Revolutionizing Healthcare Design: Modularization, Prefabrication, and Technology Advancements

Join us as we navigate recent industry changes, including economic shifts, labor shortages, and procurement challenges. Learn how modularization, prefabrication, and technology advancements are reshaping healthcare facility design and construction. Gain insights from our in-house experts, Gary Brett and Heather Furhman, as they share experiences and strategies to enhance collaboration, streamline processes, and reduce costs in healthcare construction.

[00:00:00] Brad Ducey: Welcome to the Construction Insiders Podcast, where our host Jessica Busch talks with industry experts about new trends, best practices, and how to successfully deliver construction projects in today’s market. Whatever your role on a project, we think you’ll find these discussions interesting and worth your time.

[00:00:21] Jessica Busch: All right. Thank you, Brad. So today we’re going to talk about all things healthcare. The last couple of years have brought the industry major changes and has caused the industry to have to react and pivot almost overnight. So with everything that’s going on the industry, the economy, we decided we’d bring in two of our in-house experts, Gary, Brett, Heather, Furman, and talk about all things healthcare and how it’s impacting the build industry.

So thank you both for taking some time flying here, Heather. Thank you, Gary. Wonderful. Drive. I’m sure. Before, we take too much time, I guess there’s a lot going on in healthcare and there’s gonna be a lot of different topics we cover today because of just how this industry is being impacted on the construction side, the development side, not even touching what’s going on in the patient side really.

So with that, The economy. There’s a lot of questions about it. How is that relating on a day-to-day basis and what you guys are seeing in these meetings with our clients in the build industry? How is it impacting healthcare in this sector?

[00:01:29] Gary Brett: I think you, Jessica, that’s a good question. I think it’s affecting it tremendously.

We’ve got major escalation coming outta Covid. The good thing yesterday was though the feds didn’t increase the interest rate, so we’re not into a full recession yet. But we’re gonna see, we’re gonna have to wait, a few months to see if that actually works. And the feds maybe drop the interest rate, which would bring us into a better place.

Escalation though is still at an all time high. We are seeing it stabilize, but it hasn’t been going down. We’ve seen the products that we need on a big, long wait list. 24 months for some things like switch gear. But Heather you had error handling units the other day that you had on 12 months wait list, and you got them within two weeks, correct?

[00:02:09] Heather Furhman: Yeah, I mean there’s there are opportunities there, but the key is planning and taking strategic measures with your procurement process. And of course thinking ahead cuz the long lead items will sync a project really quickly. But the other key component is working with the design team and the client to be thoughtful about what, what.

Different air handling units you’re using, right? Because we can look down the pipeline and see, this vendor, this provider, these are their lead times, but we could get these and so let’s look at the ones that are available quicker and they’re not coming from Italy, they’re here stateside or something like that.

So those are the things that, that are being talked about between the design team, the owner’s rep. The client group and the construction management team and everybody being at the table together, which is a new concept really in, in what we’re seeing today in healthcare. Having everybody on board very early on and having a collaborative discussion, looking at the project holistically.

[00:03:14] Gary Brett: So I think the big buzzword there is avoid, avoid customized units.

[00:03:18] Heather Furhman: Yes, absolutely.

[00:03:18] Gary Brett: Get the ones off the shelf. This long lead time, I think though is wearing thin with the industry. I think we’ve been enough out of Covid in the last two years for the systems to have been got back to normal with the delivery process.

So it is wearing a little bit thin. I think, the warehouses are maybe taking a little bit of an advantage of that. And I’m not saying they are, they could be. The other big thing though is labor. Labor shortage is an issue. The average age of a journeyman before covid was 42.

Now coming outta Covid, it’s 47. Wow. People during the recession in 2008, 2010 went away from construction as well, and I was joking to one guy in a, in an Uber in San Diego here one time, and I said, oh, where’d you work for before you came? Uber Driver. Oh, dpr. Oh, you going back to dpr? No, I like Uber driving, and then the young kids, they’re coming outta college and they don’t wanna work on a dirty, messy

[00:04:12] Jessica Busch: want a computer screen

[00:04:13] Gary Brett: and they want a computer screen and they wanna be able to do it in a warehouse. So that’s where I think Modularization comes into control there. And the younger people are maybe gonna come back into construction because modularization is getting legs and growing a little bit.

[00:04:26] Jessica Busch: So with healthcare, the specialized equipment, lead times, you’ve talked about labor escalation, financial, and lenders. Is that an issue you guys are seeing with this sector at all?

