COVER STORY, AUGUST 2008

PULSE OF HEALTHCARE DEVELOPMENT BEATS STEADILY
Patients demand convenience, comfort from new hospitals.
Ashley Ball

As baby boomers continue to age, hospital facilities — most of which were conceived along with the generation around 50 to 60 years ago — are having a tougher time adjusting to the new millennium; consequently, healthcare development is booming.

Steve Doyle, Vice President, Healthcare Development, McShane Corporation

“We’ve really seen the surge in the last 5 to 6 years,” explains Steve Doyle, vice president of healthcare development for McShane Corporation. “Annual healthcare spending in the country has gone from about $6 billion per year in 2001 and 2002. Healthcare spending has risen each year since to the point where some experts are projecting $9 billion in healthcare capital expenditures overall in the coming year.”

One of the major causes for this rise in healthcare development is the changing nature of how healthcare is being delivered.

People are not choosing healthcare facilities solely based on physicians anymore; patients want to be comfortable, and facilities are being altered to meet this new desire. From relocating to more convenient locations to upgrading the quality of food served to patients, healthcare is becoming more personal.

“There’s a lot of hustle just to keep up,” Doyle explains. “[Hospitals] really have to continue to grow and change, and find ways to expand their existing campus or build a brand new one, because at this point a hospital is almost obsolete if it’s a 50- to 60-year-old campus.”

When it comes to deciding between extensive renovations and ground-up development, most hospitals are driven by a state-sanctioned health facilities board. For one state, building an entirely new structure might be feasible, while another state might have to settle for renovations. Many states have a board that dictates where and how hospitals can spend their money, according to Doyle.

As hospitals undergo major structural modifications to increase market-share, smaller-scale healthcare facilities are shifting locations for more widespread appeal. A number of mixed-use medical parks, which incorporate healthcare offices with retail and general office use, have been launched in recent years. While general office buildings have a finite number of people entering and leaving the facility daily, the number of patients in medical offices fluctuates, so there is a wide, built-in customer base for surrounding services.

“In a medical office building, anytime you walk into a physician’s office, there are always six other people there waiting just like you,” Doyle says. “So a medical office building can generate anywhere from 300 to 500 people per day coming through the front door.”

Not only does the healthcare facility and its surrounding businesses benefit from this synergy, but the patient also enjoys the increased convenience of being able to go to the doctor and run other errands all in the same location.

“I would rather go to a nice medical office building that is sitting out on a highway with easy access, and where I can get a cup of coffee, than have to travel to a hospital location where it’s hard to find parking and I’m walking through a maze,” Doyle says.

As a response to preferences such as Doyle’s, the industry is beginning to diversify its locations. With baby boomers entering into their 60s, the healthcare market is becoming more competitive, and facilities are reaching out to suburban and rural markets to retain as much market-share as possible. The aging population is just one more force behind the rise in healthcare development and renovation.

“Even though 90 percent of the hospitals in this country are non-profit, the industry is still driven like others to make sure it has a profitable bottom line so they can pay their bills and keep the doors open,” Doyle explains. “It’s a service business even though it’s healthcare.”

And, just like other businesses, healthcare has not been able to escape the weakened economy. Although the healthcare industry is in a more favorable position compared to other industries, due to factors such as the aging population and a continual need for its services, it is still affected by the economic downturn.

“The constraint that will affect the healthcare world is financial availability,” Doyle says. “Even though [hospitals] still have that favorable outlook, there’s more trepidation in the capital markets today, which is affecting everybody across the board.” 

Nevertheless, “We haven’t peaked yet, ” Doyle emphasizes. “We’re in the middle of a long-term trend and there is more yet to come.”

PRAIRIE POINTE MEDICAL OFFICE CENTER Hoffman Estates, Ill. McShane Corporation Prairie Pointe Medical Office Center The 64,000-square-foot Prairie Pointe Medical Office Center is the first development to break ground at Prairie Pointe, a 23-acre mixed-use development comprised of the medical facility, as well as hotel, retail, and restaurant sites. Situated along Interstate 90 at Route 59, the mixed-use project is within the 780-acre Prairie Stone business park. McShane Corporation and The Rego Group are developing the mixed-use project in Hoffman Estates. Its location near 10 suburban hospital and medical centers will accommodate the increased demand for physician offices and services in suburban communities. McShane Corporation, Kipgo Development Group and SSCS Properties are co-developing the four-story, Class A building, which is located at 4885 Columbine Boulevard. With completion slated for this fall, the medical office facility is currently 30 percent sold. Suburban Surgical Care Specialists acquired a 15,200-square-foot suite and Tri County Podiatry Associates purchased a 2,500-square-foot suite.

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