The federal government continues to wrestle with major health care utilization issues, including perennial cost increases and the uneven quality of care. Cost and breadth of access have become particularly contentious, with Congress straining to find ways to create a reform package that would be deficit neutral, or better from a long-term federal budget perspective, while still expanding access to the roughly 47 million Americans who are presently uninsured.
Among the most pressing concerns is that health care continues to gobble up an ever-rising fraction of the U.S. gross domestic product (GDP). The Centers for Medicare & Medicaid Services estimates that national health care expenditures grew roughly 6 percent last year, and are expected to expand 5 percent this year despite the fact that the overall economy is expected to shrink.
As a consequence, health care’s share of the GDP is estimated to have risen from 16.2 percent in 2007 to 16.6 percent in 2008 and to nearly 18 percent this year. By 2018, national health care spending is expected to reach $4.4 trillion and comprise one-fifth (20.3 percent) of the GDP.
Opportunities Amid Challenges
Many Americans and policymakers view the ongoing expansion of health care as a long-term threat to economic vitalit
y, but profound opportunities associated with this segment of the market exist as well. For example, health care providers in hospital and skilled nursing settings, as well as institutional researchers, private biotech firms and pharmaceutical companies, are generating a need for new or updated facilities.
Health care-related construction opportunities have been particularly important during economic downturns. For instance, between April 2008 and April 2009, health care construction increased nearly 4 percent while total construction decreased nearly 11 percent. On an annualized basis, U.S. health care construction exceeded $47 billion in April, more than the respective construction volumes generated by lodging and transportation.
CoStar Group, which specializes in commercial real estate, reported in 2008 that nearly every health care sector—including pharmaceutical, outpatient and acute care facilities—was booming. While the credit crunch that began in 2007 and deepened in 2008 limited the expansion of construction opportunities in more recent months, health care construction continues to enjoy a level of momentum that is exceeded by only a handful of construction segments, including power and conservation.
Largely because of long-term demographic forces, the industry’s construction outlook remains positive, though the pace of future growth certainly will be impacted by ongoing efforts to constrain health care spending. Many hospitals across the United States that were constructed during the late 1940s and early 1950s with the financial assistance of the Hill-Burton Act need to be replaced. Additionally, during the mid- to late-1990s, many hospitals suffered relatively poor financial performance, in part because of the expansion of uncompensated care. As a result, and as evidenced in a 2000
Modern Healthcare construction and design survey, minimal replacement and renovation activity took place during a decade that was positive for the overall economy.