[00:04:35] Gary Brett: Yeah, it is. Obviously the interest rates up. So it’s harder to get loans or you’re getting loans with higher interest rates.

I think that’s where we’ve gotta see the feds hopefully step in the next couple of months and drop the interest rates a little bit. That’ll start things flowing again. And we don’t want to go into a full blown recession. We’re halfway there. I’d say we’re one foot and one foot out at the minute, but I think if the Feds can help us out, obviously we’re coming up to a, an election as well, so you know, they’re gonna

[00:05:00] Jessica Busch: Interesting.

[00:05:01] Gary Brett: Yeah. Yeah. They’re gonna start dropping in them so they can get the votes and everything else, normal thing that happens, hopefully that will happen. I think a lot of the systems though, have enough money in their coffers. A lot of the systems during Covid did stop and, but a lot of the systems did keep going.

So it’s interesting to see where they’re at. I think everybody is taken a loss in the, in, in the first quarter of this year. But that’s on paper. They, they’ve acquired other systems, they’ve built things they’ve gotta do things to to equal it out. So I think that’s an interesting, with, interesting with the lending of money.

And the interest rate with Feds? What you think, Heather?

[00:05:37] Heather Furhman: Yeah, I think where the real opportunity with lending is non-traditional lending. It’s the traditional lending through banks where we’re seeing these incredible interest rates. And so that’s where we’re seeing the real opportunity is this the non-traditional sector and getting lending through, through those avenues.

[00:05:55] Jessica Busch: So with money on the mind. Let’s talk about cost then. Let’s jump to the, let’s jump to that topic. How are we able to bring costs down as an industry for the health, for our healthcare clients? You in New York, Gary, you in California. How is that playing out with the cost, keeping costs down?

[00:06:13] Heather Furhman: Yeah, I think a lot of what we were speaking about before Gary mentioned modularization and also prefabrication. That’s an economy of scale is one of the benefits which brings the cost down. And then what we also see is another really incredible benefit is if you start layering in the components of design assist.

Again, bringing, the vendors and the designers together, working on it cohesively and coming up with, the detailing and the designs and having them approved. It’s starting to change the way we were talking about this earlier, Gary. It’s starting to change the traditional way that we are used to designing, developing and constructing a project.

It’s really speed to market and the healthcare systems have to get things moving faster at a more economic value. Those are two main components that, that can help. But it also, we’ve gotta shorten timelines. Time is money. That’s what Peter Laer taught us, and that’s, and it’s true.

So it’s shortening the design time, not taking two years for a master plan. Or, a year for concept, like we have to do things faster, both on the design time, design side and the construction side. And I know, Gary, you were mentioning the costing it’s a different traditional, no longer the traditional milestone costing, right?

[00:07:36] Gary Brett: No, I think, that’s one of the ways that we’re getting cost certainty. I think that’s different to what we were discussing, but let’s go to cost certainty first. There are software softwares out there now that can give you cost certainty at a conceptual level. Plus also, the use of continuous estimating.

That’s the new buzzword in the industry at the moment for third party cost estimators anyway, con contractors have done it their whole life, but with the third party cost estimator being involved continuously, I think you’re gonna get a little bit more cost certainty because we’re not just jumping in and out at the S D and CD level, we’re actually staying connected to the team.

And there is no traditional CD, dd CD level anymore. There. There’s different levels that you can check your estimate at. But I think, for the cost of projects it’s different for hospitals than it is for medical office buildings. I think medical office buildings there’s two ways of going about it.

You either build an ASC with everything in it, or you build a medical office building with less departments in it and just doctors. And if you need an imaging, you go to your hospital, the pharmacies, can you go to CVS and fill your prescription there? Do they need on, onsite pharmacies and do they need onsite imaging And that’s gonna bring the cost of your projects down for medical office buildings, shrink the building.

You may be, have an economy of scale with a smaller size building, but it should bring those costs down. The other thing is standards or systems have standards. They may have to look at those standards and bring them down a little bit. In California, obviously we’ve got different restrictions on seismic conditions and so forth.

You’ve gotta look at those standards. And then with hospitals similar thing, can we take those non-hospital departments and put them in a separate building next to the hospital, which is only gonna cost a third of the cost of a major hospital. So that would bring the cost down. It would shrink your hospital and it would allow you to do that.

So I think there’s a lot of things that people can do. There’s a lot of systems in California have said to me, we might not even stay in California and we might leave. Because it is an astronomical amount of money that they’re paying now. And we’ve been asked all the time, how do we bring costs down?

