Emergency Department Construction Activity is Here to Stay
Updated: Jun 4, 2020
In recent years, one of the major healthcare construction trends is the significant level of investments that have been made towards improving emergency services. Due to the constant changes and challenges in the healthcare market, hospitals have needed to make significant upgrades to existing conditions in order to create a patient-centered care environment to increase safety and satisfaction. In Georgia, almost every healthcare system has thus proceeded to build, improve and expand its Emergency Department component. Since this has become and will continue to be a common trend, we wanted to take a deeper dive behind this activity to gain further understanding behind current market dynamics.
Increased Demand
First and foremost, there is a greater demand for Emergency Services now than ever before. In simple terms, we can formulate the growth in demand of Emergency Services as follows:
Increase in demand = Increase demand per capita x population growth
Data gathered by the Kaiser Family Foundation shows that Emergency Room visits per 1,000 people in the United States have been steadily increasing since the turn of the millennium – 366 in Year 2000 to 428 in Year 2014, or more than a 1% steady annual increase. For Georgia the per capita growth rate for the same period is a little bit slower, but still at a significant 0.73%/year (http://kff.org/other/state-indicator/emergency-room-visits-by-ownership/#). Regulators have hoped that an expanded urgent care network and broadened growth of the insured population through the Affordable Care Act would taper the increase of ER visits. However, the data indicates that, so far, this hasn’t been the case.
In the same time period, the US population has been growing at a rate slightly less than 1%, while the same figure for Georgia has been a healthy 1.58% per year. Analysts estimate that the state of Georgia broke the 10 million population barrier in 2013 compared to 8.2 million in 2000 (http://worldpopulationreview.com/states/georgia-population/). Combining both of these factors, demand for emergency services has been growing at a rate of 2.03% for the overall U.S. and 2.32% for Georgia since the turn of the millennium. Doing the simple math for Georgia, that’s more than 90,000 ER visits that have been added each year!
Supply Dynamics
In addition to the demand increase for emergency services, the changes to the supply side have also been a big factor in spurring the investment activity. In 2015, one of the major healthcare stories in Georgia was the consolidation activity. As smaller, under capitalized regional hospitals are being acquired by larger systems, such as Piedmont and WellStar, we see investment dollars make their way into these facilities for capital improvement projects, and emergency services were a prime candidate.
Furthermore, in recent years a significant number of hospital closures have occurred with a total of 57 in the United States since 2010, five within the State of Georgia. Rural hospitals have been faced with a myriad of financial challenges; however hospitals that have felt the most financial pressure are those that have not expanded Medicaid services. According to a report from iVantage Health Analytics, who specializes in hospital strength index assessments based on nine pillars of strength, 8.5% of rural hospitals in expansion states are vulnerable to closure and that number nearly doubles in non-expansion states with 16.5% of rural hospitals that are vulnerable to closure.
As rural hospitals are forced to close their doors, their existing patient population is required to migrate to nearby health systems in order to obtain services. This creates a need for increased capacity and improved patient care at those locations.
The Result As both demand and supply forces continue to pull in the same direction, in combination with the ever-changing conditions of the healthcare market; we fully anticipate the investment growth activity in emergency services to remain at its recent impressive levels.