Essay Archive
BACK TO LIST

Millennium Mega-Trends
By Russell C. Coile Jr., M.B.A.

"High-tech, high-touch" is consciously choosing to employ technology when it adds value to human life... It is appropriate human scale. John Naisbitt, High-Tech, High-Touch (1999)

Remember reading futurist John Naisbitt's Megatrends in 1982? Almost 20 years later, one of the enduring trends that Naisbitt predicted was the now-famous "high-tech/high-touch." That forecast is coming true now, as those planning the healthcare facilities of tomorrow use new research findings and value-driven principles. These ideas have gained great acceptance in the past two decades, and many projects reflect Naisbitt's farsighted advice. So what will tomorrow bring?

Things could be improving. The health industry survived Y2K, and the economy is on track for a record 10+ years of continuous prosperity. Today, the nation's health bill is $1.3 trillion, and rising at an annual inflation rate above the Consumer Price Index. The federal government estimates healthcare expenditures could total $2 trillion by 2008. This high-side forecast might be right. Medical care inflation is picking up speed, as prospering employers are willing to accept managed care price increases, and pharmaceutical costs rocket upwards.

But there is also reason for caution. In the midst of this expansionary outlook, the Balanced Budget Act (BBA) of 1997 casts a pall across the nation's healthcare providers. Capital outlays for health facility construction have been flat at $14-$15 billion for the past several years, and probably will not regain momentum until the BBA is repealed or reaches its legislative sunset in 2002.

Here are the "millennium mega-trends" that will influence healthcare facility design and construction in the decade ahead:

• Aging - The Baby Boom are becoming 50-somethings, and their accumulating sports injuries and early symptoms of chronic illness will begin to make an impact on the nation's health spending, especially ambulatory care and "bedless hospitals."
• Alternative medicine - Two Harvard studies confirm that spending for alternative medical treatments has doubled from $16 to almost $30 billion in the 1990s. More hospitals will put alternative medicine centers into their ambulatory care projects, including features such as labyrinths and meditation gardens.
• Ambulatory care - The rapid growth of ambulatory care is about to hit a brick wall. Beginning July 1, 2000, Medicare's "APCs" (ambulatory patient classifications) will be imposed. Like DRGs (diagnostic related groups), APCs are designed to bundle the reimbursement of many ambulatory services that are billed separately now. The result could be a 5-7% reduction in Medicare ambulatory payments, and some consultants predict the impact could be lost revenues in the 10-15% range. Ambulatory care projects on the drawing boards may be scaled down, or put on hold, until the fiscal impact of APCs can be calculated.
• BBA = Capital shortages - Hospitals and health systems across the U.S. are experiencing a capital crunch, with bond downgradings for some systems to near-junk bond status. Medicare budget cuts totalling $192 billion will be exacted over the five-year term of the legislation, now in its third year. The BBA is having a devastating financial impact on hospitals. An estimated one-third of America's 5,000 hospitals will experience financial losses this year, where investment income is insufficient to overcome operating losses.
• Building boom - A mini-boom in health facility construction is happening in high-growth communities and on the campuses of high-profit hospitals. Although overall capital spending for new health facilities has slowed, some provider organizations have the ability to compete with new facilities.
• Consumerism - Facilities will be a key strategy for attracting and retaining consumers. With managed care in retreat, HMOs are delegating patient-care decisions to doctors. This means that consumers will have a wide choice of hospitals physicians, and treatments.
• Cost-efficiency - Operating costs matter, and will be a key part of any capital-expenditures equation. New facilities must make a business case for savings in energy, labor, and expenses per case. Better work flows, reduced space for non-critical functions, and facilities that promote staff satisfaction are strategies for demonstrating cost-efficiency.
• Centers of excellence - Back to 80's! Many hospitals will competing on their clinical centers of excellence, just as they did in the 1970s and 1980s, before managed care arrived. Hospitals that don't have the capital for total replacement will focus their facilities spending on the niches, either clinical services or key population groups. There will be plenty of competition from entrepreneurs building specialized facilities, such as heart-only hospitals. Most popular centers are heart, cancer, women's, surgical, and children's.
• E-Health - The information era is here. Baby boomers are the fussiest group of consumers the world has ever known -- and now they are on the Internet. Hospital websites will be used to provide all sorts of information about the facility - including what it looks like - to attract patients.
• Emergency departments - The "ED" is becoming the front door of the hospital. Many community hospitals now experience some 30-50% of admissions on an unscheduled basis through the emergency department. Hospitals with a progressive concept of emergency care are offering a wide array of services in the ED, including urgent care/express track service, emergency, trauma, chest-pain center, observation beds, and specialized care, e.g..,pediatric emergency, psychological crisis center.
• Healing environments - Acceptance of "healing environments" is widening, as research provides a growing body of evidence that the design of the built environment can influence patient outcomes and costs. Facilities that adopt healing and patient-centered principles are experiencing higher levels of patient and staff satisfaction.

This is a mixed outlook for healthcare design and construction in the next 2-5 years. Many trends are positive, but the harsh realities of Medicare budget cuts are a negative. Some new construction projects, like Northwestern's new $560 million medical center in Chicago, are extensive investments in healing and patient-centered concepts. Projects of this scope fly in the face of the economic realities, which are pushing many community hospitals and public healthcare facilities against the financial wall.

Hard times won't end until the Balanced Budget Act is amended, or finishes its five-year authorization in 2002. In any market outlook, regardless of the BBA, there will always be some clients that can afford their version of the future, and others who can see the competitive advantage in strategic facility investments. Those who combine innovative ideas for cost efficiency with healing design will make their own future.

Futurist Russell C. Coile, Jr., is senior vice president and national strategy advisor for superior consultant, a national health information and e-commerce firm based in Southfield, Michigan. He is the author of seven books on the future of the health field, including New Century Healthcare (March, 2000). He is also on the board of directors for The Center for Health Design. For information, call 972.403.1945, or e-mail Russell_Coile@superiorconsultant.com.