And, I think it’s a team effort and it’s a team effort from architect to contractor, to design team to owner. I know it’s the same thing in, in, on the east coast, in, in with New York and Boston. They’re nearly about the parallel to the same as we are here for costs on hospitals. And it was quite an interesting topic that I.

Went to listen to last week at a conference and the lady says, let’s stop talking about cost per square foot of construction, but revenue per square foot. If you can’t make that revenue per square foot, then you shouldn’t be building that building. So it’s either fill it or can it,

[00:10:18] Jessica Busch: which is why, I guess you mentioned a lot of these systems looking to outsource.

To the CVSs for pharmacies, et cetera. Are there any that we’re seeing working to centralize for different reasons? Is that helping costs at all for different scenarios or,

[00:10:34] Heather Furhman: yeah, and I think this was, maybe not intentionally, but part of Covid was healthcare systems needing to assess whatever square footage they had overnight and transform it into something else. And I think what it allowed healthcare networks is to understand how they were using their, a floor plate.

[00:10:55] Jessica Busch: Better understanding of what’s really going on.

[00:10:57] Heather Furhman: Correct. Yeah. So if you had a floor plate that had, multiple care types plus administrative spaces plus layering on top of it, other uses and the program of the floor plate was just so congested.

It’s how can you simplify that because that’s where you’re gonna get the flex, the flexibility for another pivot that may be needed at some point in time. Hopefully not soon. Not, yeah. But I think that’s really what started coming out of that and we’re seeing in New York, a lot of the major healthcare systems are now doing that, where their administrative teams are now in one building that they may, it’s maybe not an asset that they own. They’re renting, leasing office space in a class A, class B building or something like that. Where that allows them to now take their assets and their floor plates and maximize the care program that they can offer.

[00:11:47] Jessica Busch: Talking about that with this kind of audit that these systems are having to go through of themselves. What about technology? How does that play into it? What are you seeing the patient care model with that, with the buildings themselves and what we need to put into them nowadays?

[00:12:01] Heather Furhman: Yeah.

[00:12:01] Jessica Busch: What’s that looking like?

[00:12:02] Heather Furhman: So technology is huge. Right now, and I, I think people are still trying to figure out just how far they can go. I think we’ve just barely scratched the surface. But, I’m working on a healthcare in a healthcare system in New York City and, I.

Everybody knows that BIM is, 3D modeling and this is how you manage the mechanical, electrical and plumbing in the building with your BMS systems and things like that. Taking that to the next level where you’re now actually building what they call a digital twin that essentially allows the building to monitor and adjust itself is, you start to get into the, to the world of ai, right?

And it start and where that can go and at the moment it seems endless. But the other really interesting thing that, that we’re working on for this cancer care center that I’m a part of is what they’re calling a digital ecosystem. It’s a digital health ecosystem, and essentially what they’re doing is they’re building a second twin.

Not just for the facilities and operations of the building, but actually to look at how the care is being provided and making sure that it is as efficient and fluid as possible within. For patient for the needs of the patient, and how the care is being offered. And also monitoring it through that way.

I don’t know what the next layer is but I’m excited to see what it is. And I think, to your point, Gary, this is where the minds of the young minds coming outta school wanna be, right? They wanna get into this technology and the ai and so there’s, I think the opportunities are endless.

[00:13:26] Gary Brett: Yeah. You’ve got the technology, and then you’ve got the low voltage. So I think there’s two different entities there. But I certainly think after Covid people started looking at the low voltage systems and the technology to be able to make the hospitals or medical office buildings do what they want to do and whatever instance they want it to be in.

The big thing is though, it costs money, so owners would like this, but then the upfront cost, they’re already high. So where is the happy medium? If you want it, you have to have it. It’s the future. Hopefully it’s gonna get cheaper. Just the discussion about green, and it does, it cost money to put, lead gold into a building or lead platinum, and in the beginning, yeah, it was however I make the money now, it’s Oh, yeah. It’s free. Yeah. So I think the future is coming just like ai, The actors Guild over here in California are fighting it, and everybody else is fighting AI because they don’t wanna lose their jobs.

But, it’s certainly coming certainly on the cost estimating side too. And one of my colleagues in LA showed me a presentation of AI where they could, sketch up a building on a piece of paper, bring it into the AI system, have renderings, and then bring in architectural drawings and bring out a number.

Within a couple of hours of the seminar he went to. It was interesting. We don’t know how well the good the numbers were, certainly the graphics were very good. But yeah, it’s coming. It’s just the cost of it and how much systems want it right now. When I first started 18 years ago, IT was $25 a square foot per square foot of the building.

