(RANKINGS: Check out rankings of the firms that participated in the survey, based on gross healthcare billings, completed projects, RFPs received, and contracts signed. For architecture/engineering firms, click here. For construction firms, click here.)

When industry members were asked what the biggest threats and opportunities are for those working in the field of healthcare design and construction, one answer came up time and time again—for both questions. Healthcare reform, guided by the Affordable Care Act (ACA), is setting the tone for much of what’s challenging and promising for firms in this space.

And while healthcare reform means a lot of different things to a lot of different people, when it comes to providers’ bottom lines, the word of the hour is “reimbursements.” With the shift from a volume-based business to one driven by value, healthcare organizations across the country are shying away from committing to large capital projects until the fog surrounding potential revenue losses begins to lift.

For architecture, engineering, and construction firms, this largely translates to a period of “wait and see.” But not entirely.

That’s where opportunity has also surfaced. As part of a value-driven world of care delivery, providers are now looking to expand access to preventive care through smaller ambulatory sites. They’re re-evaluating existing spaces to support team-based approaches like medical home models of care. And they’re thinking today about what healthcare might hold tomorrow, looking for master plans that focus tightly on flexibility and sustainability.

So while the larger inpatient projects of old are becoming few and far between, projects with smaller price tags and square footages aren’t going anywhere. And the effect of this transition on the healthcare A/E/C industry becomes obvious when reviewing business from 2013. The 106 companies that weighed in on the state of business in this year's Healthcare Design Corporate Rankings Survey help paint a picture of an industry that, like healthcare in general, is taking new shape.

(To view charts and graphs illustrating data collected from the 2013 survey, please click on the image gallery above.) 

On the way
Although the size and value of individual projects have diminished over the last few years, business isn’t necessarily slowing down. Last year saw a total of 13,807 requests for proposals (RFPs) received by firms responding to the survey, averaging 134 per firm over 2012’s 130 per firm and 2011’s 119. When asked how those numbers compared to the previous year, survey participants confirmed the data—43 percent reported having more requests, with 28 percent seeing about the same and 26 percent having fewer.

Additionally, 9,338 new contracts were signed in 2013, averaging 92 per firm, a drop from 2012’s 115 per firm and 2011’s 99. However, when asked how contracts signed in 2013 stacked up against 2012, 38 percent of respondents reported that they experienced more activity last year, while 34 percent said new business stayed pretty level and 24 percent saw a drop.

The total dollar value of all new contracts signed in 2013 saw some positive shifts, too, with firms predominantly showing growth. For example, fewer firms reported total contracts valuing less than $1 million compared to 2012, with upticks noted in values in the $5 million to $10 million, $10 million to $50 million, $50 million to $100 million, and $500 million to $1 billion ranges. Slight dips were seen in total values in the $100 million to $500 million and more than $1 billion categories, but each dropped only 5 percent compared to 2012, with the majority of all new contracts signed totaling more than $100 million.

And clearing the way for work to come was a total of 8,561 healthcare projects reported to be completed last year, an average of 106 per responding firm compared to 87 in 2012 and 61 in 2011.

Sizing down
Despite the reported uptick in activity, 2013 gross billings—coming in at $8.4 billion—serve as a reminder that revenue has taken a dip over time. Last year’s billings averaged $79.2 million per responding firm, compared to $98 million per firm in 2012 ($9.2 billion total) and $100 million per firm in 2011 ($10.5 billion total). Of the gross billings reported for 2013, 40 percent represented completed projects, a slight jump from 36 percent in 2012 and 39 percent in 2011.

Likely contributing to the billings slip is the ongoing slew of smaller-scale projects. Few significant changes were seen year-over-year in regard to the value of projects underway, with the majority—35 percent—of ongoing work valued at less than $500,000, similar to 2012 when 41 percent of that year’s current projects were at the same mark. The next largest segment was $1 million to $5 million with 20 percent of projects underway in that range, followed by 13 percent at $500,000 to $1 million. Big-ticket projects were much rarer, with just 5 percent of projects valued at more than $50 million.

The size of projects underway had a similar story to tell in 2013, closely mirroring 2012 data and hovering at the smaller end of the spectrum. The majority of current projects—38 percent—were less than 5,000 square feet, an increase over 34 percent in 2012. Other categories showed little movement, too, with the second most common size at 5,000 to 20,000 square feet (27 percent), followed by 20,000 to 50,000 square feet (18 percent)—mimicking a similar trend in 2012. Projects at 50,000 square feet and up weren’t nearly as popular, comparatively, with most dropping to single digits percentage-wise; those more than 500,000 square feet totaled just more than 1 percent compared to about 3 percent of projects underway in 2012.

Digging in
While the margin between new construction and renovation projects has slimmed considerably over the years, a tipping point was finally reached in 2013 as renovations had a slight gain on new construction, taking 51 percent of business. The previous year instead saw new construction comprise 53 percent of work, a dip from 57 percent in 2011.

