Colorado Hospitals on a $3.4 Billion Construction Boom

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Colorado hospitals on a $3.4 billion construction boom
Cash pours into new facilities in time of change, recession

By Ann Imse
Colorado Public News

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Colorado hospitals are on a $3.4 billion building boom.

That’s the total value of some 50 hospital construction projects occurring all over the state, a Colorado Public News examination has found.

This expansion is occurring at a time of great change in the industry, with some factors driving demand up, while others drive it down. The high cost of health care was cited as the second most important issue facing the country in polls during the fall election.

Colorado Public News found five new hospitals underway or opened within the past three years, from Denver to Rangely in northwestern Colorado.

Eleven major additions have been undertaken in Aspen, Boulder, Grand Junction and Pueblo, as well as Denver and its suburbs. They range from new towers full of inpatient beds, to stand-alone emergency rooms, surgery centers and clinics.

Some of the new construction begs the question of just what constitutes a hospital anymore. The $100 million branch Children’s Hospital being built in a southern Denver suburb has surgery, imaging, diagnostics, everything expected in a hospital – but just 12 beds designed to keep people overnight or for longer periods of time. By contrast, the main Children’s has just expanded to 414 inpatient beds.

“We have many, many more patients” being treated in less than a day, explained Jerrod Milton, vice president of operations for Children’s, on a recent cold, windy day at the construction site for the new hospital. In fact, Children’s has seen the number of such outpatients grow by 70 percent in the last five years. “This is our goal – it’s to try to keep people out of the hospital,” Milton said.

Increased outpatient care is reducing the need for hospital beds, but other factors complicate the picture. The federal health care law is expected to insure half a million more Coloradans beginning in 2014, raising demand for hospital procedures. At the same time, the state expects a 54 percent rise in the current decade in the number of Coloradans 65 and over, and they will need more care as they age.

CEOs must figure out how all these trends will affect their expensive investments in buildings.

“The future of healthcare is unknown for everybody,” said Bain Farris, CEO of Saint Joseph in central Denver. “But none of us believes there will be more money.”

Nevertheless, Farris is rolling the dice right now on the state’s most expensive current hospital project, a $623 million new hospital. That’s because he needs a more energy-efficient building as cost pressures mount. The latest equipment – robotic surgery, giant imaging scanners and the like – demands more room, more power, and more cooling. He also needs a hospital designed for inpatients who are more ill than in the past, because the healthier ones go home more quickly.

So how can Colorado patients afford all this? Hospital administrators insist that costs will drop as they reduce the time patients stay.

“Theoretically, there should be less patient demand, but we don’t know when that is going to hit us,” said Bruce Schroffel, CEO of University of Colorado Health. Its University Hospital in Aurora is building the largest inpatient expansion in the state.

Donna Lynne, CEO of Kaiser Permanente, doesn’t envy the hospitals’ positions. “Building today for hospitals is a risky business,” she said. “Everything is being done outpatient.” Her group’s patients don’t even want to go to the doctor’s office, much less a hospital, she said. “People want to take a picture of the mole on their arm, send an email to the doctor and get a message back” letting them know what to do next.

Hospitals also face the likelihood of a major change in the way they are paid, says Colorado Business Group on Health, which promotes lower costs and higher quality. One experiment in Colorado would give certain hospitals a pre-set payment for treatments, leaving any extra cost for avoidable complications on the hospital. A number of the construction projects are switching from two-bed rooms to private rooms, in part to reduce hospital-borne infections.

The wave of hospital construction also is being spurred by low costs. “The economy has dragged down the cost of capital,” Milton said. Those low interest rates are joined by low building costs, as construction companies desperate to remain in business through the recession have cut their prices to snag the hospital work.

Hospitals across the state also are building to cope with change. Aspen Valley Hospital is spending $78 million to triple its size, without changing its total 25 inpatient beds. Given its high-cost location, the hospital is even building 18 apartments for employees.

Many of the new facilities are gorgeous, with fireplaces and atriums replacing cramped lobbies. Children’s Hospital’s Milton said there is quite a bit of research showing the “colors and light and arts and all of that complement the healing process, and help get people out of the hospital quicker.”

Major Colorado hospital projects

University Hospital in Aurora is building the most expensive addition at $400 million, as it adds 276 beds to a facility only eight years old. CEO Bruce Schroffel cites a deliberate decision to go $700 million further into debt. This money was invested in new facilities and to recruit top specialists from around the world. It paid off, in booming business, and also a ranking as the top-quality academic hospital in the nation. That ranking counted effectiveness of treatment, mortality and patient safety, among other measures.

“It’s a different perception of who we are than we were 10 years ago,” said Schroffel.

UCH is now taking that brand wider by affiliating with Poudre Valley Health System in Fort Collins, and by taking over Memorial Hospital in Colorado Springs in October. Schroffel said he expects to see some modernization at Memorial in the next five years, but there is no plan as yet. Poudre Valley just completed an E.R. and surgery center in Greeley and is working on a new cancer center in Fort Collins.

Children’s Hospital of Colorado also is seeing growth due to its reputation as one of the nation’s top pediatric hospitals, drawing patients from well beyond the state.

It is adding beds, both at its five-year-old main facility in Aurora and in branches along the Front Range. As part of the UCH takeover of Memorial in Colorado Springs, Children’s took over Memorial’s 100-bed pediatric unit in October.

Milton says “it’s certainly possible” that Children’s could expand further in Colorado and even beyond the state’s borders. “If there is a need and we can do it, we’ll certainly consider it.”

St. Anthony saw a hole in coverage in the Denver suburbs, moving its trauma care hospital to the west side of the city, and building one-third of the beds as intensive care. Its parent company, Centura, is developing a new hospital in Castle Rock, and another in Westminster along Interstate 25 at 144th Street. It is also adding physician practices, occupational health, and hospice programs to provide a full spectrum of health care, not just hospital care.

SCL Health System has purchased a plot of land once slated for another hospital further north in Frederick. SCL says it hasn’t decided what type of medical facility to build there yet.

St. Mary’s Hospital in Grand Junction is in the midst of a $267 million renovation, including the addition of a 12-story tower.

Parkview Medical Center in Pueblo added operating rooms, 84 beds and switched from 2-bed to private rooms in a $31 million expansion. Demand in the southeast corner of the state is rising, as the population ages and more people are becoming diabetic, said CEO Mike Baxter. The hospital also brought in more specialists, so patients with more difficult problems could receive care closer to home instead of driving to Denver, he said. “If we’re not set up to compete, we’ll fall behind,” he said.

Boulder Community Hospital is in the midst of a $110 million expansion.

Rangely District Hospital is replacing its building at a cost of $35.2 million.

Valley View Hospital in Glenwood Springs is building a $29 million addition.

Spanish Peaks Regional Health Center in Walsenburg is expanding its emergency department and adding a decontamination room due to the occasional injury due to chemical spills on Interstate 25 and at oil and gas sites, said CEO Todd Oberheu. Now, decontamination occurs in a blow-up room outdoors. “We would put somebody into hypothermia if we had to do that today,” he said.

Additional projects in Southern Colorado

Children's Hospital Colorado Colorado Springs is building a new specialty care center at a cost of $11 million.

Heart of the Rockies in Salida is building a new 18,367 sq. ft. clinic at a cost of $5.5 million.