Now it’s anywhere from $150 to $200 a square foot, There’s obviously a lot more it going in, including game stations and everything else for the kids and things like that I never had when I was growing up, at least anyway.

[00:15:14] Jessica Busch: So with costs being a big component and having a lot of eyes on it these days from a financial perspective, when it comes to that available capital for these facilities, what have we seen change?

Is there more of a focus on a certain type of building post Covid? I know like with elective surgeries going away the last couple years and then coming back, what has changed in terms of priorities with builds with that capital?

[00:15:38] Gary Brett: Yeah, that’s a good question. I think as we came outta Covid, everybody was going for a more centralized building to include everything, more like your ASC rather than your primary MOB or your secondary MOB.

I think after the two years now that we’ve had to be able to look back at what happened and reassess. I think we’re generally, I’ve seen, we’re generally going back to the model we had before, but going back to an earlier question, I think what they’re doing now because of the cost of construction, is they’re reevaluating how many buildings they were put in a particular city.

For instance, I’ve got a client on the east coast that wanted to build two ASCs. We started, early construction or early design. And now all of a sudden we’ve been put on hold. We’re thinking now about building one ASC Central in that city and bringing everybody into that one asc. Now, it’ll probably be bigger, but again, the economy of scale will save on that.

The other thing we’re seeing is systems actually coming together and actually building a building together and sharing the cost and sharing the actual space within that hospital. Or ASC or medical office building where I think that’s where we’re gonna see a lot more. We’re gonna literally see a lot, not mergers, but a lot more.

[00:16:59] Jessica Busch: Are these like mod modular systems? Are these your standard hospitals?

[00:17:02] Gary Brett: Just, no, this is your standard hospitals one system here. I’m not saying that it’s the right system. Scripts and Sharp. Getting together.

[00:17:07] Jessica Busch: Yep.

[00:17:08] Gary Brett: And building a building.

[00:17:09] Jessica Busch: Gotcha.

[00:17:09] Gary Brett: And sharing that building, it, it brings the cost down.

Obviously they can share it, they can fill that space. So that’s another thing that we’ve been seeing happening. Again, at that conference last week the speaker said that within the next 10 years, there are only gonna be 20 healthcare systems within the whole of the United States because we have been seeing smaller systems being bought by the bigger systems.

It’s happened before Covid, it’s happening now after Covid, but Heather, any comments?

[00:17:35] Heather Furhman: Yeah. Yeah.

I think yeah, I, like we were saying before it’s, we have to start looking at things differently. The traditional methods seem to be showing their age, for lack of a better term, but yeah.

So coming up with new methods and new partnering and things like that, I think is really has to be the future.

[00:17:52] Jessica Busch: So with these new ways of doing things, that also makes me think of having to be flexible. But with those options, are there costs? How do they, is it gonna outweigh, what are the pros cons? What are the benefits?

[00:18:08] Heather Furhman: Yeah.

[00:18:08] Jessica Busch: Flexibility to me means money.

[00:18:10] Heather Furhman: Flexibility does mean money. And we do have a lot of clients, right out of the box they say, we want the space to be flexible. Okay, that’s fine. We can make it flexible, but it means we’re going to be adding in. A lot of components for a future plug and play that you have no idea if you’ll ever use, which means we have to beef up the infrastructure for the entire building.

So that’s an example. And there’s cost involved in that. I think one of the, one of the maybe more effective ways to be flexible is to look at the building from a core and shell standard, right? And so designing the floor plates so that they can very quickly be, changed or, moved around or whatever it needs to be.

But the structure of the building, the bones of the building, need to allow for that, which means maybe open floor plates rather than columns all over the place, the core being along the back wall rather than in the center or up in the front, or, however it’s gonna work.

But you have, so you have to that’s what you have to think through in terms of flexibility rather than thinking, oh, right now we don’t have med gas, but we may want that at some point, because that’s a lot of infrastructure for med gas if you don’t actually ever use it. And quite honestly, depending on the timeline, you may need a totally different hookup in a totally different system by the time you use it.

Those are some of the design challenges I think that the AE groups are really looking at trying to understand further.

[00:19:31] Gary Brett: Yeah. I think coming outta Covid, everybody wanted to have rooms that were ICU rooms or med surge rooms. And I’ve known a few facilities that have opened that way. Obviously the costs are more are higher, but I think people have gone, not gone away from that. I think, maybe they want a couple of floors of that. I know I had one, one building that I looked at the other day. They did the whole hospital. They obviously had the money to be able to do that, but some of the smaller systems that can’t and still need to do that, obviously in California we’ve got seismic regulations and 2030 is the deadline to be MPC and SPC rated.

