than housing all of their services in one centralized location, healthcare construction projects are now more likely to build outpatient facilities that cater to non-emergency care. This will allow hospitals to streamline the critical services they do offer, such as emergency services. By moving non-critical care offsite to an outpatient facility, hospitals are able to reduce waiting times while also providing better care to the patients that are suffering from a medical emergency. Off-site facilities are also one way that hospitals are preparing for the influx of Baby Boomers and allow for patient rooms with more square feet per room. These outpatient and inpatient facilities are more capable of caring for chronic illnesses related to aging, while hospitals are geared towards treating emergency cases or surgery.

A second way that hospital facility construction is changing is through design shifts intended to incorporate future technologies. Since it is often impossible to know what technology may come around in 10, or even 20 years, hospitals have begun moving towards more modular designs that can be modified in the future to incorporate new technology. This movement toward a modular, evidence based design can have an impact on total cost because an increasing number of designs are utilizing prefabricated components. This allows the pace of construction to increase, often while driving down hard costs, and all while allowing the final structure to be produced for less money.

Designing hospitals for increased resilience can have an impact on hospital construction costs as well. Resilience against things like natural disasters can require significant design choices. For example, hospitals worried about flooding from things like hurricanes or tsunamis may consider locating their generators on the top floors rather than the basement. While this may seem simple, it may require moving the HVAC, chiller, and boiler room to accommodate the change. Enhanced resilience may also require using different materials or design methods, such as for hospitals in earthquake-prone areas like California. Rather than simply building to code, many modern hospitals are recognizing the need for continued operations during and after a natural disaster. This recognition requires building structures that are capable of withstanding significant weather phenomena without a loss of service.

Each of the challenges for hospitals that we have mentioned can result in increased construction costs, highlighting the importance of an accurate hospital construction cost estimate. Many hospitals are choosing to overhaul older hospitals rather than begin construction on a completely new building. Calculating the healthcare construction cost per square foot can be difficult, but renovations are trending to result in lower costs overall for healthcare providers. The cost per square foot for hospital construction also varies widely depending on location. For example, according to a study by Becker’s Hospital Review, the average cost per square foot for a hospital in San Francisco was between $450-650, in contrast to Las Vegas where costs were between $285-455. For healthcare providers in locations where hospital construction costs are significantly higher, renovation and overhaul of older systems may prove a financially sound decision.

One final impact that of the challenges facing hospitals is on the design process rather than the cost. Many hospitals are experimenting with a more collaborative design process that involves architects, engineers, trade specialists, and hospital staff. Patient input is even being considered in the design process. For construction firms, this means there is an increased reliance on construction cost estimation software. This is due to the fact that a quick turnaround is needed to incorporate design changes throughout the design process. At the same time, healthcare providers are more likely to want a comparative cost analysis between designs. The ability to quickly incorporate changes into a design and generate an accurate estimate that includes those changes is one of the most significant advantages of construction cost estimating software. Hospitals are enormously complex, which accounts for why the cost per square foot of hospitals, even excluding necessary equipment, is so high. Navigating this complexity can be challenging, particularly during an extended collaborative design process that incorporates a wide variety of opinions and ideas. Managing this task without a strong construction cost estimating software platform is nearly impossible. Given the fact that hospitals are only going to become more complex in the coming years, we can expect to see an even greater reliance on technology for the design and building of future hospitals. This will help drive down costs, increase efficiency, and produce hospitals that ensure high rates of patient satisfaction.

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