The health care industry still is adding jobs across Georgia, but concerns about the economy and health care reform have led hospital officials to take a scalpel to many building plans.
The value of major new construction projects requiring state-issued certificates of need fell nearly in half in Georgia last year compared with the previous year. The number was only one-third of a $1.4 billion peak level reached in 2006.
The Georgia Department of Community Health approved $541.7 million in major health care projects last year, down from more than $1 billion in 2008.
“Activity has been on a downward trajectory for the past four years in Georgia,” said Lindsay Fernard, an economist for McGraw-Hill Co., which monitors construction activity across the country.
“The stock market crash and credit market freeze battered health care systems’ portfolios, and left many systems with little to no access to funds or credit,” he said.
“In addition, uncertainty surrounding health care reform made it an even more unwelcome environment in which to move ahead with expensive capital outlay projects.”
Feeling economic pain
Hospitals, nursing homes and medical facilities typically get through recessions better than most industries because there always are sick and injured people to treat. Indeed, as Georgia’s unemployment hit double digits over the past year, health care employment increased by 6,200 jobs.
Among the 48 private-sector job classifications in Georgia, only nine showed positive job growth in the past year and three of those were in health – hospitals, ambulatory health care services, and nursing and residential care facilities – according to the Georgia Department of Labor.
Status of major projects* $320 million expansion of the Memorial Hospital Glenwood campus approved in 2006 but suspended. The hospital is evaluating plans.* $68.7 million expansion of Erlanger East, initially authorized in 2004, extended for two more years. So far, $17 million of improvements are completed.* $14.3 million Memorial Hospital’s imaging and outpatient center in Ooltewah is under construction, replacing an earlier 2001 plan for larger inpatient hospital beds in Ooltewah.* $7.3 million Cyberknife ambulatory surgical treatment center to be done by joint venture between Erlanger and Community Care Inc., an ambulatory surgical center development company.* $6.5 million Hospice of Chattanooga facility with 16 residential beds in Cleveland, Tenn. Funds are being raised for a possible summer groundbreaking.* $2.2 million Hospice of Chattanooga facility with 16 beds at The Health Center at Standifer Place, scheduled to be completed at the end of February.* $1.5 million, 8,000-square-foot medical complex at Erlanger South being developed with a private developer on 20 acres bought eight years ago.Sources: Erlanger, Memorial hospitals, Hospice, Tennessee Health Services and Development AgencyNorth Georgia projectsThe Georgia Department of Community Health issued certificates of need for:* 7.9 million renovation and expansion of emergency department at Hamilton Medical Center in Dalton, Ga. Approved in December 2005; $1.8 million cost overrun added in 2007* $5 million purchase of imaging equipment and scanner batching at Hamilton Medical Center, December 2009, following $1.8 million purchase of CT scanner in March 2006 and open MRI scanner in January 2009* $3.5 million two-level parking deck at Hamilton Medical Center, approved March 2006* $3 million renovation of maternal and infant care center at Hamilton Medical Center, approved in March 2008* $1.7 million purchase of da Vinci Surgical System, approved in June 2009* Erlanger also is planning an 8,000-square-foot medical complex at its Erlanger South campus in Fort Oglethorpe this year.
Nonetheless, the recession caused many hospitals to scale back building plans, according to the Georgia Hospital Association.
“This is the most difficult market I’ve seen in 18 years in this business with both reductions in Medicare and Medicaid and increases in the number of uninsured persons in Georgia,” said Kevin Bloye, vice president of public relations for the association.
In a survey of most of the 200 Georgia hospitals a year ago, 73 percent said they were reconsidering or postponing clinical, technical or equipment purchases; 66 percent were delaying acquisitions of information technology upgrades and more than 60 percent were deferring plans for new capacity and renovations.
Technology upgrades
Still, area hospitals have continued to invest millions in equipment and technology upgrades and to prepare for electronic health records.
Since 2005, for instance, Hamilton Medical Center in Dalton, Ga., has gained approval from the Georgia Department of Community Health for $26.3 million in upgrades, mostly for imaging and scanning improvements and to beef up the emergency department and the infant care center.
However, Hutcheson Medical Center in Fort Oglethorpe, which built an outpatient center on Battlefield Parkway five years ago, has not had a certificate of need request since then.
Erlanger hospital once planned a major medical complex along Battlefield Parkway in what it calls Erlanger South. But nearly a decade after such plans were developed, Chattanooga’s biggest hospital has installed only modular medical offices on its 15-acre site in North Georgia.
But Erlanger President and CEO Jim Brexler said the hospital plans to soon open a $1.5 million facility to house physician offices and begin development of Erlanger South.
“A lot of things happened on the economy and everything else, so there definitely was a stepping back from the big projects,” Mr. Brexler said. “However, that hasn’t changed the routine capital investment issues that have been going on. If anything, we have increased that a little bit.”
Erlanger continues to invest, on average, more than $20 million a year in investments in new equipment, technology and facility renovations and upgrades.
Memorial Hospital also continues to invest, on average, more than $18 million on equipment and other capital budget items, according to hospital President Jim Hobson.
But Memorial’s plans for the biggest hospital project in the region – a $320 million addition and renovation of Memorial Hospital’s main Glenwood campus – were suspended three years ago when the economy and credit markets began to sour.
Memorial’s certificate of need for the hospital upgrade and expansion in Tennessee doesn’t expire until February 2012 and Mr. Hobson said the hospital still is pursuing expansion, although at a slower and different pace.
“We’re continuing down the path that we started,” he said. “But we’re trying to manage our way through our capital plans as we adjust to the changes the world has gone through over the past 18 months and try to understand where health care reform is moving.”