You’ve gotta look at all these things and work it out. But yeah, there obviously flexibility. It means extra cost,

[00:20:10] Heather Furhman: yeah.

[00:20:12] Jessica Busch: So if we were to kinda summarize what you guys are seeing with healthcare and the build industry, what are those three to five takeaways that you would want someone to walk away with?

[00:20:27] Heather Furhman: I think in my mind, Gary, their technology is a huge one. I think. Another really important is a standard of patient care. All of the, it seems like a lot of the networks are trying to figure out how do we provide better service? How do we improve the service, how, it’s a constant constant improvement that they’re looking to have.

So I think that’s really important.

[00:20:51] Gary Brett: I think cost certainty, finding cost certainty is very important to the client at the moment. Obviously with the spiraling cost of construction. I think also, looking at, we talked about flexibility, but looking at pulling things out of buildings that are not needed to be able to make that cost a little bit less.

I think that’s probably our five. Yeah, there was one more I was thinking about, but I can’t put my finger on it right now.

[00:21:13] Heather Furhman: I was the only one I would add to that is what you said very early on, Jessica about Actually, maybe you said it, Gary, that the square footage of the building needs to be profit generating.

And so having administrative spaces doesn’t generate profits, so you have to start looking at it as you, you said it, Gary was the, don’t look at a square footage. It’s more about the proforma. It’s about how do we get this building up and running and generating

[00:21:37] Gary Brett: revenue per square foot,

[00:21:38] Heather Furhman: revenue per square foot as quickly as possible.

[00:21:41] Jessica Busch: So we’re seeing those departments being moved out of a hospital building into a different building that doesn’t have the same codes and regulations.

[00:21:47] Heather Furhman: Yes, and I think a good example of that is a project that I’m working out in in New York City. Originally, this was meant to be a swing space for the main hospital, which is gonna, was gonna be renovated.

They were gonna use this as this new 15 story MOB as a swing space. And it very quickly became clear to the folks leading the effort, in the C-suite of the network that, wait a minute, we need these floors to generate profit, we need revenue. So it completely switched how, the program of the building.

And it’s now gone into a cancer care because they know they can now balance out. The different care types and generate profit on this one. And so of course then our task is to get it up and running as quickly as possible to

[00:22:36] Jessica Busch: generate that revenue.

[00:22:37] Heather Furhman: That’s right.

[00:22:37] Gary Brett: And that last bullet point was how do we bring the cost of the project down?

[00:22:40] Heather Furhman: Yeah.

[00:22:40] Gary Brett: I think that’s the big, that’s the big bullet point of everything. How do we do that? How do we, how can we build a building for the client for the money they’ve got?

[00:22:48] Heather Furhman: Yep. Yeah. That’s always the key. Part of what you’re doing with different systems, Being a constant cost checker rather than this really.

It’s a, it’s an aggravating process that we all go through where we get to sds, we do a cost, oh my God, we’re 20 million over. But it’s you’re never gonna pull 20 million out through a value management or value engineering process. I know that’s a bad word or bad phrase.

We’re not supposed to say it, but it’s not gonna happen. And you can only squeeze so much lemon. So much juice from a lemon and then all of a sudden, so we get that settled and then what do we do? We spend four or five months going through DD and then we do a price check. Oh my, now we’re 30 million over.

It just, it’s like the time. At some point we all have to realize that maybe this isn’t the right sort of process that we’re going through. And some of what Gary and I were talking about before where you have the design team, the cm, the cost managers, the cost estimators, the owner’s rep.

Everybody’s here at the start.

[00:23:46] Gary Brett: Yeah.

[00:23:47] Heather Furhman: And everybody’s talking. We’re coordinating, we’re collaborating and coming up with the best ideas.

[00:23:52] Gary Brett: Yeah.

[00:23:52] Heather Furhman: terms of cost and program.

[00:23:54] Gary Brett: No, definitely.

[00:23:55] Jessica Busch: All right. That was a lot. Thank you both. It was very interesting. And so until next time.

Yeah. Gary, Heather

[00:24:02] Gary Brett: Thank you.

[00:24:03] Heather Furhman: Thanks so much.

[00:24:04] Jessica Busch: Bye guys.

[00:24:06] Brad Ducey: if you enjoyed this episode of Construction Insiders, we encourage you to check out our website at https://cumming-group.com/, that’s https://cumming-group.com/ where you can find our full knowledge library under the Insights tab. It’s all great stuff. We’re really passionate about it. We hope you’ll check it out. Thanks for listening.