From a wider vantage, projects are still largely focused on hospital work, which accounted for 53 percent of 2013 activity, with the next closest sector being ambulatory care at 17 percent, followed by medical office buildings at 11 percent, clinics at 7 percent, and long-term care facilities and infrastructure projects tying at 6 percent—all trends noted in 2012, too.

Across facility types within those sectors, acute care hospitals still reign supreme with 95 percent of respondents reporting projects in those spaces last year, followed by a three-way tie of specialty hospitals, medical centers, and ambulatory care centers at 82 percent and laboratories at 79 percent. MOBs, ambulatory surgery centers, and clinics all took a spot in the 70th percentile, continuing to illustrate the shift toward community-based care. Another movement noted in the results is work being done in the senior/long-term care space, with 50 percent of respondents reporting projects in assisted-living, 45 percent in skilled nursing, 29 percent in both independent living and memory care, and 24 percent in hospice.

Among specialty facilities, children’s hospitals rose to the top again, with 62 percent of responding firms reporting work there in 2013, followed very closely by cancer centers at 58
percent and general surgery hospitals and women’s/infants hospitals both at 55 percent. Across the board, though, fewer respondents reported specialty projects compared to 2012, with the exception of orthopedic hospitals, which saw a slight gain of 1 percent.

When it comes to design elements incorporated within the patient room, A/E/C firms have clearly been busy. More than 80 percent of respondents checked “yes” when asked about the inclusion of family zones, abundant daylighting, and in-room sinks, with plenty of other design features—from hospitality finishes to patient lifts to privacy curtains—landing in the 70th percentile. The least popular design component was mirrored headwalls, with 43 percent of responding firms using them in projects last year—but even that was a bump up from 39 percent in 2012.


Line of sight
When looking ahead, healthcare A/E/C firms largely agree that response to the ACA and its ongoing industry effects—both for the positive and negative—will be the name of the game.

“One of the biggest threats to our firm’s healthcare practice is the change in where and how healthcare will be delivered as a result of new healthcare reform law. Our healthcare clients’ capital budgets will no longer be focused on constructing large inpatient facilities and additions, but rather will be spent on developing a much more distributed  network of smaller outpatient care sites that, in many cases, will be developed in collaboration with developers and real estate partners. … We will need to adapt our focus to meet the needs of a different type and size of project, often being led by a different client type or individuals,” responds one participating firm.

Echoing that sentiment, another respondent remarked that as providers work through the next decade to assemble the right facility mix, it will be critical to find a balance that’s sustainable. “As many healthcare systems move away from a hospital-centric delivery model of care, a disproportional amount of space devoted to acute care will weigh on the efficiency gains in outpatient and other post-acute care facilities.”

To make best use of the inpatient spaces that are maintained—where presumably only the very sickest of patients will be cared for—existing hospitals will likely need to be retooled, notes another firm: “Hospitals may need to add telemetry units, more ICU beds, or upgrade the facility infrastructure to encompass information technologies necessary for clinicians to care for these patients efficiently.”

And efficiency overall will remain key in coming years, too, a trend that survey participants say will open up plenty of opportunities for A/E/C firms to bring more value to the table—from evidence-based design and Lean approaches to master planning and energy modeling—to help drive down cost and create more sustainable environments of care. Another respondent adds that flexibility in space design will be essential, such as creating rooms with multiple functions to end the historic need for demolition/renovation of existing spaces, with innovations like BIM, prefabrication, and integrated project delivery streamlining the design and construction process.

Communicating what all of these innovations mean to clients will become critical, too, as firms are likely to see a number of new competitors heading for the healthcare marketplace. “Specialized acute care facility design opportunities will decrease while an increase in outpatient clinic design will allow many design firms that would not typically pursue healthcare to break into what was once a niche market,” predicts one firm. 

As providers work to find the best fit to address new challenges on the horizon, albeit with limited dollars in hand, A/E/C partners can and should have a seat at the table, too, says one participant: “The biggest opportunity is to help our clients find ways to spend their capital more effectively. If they can plan the right project in the first place, while being judicious in the execution of the project, there is potential to do more with less. We should be the leaders in this movement.”

Jennifer Kovacs Silvis is managing editor of Healthcare Design. She can be reached at jsilvis@vendomegrp.com.

To see full rankings of the firms that participated in the 2014 Corporate Rankings Survey, see healthcare architecture/engineering firms here and construction firms here

All figures used in the Healthcare Design Corporate Rankings Survey section were self-reported by 106 industry firms that submitted responses via Healthcare Design’s online survey form. They have not been verified by the publisher, nor does the publisher guarantee accuracy. 

To read coverage of the 2013 Healthcare Design Corporate Rankings Survey, see "2013 HCD Corporate Rankings: Industry Continues To Ride The Tide."