Health care a booming industry for CNY constructors

Recent changes in the regulatory climate for health-care facilities have opened a window of opportunity for Central New York constructors.

William C. Gaetano, vice president of Charles A. Gaetano Construction Corp. in Utica, gives it a "good-news/ bad-news" perspective: "It's agreed that the Northeast is the worst off economically, and New York State is the worst in the Northeast. And there's a little triangle in Central New York --Utica, Binghamton, and Syracuse --that is the worst part of the state. Albany has its government, Rochester has Xerox and Kodak, and Buffalo has international government and the Canadian trade."

That's the bad news. And it's compounded by the fact that hospitals aren't getting the reimbursements from the state they were used to. But that's also good news for the Central New York construction industry. As Gaetano goes on to explain, "The shake-up in the health-care industry has caused hospitals to look at alliances with HMOs, and establish suburban ambulatory-care centers. An outreach acute-care center is cheaper than the emergency room."

So hospitals are considering suburban centers as:

1. A marketing tool. "They go to the suburbs where the people are."

2. A proactive move to accommodate the changing regulatory and reimbursement climate.

Hospitals are also banding together, says Gaetano. In the Utica area, the Mohawk Valley network -- with St. Luke's as the lead institution and including St. Elizabeth, Faxton, and Little Falls hospitals -- is a consortium that shares buying and accounting services. Gaetano sums it up as "a sign of the times." He adds, "Since the state doesn't want duplication of services, hospitals are specializing. St. Luke's has maternity services. So we're building a new maternity addition to that hospital. St. Elizabeth takes the cardiac surgery cases. And Faxton provides outpatient rehabilitation services."

To the south, William H. Lane, CEO of William H. Lane, Inc., Binghamton-area general contractor, says his company "has many opportunities...in hospitals, nursing homes, and medical-office buildings. The local hospitals -- United Health Services and Lourdes -- are responsible for much of the building of medical centers in rural areas. These acute-care centers are staffed with hospital personnel." This helps alleviate the effects of the downsizing being forced on hospitals by decreasing Medicare and Medicaid reimbursements.

Lane points out that services in these suburban medical centers are provided to patients at a lower cost, and are much more accessible to them. He has observed "a high amount of activity in health-related building in the Southern Tier."

The remote medical facilities Lane's firm is building are usually leased to the hospitals. "That way, there is no initial capital investment by the hospitals," he explains. "The cost to them is the value of the lease, which is a direct tax write-off." He notes that a Pennsylvania hospital, Robert Packer, is also establishing ambulatory-care facilities in Vestal, Owego, and other areas in the Southern Tier.

In the Syracuse area, Robert J. Diamond, president of Diamond & Thiel Construction Co., Inc., which is involved in health-care construction. has noticed that health services "are not so consolidated. The hospitals are bringing services to the patient."

Gaetano points out that health care's move to the suburbs follows a pattern: "First it was the schools. Then it was the shopping centers. Now it's medical centers. As people move out of town, the services follow." He adds, "Everybody's in a hurry today. They want services quicker."

Jeff Davie, a project manager at Zausmer-Frisch Design/Build, says that 50 percent of that company 's construction is in health care today. He, also, has noted that it is "a duplication of the mall development. People move into an area and want the conveniences there, too."

Davie sees doctors "changing the structure of their businesses -- expanding the value of their businesses. There are not as many dollars in medical care today, what with litigation, insurance, and HMOs. Also, there are more old people -- the parents of the baby boomers. And new medical problems to care for, such as new treatments for cancer, and AIDS." Other influences he sees changing the basic structure of medical care are an increasing demand for better service on the part of patients, insurance dictating fewer days in hospital, and a trend toward ambulatory care.

"The construction industry is customer-driven," Davie points out, "and our health-care customers are looking at suburban medical centers." Zausmer-Frisch has recently completed a medical center in Cortlandville, outside of Cortland, and another in Camillus, for St. Joseph's Hospital Health Center.

Nursing homes are growing sources of projects for CNY construction, and they, too, are evolving. Gaetano explains, "Proprietary [for-profit] nursing homes used to be set up in older, large homes. Today they're realizing that that set-up isn't ideal for senior citizens. In Utica we're renovating an old Acme supermarket to be used as an adult residence. Adirondack Manor, which has senior residences all over the state, had a home in two older houses in Utica. But they're setting up this new facility that is all on one floor. Residents will have a room with a small kitchen, and there will be a common dining room, and they get ho meals a day included in their rent." The facility will be known as Willow Park.

Hospital specialization...a health-care move to the suburbs...a growing elderly population...all spell O-P-P-O-R-T-U-N-I-T-Y for CNY constructors. But Robert Diamond sounds a warning note: "This is going to reach a saturation point fast." Rather like the schools...and the shopping centers.

Copyright Central New York Business Journal Dec 09, 1996
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