| COVER STORY, DECEMBER 2009
THE FUTURE OF HEALTHCARE
Supply vs. demand = new construction.
By Terry Bays
The need for new healthcare facilities is driven by two primary factors — Baby Boomers and military personnel relocation. As the United States’ population ages, the demand for additional healthcare facilities rises. Within the next 20 years, 80 million Baby Boomers will reach the age of 62, putting the number of individuals needing healthcare at an all-time high.
This need will be experienced by all military installations as well as non-military medical facilities due to war veterans requiring more care. In addition, a significant number of troops are relocating to the U.S. from foreign bases, which has had a larger effect on Texas than most states as a result of the number of military installations located here. With the increase of people needing medical treatment, public, private and military hospitals are predicted to have problems meeting the overwhelming demand.
If growth and out-of-date facilities were not enough to worry about, most non-military hospitals are currently experiencing a profit margin of less than 5 percent, with some as low as 1 percent. Some hospitals are looking for new ways to distinguish themselves to gain more business.
A Bright Spot in Texas
As one drives around the major cities and rural counties in Texas, a person cannot help but notice the current construction of healthcare facilities — and this is not limited to Texas. From out-of-the-ground construction, to additions and renovations of existing structures, $958 billion worth of work is occurring across the country. Texas is receiving its fair share of this money since it is experiencing a high level of growth that most other states are not. According to the United States Census Bureau, Texas’ general population grew over the last 8 years by 16.7 percent, while the national average was only 8 percent.
The non-military healthcare facilities have to learn how to expand in a time where profits are at record lows and some facilities are losing money. There are currently an estimated 5,700 hospitals nationwide that are making efforts to increase profits by attempting to make changes in management practices while maintaining patient quality and care. This is a huge factor when 70 percent of the cost of running a hospital is in labor, which is experiencing shortages of qualified personnel.
Public and Private Hospitals
The shortage of doctors and nurses to care for the increasing number of ailing patients is more of an issue in the private and public healthcare facilities than in military. Some cities are being proactive, such as El Paso, Texas, which recently changed one of its local hospitals into an educational hospital with the hope of attracting more local students and keeping them employed permanently after graduation.
With the lack of qualified caretakers comes the concern of receiving reimbursements from Medicare, Medicaid and insurance companies. Hospitals are inspected at least once every 3 years by the Joint Commission, an agency authorized to make inspections for potential deficiencies in life safety measures, infection control and other extensive numbers based upon criteria. Hospitals must pass all these criteria in order to qualify and receive this assistance that benefits the more than 43 million people on Medicare and 53 million on Medicaid.
Public and private hospitals also have to combat the challenge of caring for the uninsured. The number of uninsured Americans grows everyday as more people lose their jobs and health insurance, which means less returns for hospitals. The ability to afford paying for the uninsured is hugely affecting how hospitals do business.
The Military Impact
The military is experiencing a surge in medical construction due to the Base Realignment and Closure Commission (BRAC) of 2005 as well as its out-of-date facilities in need of renovations.
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A rendering of the interior of a medical facility project at Fort Bliss in El Paso, Texas.
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In November 2005, Congress enacted a law giving the BRAC Commission the responsibility of repositioning thousands of military personnel, both stateside and oversees, in an effort to cut costs for the Department of Defense. As a result, the decision was made to shut down 25 major installations in both the United States and abroad and radically realign 24 others, primarily in the United States. This decision had a major effect on Texas cities, such as El Paso, which is home to Fort Bliss. An estimated six brigades were reassigned to Fort Bliss, increasing the number of soldiers from approximately 19,000 to additional 55,000. With family members included, El Paso’s population is estimated to increase by more than 100,000 people.
There are several other military installations in the state of Texas experiencing similar growth, which is pumping millions of dollars into the state. The majority of this work is currently expected to complete by 2014.
The Future of Healthcare is not an Option
The need for new healthcare facilities, as well as the need to remodel existing hospitals, will steadily increase over the next 20 years as Baby Boomers move into their senior years. To meet these medical demands, hospitals will need to continue to update and find ways to manage funding needs in order to survive.
The current healthcare reform will have a major impact on the future of potential profits and losses, but that exact impact is yet to be determined. Stay tuned.
Terry Bays is a senior project manager at Walton Construction Company, LLC.
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