Although FMI’s health care construction forecast slipped 1% since last year, it’s still expected to grow 6% in 2014 to $44.0 billion. Demographics continue to drive the forecast in this sector, with baby boomers retiring in larger numbers and likely needing more access to greater health care services.
However, there is a larger elephant in the room that makes predictions a bit dicey right now. The Affordable Healthcare Act (Obamacare) is set to provide access to affordable health insurance for millions of Americans who are currently uninsured. This looks like a potentially sudden shock to the system, even though it has been coming for three years now, because many have ignored it or tried to legislate it away. It is still to be seen how this legislation will affect the growth of this sector.
In addition, the “2013 CFO Outlook, Survey of U.S. Senior Financial Executives” by Bank of America/Merrill Lynch cites 58% of CFOs as seeing rising health care costs as a chief concern. That response isn’t based solely on the coming changes due to Obamacare, but also the concern for the continually rising health care costs Obamacare seeks to improve.
Meanwhile, health care providers will continue to focus on reducing costs for new facilities through use of technology and fewer frills.
FMI is a leading provider of management consulting, investment banking and research to the engineering and construction industry.
Market Drivers
• Population change younger than age 18
• Population change ages 18-24
• Stock market
• Government spending
• Nonresidential structure investment
Industry Trends
• One-year delay of implementation of the employer mandate portion of ACA (aka “Obamacare”).
• Hospital beds per 1,000 people are trending downward.
• Shorter patient stays.
• Increasing use of growing number of ambulatory-care facilities.
• Heath care industry still not prepared for increased number of insured.
• Trend toward rebuilding existing facilities to use modern hospital design and allow for greater use of technology.
• Nontraditional funding sources for private nonprofit facilities.
- Private development and equity
- Government or government-backed
- Pension and life insurance companies