Uncertainty, Retooling Marks Midwest MOBs

ST. LOUIS-Medical construction, marked in the past decade by massive hospital planning and development projects, has reached the end of that trend, according to the HOK Healthcare Practice in the North Central Region. Notwithstanding many large projects in the Midwest, including the $1-billion Ohio State University Medical Center ProectONE in Columbus, OH, the HOK team said large-scale construction will now slow down for the next few years.

Early this month, Matthew Cotton joined the company to co-lead the region. He joins the 45-person team, partnered with Chicago-based Sheila Cahnman. Cotton left design planning firm Tsoi/Kobus Associates Inc. out of Boston, and says he’s joined a much larger institution. “HOK is a global brand, and they go all the way from  planning and design to follow-up and operation.”

Though many MOB experts believe that the new government health care regulations would boost medical office development, both Cotton and Cahnman say there’s too been too much uncertainty in the past two-to-three years to have any projects of size ready to go in the coming months. “There’s been more of an incremental approach in capital investment in the past couple of years,” Cotton says. “Hospitals are more looking to invest in revenue generators, such as replacing outdated beds or surgical platforms. You’re going to see more renovation projects going forward.”

Cahnman agrees, saying that hospitals, hampered by new requirements such as much-expanded record keeping, want to focus on smaller facilities or renovations that focus on keeping a patient well. “If they are building, it’s for ambulatory care clinics. They want to have patients get procedures in the least expensive place,” she tells GlobeSt.com. “I think instead of new development, which is also hampered by problems raising capital and philanthropy, you’re going to see more mergers and acquisitions, and hospitals buying physician practices and affiliations.”

Right now is the tail end of the building boom, she says, including the Columbus project. Her company designed the one-million-square-foot complex, which will house a new 19-story tower that will include a cancer hospital and research institute, as well as a 144-bed critical care building. Other HOK projects wrapping up include a $417-million, new Columbia St. Mary’s Hospital in Milwaukee that just opened, and a $211-million Our Lady of Lourdes Regional Medical Center in Lafayette, LA that will debut in summer 2011.

The Midwest will begin to see less health care construction, Cahnman predicts, as she says there are many areas that are now overbuilt, and capital is harder to attain. What will be seen is some private groups going after public systems, she says, such as Vanguard Health System’s $1.5-billion bid to take over the Detroit Medical Center. There are some hurdles as politicians and officials argue whether a private firm should be allowed to take over a non-profit group. “There are a few hospitals like that, that could be targets, including down in Louisville. It will be interesting to see how that develops,” Cahnman says.