Owners and delivery teams diagnose growing healthcare facility construction costs

Unimaginable a few years ago, multibillion-dollar price tags for healthcare facility construction projects are more common now than ever.

Just take a look across San Diego County. A new decade-long, 10-building expansion at Sharp Healthcare is the third billion-dollar health facilities construction campaign underway across the sprawling Southern California county, with Scripps Health and UC San Diego Health also undertaking similar project costs in the coming decade.

Accounting for new construction costs

It’s not just outfitting a modern healthcare facility with state-of-the-art technology and equipment that’s driving up costs, although that certainly contributes to the bottom-line total.

Construction expenditures also must account for retrofitting original structures that do not comply with modern natural-disaster safety requirements, as well as stringent standards in new construction.

According to think tank Rand Corporation, the costs of implementing seismic compliance construction projects have increased in recent years at a rate faster than inflation. The results from quantitative and qualitative analyses indicate that, despite decades of investment in seismic compliance projects, earthquake standards upgrades and new construction are estimated to cost hospitals across California from $34 billion to $143 billion by 2030. The lower price is the cost to retrofit buildings, the high end is for new construction, the Rand report states.

Costs also are escalating globally. One UK project soared in cost in 2022 from an estimated £410 million to £1.1 billion (roughly US$1.3 billion), while in Adelaide, South Australia, the Women’s and Children’s Hospital is estimated to cost AU$3.2 billion.

And it isn’t just the buildings. Healthcare facilities also are required to make significant infrastructure improvements so that their systems, including water supply and equipment, can sustain at least 72 hours of operation after a natural disaster.

Diagnosing costs unique to healthcare construction

Multibillion-dollar healthcare expansions and upgrades are not exclusively a California phenomenon in the US. St. Louis Veterans Administration Health is planning a $1 billion renovation at its John Cochran Veterans Hospital in St. Louis, Missouri. And groundbreaking recently was held for Helios, a 135-acre, $5 billion medical campus in North Las Vegas, Nevada. 

It’s no secret that costs are spiking across all construction projects. High interest rates and stubborn cost inflation affecting the price of materials are two prime culprits. And disruptions to the supply chain continue to linger.

However, the price tag for construction in the healthcare segment is particularly acute, given seismic retrofitting and other requirements unique to the sector. But despite escalating costs, construction in healthcare remains robust with spending in the sector near all-time highs, according to a 2022 Federal Reserve Bank of St. Louis healthcare construction report.

Prescriptions to contain healthcare construction challenges

A new ebook available for download details the complex challenges facing owners and delivery teams involved in healthcare facility construction. Facilities not only need to be functional in decades to come, but they also need to be built so they’re prepared for the unexpected. Chief among the four leading challenges described in the ebook are:

• Healthcare facilities will need to provide both in-person and virtual care for patients.
• Advancements in clinical technologies and IT upgrades will continue to shape healthcare best practices.
• Healthcare facilities need to accommodate fluctuating patient volumes and unexpected emergencies.
• Healthcare worker shortages will impact how healthcare facilities are utilized.

When starting new healthcare facility projects, owners will need a trusted solution to help them remain agile and flexible so assets can be built efficiently and flexibly to deliver needed healthcare throughout their long usable lives.

Plan, build, and operate with the Oracle Smart Construction Platform

Oracle Construction and Engineering is an autonomous business unit within Oracle, set up with world-class solutions and expert DNA to solve complex industry-specific problems by helping people improve control, see data in new ways, discover insights, and unlock endless possibilities.

Our solutions including Oracle’s Primavera Unifier Essentials, part of the Oracle Smart Construction Platform, are used to plan, build, and operate healthcare facilities and infrastructure that support communities around the world. The power of Oracle solutions helps to:

• Connect the project stakeholders and systems to consume, analyze, and share information more effectively and securely.
• Synchronize the owners, delivery partners, stakeholders, and investors to maximize capital budgets and support organizational goals.

Construction firms working in the healthcare sector should see steady growth as multibillion-dollar projects continue to proliferate. Oracle’s Smart Construction Platform will help reduce the uncertainties and empower project teams with insights and intelligence for more accurate, proactive, data-informed decision-making.

Download the ebook here.