Tackling The Healthcare Conundrum — Rising Costs And Demand vs. Shrinking Income
Want to get a jump-start on upcoming deals? Meet the major Dallas-Fort Worth players at one of our upcoming events!
Design and construction firms working in the healthcare space find themselves facing a shifting paradigm where everything from healthcare expenses, patient needs and construction prices are on the rise even as patient ability to pay and physician salaries fall or remain stagnant.
The end result is a healthcare system where architects and construction firms are forced to pay closer attention to medical facilities' bottom lines while trying to build out cost-effective healthcare facilities.
In Dallas-Fort Worth's booming healthcare sector, this means developers and construction experts doing everything from reducing medical care facility footprints to relying on new technologies.
There is definitely healthcare construction and demand growth in DFW, Methodist Health System Chief Operating Officer Pamela Stoyanoff said, but the product types churned out now are increasingly smaller and more focused in their scope, she said.
"It is about growth," Stoyanoff said. "[But] that doesn’t involve as many de novo hospitals as it used to, or at least if it does, they tend to be smaller. We are building one in Midlothian, and rather than building a traditional 100-bed hospital out of the gate, we find we're starting smaller with 50 to 60 beds."
Caddis Executive Vice President and partner Jud Jacobs attributes the smaller footprints in medical construction to demand for lower costs across the board, a factor that is essential in ensuring not only the survival of medical facilities, but of doctors and patients themselves.
"What’s challenging in this market right now is that land prices are at near all-time highs and construction prices are at near all-time highs," Jacobs said. "Physician income is not necessarily at all-time highs, and the challenge is to deliver a product that the physician can afford to occupy and make a living, so that is what we have focused on."
Caddis met this challenge by adjusting the design of certain medical buildings.
"We have come up with some building types that have zero common areas. We eliminated the common area factor, and we stretched as much design and appearance as we could with a tight budget and ... tried to be smart about the space we delivered," Jacobs said.
One factor hurting effective development is the break between what patients need the most and what hospitals can effectively offer inside their facilities while generating enough revenue to cover the practice.
"One of the No. 1 issues is mental health and how are we going to treat that disease," Stoyanoff said. "It's difficult because we still have a disparity in how we pay for something and what something might cost us. You don’t see a lot of health systems getting into mental health in a huge way because we can’t make it financially viable.”
Methodist isn't the only firm facing this dilemma when it comes to mental or behavioral health trends.
"We are very active here in this market and in New York," Structure Tone Southwest Healthcare Sector Leader Greg Francis said. "As far as migration of care from the higher-cost inpatient centers to the lower-cost outpatient settings, you mentioned behavioral health, that is certainly one where there is a real reimbursement pressure for the care; it's essential in the market, but at a lower cost."
Building smaller outpatient centers, reducing building footprints and focusing more on smaller urgent care centers is one way to reduce costs, but the construction side of healthcare also sees technology playing a role in cost elimination.
Virtual healthcare delivery — relying on technology — could be a game changer in terms of cost control and efficiency.
"We are looking to engage with virtual care in a different way," UT Southwestern Assistant Vice President Alan Kramer said.
He said that can be updating patients' ability to communicate with physicians when they want, or having wearables that send information directly to doctors.
"You have tools, like many of you probably have Apple Watches that are very sophisticated, and they do as good of a job as much of the equipment that we already have that we paid so much for. So using that technology should help us augment that relationship with patients in the coming years."