Contractors feeling better about health care sector | Finance ...

Preliminary work is under way for a more than 150,000-square-foot medical office building that is part of a $60 million expansion project planned at Fairview Ridges Hospital in Burnsville. (File photo: Bill Klotz)

The construction industry hasn?t exactly been the picture of rosy-cheek health over the past five years, but the health care sector is making contractors a little more chipper.

Construction companies are taking advantages of shifting care models and priorities in the health care business, and the proof is in the steady stream of projects under way or in the works:

• Fairview Health Services will break ground next spring on a 150,000-square-foot specialty care medical office building, hospital expansion and parking ramp at Fairview Ridges Hospital, 303 E. Nicollet Blvd. in Burnsville.
• Washburn Center for Children will build a 50,000-square-foot children?s mental health center at 2430 Nicollet Ave. in Minneapolis.
• The U.S. Department of Veterans Affairs is planning an up to 18,000-square-foot psychiatric building at the VA Medical Center campus at 4801 Veterans Drive in St. Cloud.
• A four-story, 96,000-square-foot Mother Baby Center, at 902 E. 26th St. in Minneapolis, which will extend Abbott Northwestern Hospital?s birth services into the Children?s Hospital campus, is due for completion in February.

Contractors aren?t exactly calling it a boom, but say the uptick in health-care-related projects has been a positive part of their businesses in the past year or two.

?It?s definitely active, especially compared to other markets,? said Ken Sorensen, vice president and general manager for Golden Valley-based Mortenson Construction. ?We think health care is going to be a steady market for us in the foreseeable future.?

Camille Helou, director of the health care group with Minneapolis-based Kraus-Anderson Construction Co., says his company is ?cautiously optimistic? about the market. ?We had a good year in health care and were successful in procuring some projects in town and throughout the state.?

Part of the reason for the mini-surge is simply the loosening of purse strings that comes with a recovering economy. Phil Raines of the Associated Builders and Contractors? Minnesota and North Dakota chapter, recently told Finance & Commerce that some long-delayed projects, including many in health care, are finally moving forward.

A greater factor, though, is that health care delivery models are evolving, and contractors are adjusting. The days of mega-hospital projects are waning but clinics, behavioral health facilities and primary-care centers are often being green-lighted in their place.

?The [care] delivery mechanisms used by the major health organizations ? are changing,? said Bob Solfelt, director of real estate development with Mortenson. ?They?re going more to an ambulatory care model rather than a hospital-based main facility model. People aren?t being hospitalized as often.?

That?s part of a larger trend in which providers are receiving incentives to keep people out of the hospital and healthy, according to Solfelt. The aging population is also a factor, as is the U.S. Patient Protection and Affordable Care Act. While federal reform will insure more Americans, they will be seen in outpatient clinics instead of the emergency rooms they once frequented for lack of insurance.

As a result, health care construction makes up about a quarter of Kraus-Anderson?s business these days, according to Helou. Among other projects, the contractor is building behavioral health centers for Regions Hospital in St. Paul and the La Crosse, Wis.-based Gundersen Lutheran Health System, which has facilities in Minnesota.

?The focus in the future is going to be on primary care,? said Helou. ?The intent for care providers is to keep people from going to the emergency room.?

Marc Gullickson, a former health care executive who now works as president of health care for Minneapolis-based Ryan Cos. US Inc., said the lightning pace of development in health care means contractors should be on the lookout for impending projects.

?In health care, there?s always construction and always rumors of construction,? said Gullickson. ?The technology changes so fast and providers want to provide the best service possible in order to remain viable. The technological changes in the office sector or the industrial sector don?t compare.?

One challenge for contractors who want to stay on the short list for health care projects is to nurture good relationships with providers; the organization whose hospital you built 20 years ago might want you to build a clinic soon. Another is to keep pace with developments so health care clients know you?re alongside them when changes come, according to Ryan?s Gullickson.

?An outpatient clinic today doesn?t look like an outpatient clinic looked years ago,? said Gullickson. ?It?s incumbent upon us to stay up to date with that technology ? to understand the latest radiology equipment, the latest lab equipment. The projects will be there if we?re ready.?

This entry was posted on Tuesday, December 18th, 2012 at 7:05 am and is filed under Focus on Commercial Real Estate Sector. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.

Source: http://finance-commerce.com/2012/12/contractors-feeling-better-about-health-care-sector/

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