A glance at the financial news headlines over the past year would give the impression that it's a tenuous time to break ground for new surgical construction. For the planners of some ASCs, however, the time to build is now.

While the iron is hot
Contractors started work on the Gardendale Surgery Associates project in Gardendale, Ala., in September. The facility's planners expect to occupy and open the ASC by Feb. 1, 2010, at the latest. That's nearly 3 years after the state awarded the project a non-contested certificate of need in April 2007. The issuance of a CON usually serves as a starter's pistol to surgical construction projects, but in this case economic circumstances and external complications delayed the ASC's first steps.

The facility had originally been planned as one section of a larger "medical mall" that would also have included professional office space, medical retail and other healthcare-related uses, says Larry Taylor, chief executive officer of Practice Partners in Healthcare, the Birmingham-based management firm that's presently the ASC's majority owner. When the overall developer failed to secure the financial backing and participant interest necessary to complete the project, he says, "we stepped in to buy a majority controlling interest, modified the plan and hired a developer to do the ASC alone.

"We couldn't wait for the surrounding building to reach the starting line," says Mr. Taylor. And despite the rough economy, the CON — which was valid for 1 year, had a 1-year extension and was bound to the proposed site — was a reason to strike while the iron was hot. "At that point, we needed to take control of the project, control our own destiny so the CON wouldn't sunset," he says. "We decided it was a worthwhile risk."

The $6.3 million project will result in a 14,600-square-foot, 2-OR, 1-procedure room, multispecialty ASC with plans to expand into shelled-out space after a year's operation to add 2 more ORs and another procedure room. "We believe physicians should have majority control," says Mr. Taylor, so his firm plans to dilute its ownership interests down to a minority share over time as surgeons join the facility.

While the construction delay may have been tough on planners' nerves, building in a slowed economy has offered some bonuses, Mr. Taylor admits. High-quality labor looking for employment was one draw. "In a busier time, our contractor wouldn't have engaged in building a center this small," he says. "They usually work with larger facilities." It's likely that the cost of that labor and of construction materials will total lower than initially budgeted — "it's a very economical building in terms of the square footage cost," he says, "significantly lower than we'd seen before" — though final figures are not yet available.

Another positive benefit involves the equipment that'll make the surgery center run. "We believe we've had a purchasing edge in terms of equipment, and have cut our capital expenses on fixed and movable assets," he says. "People are looking to make sales."

In terms of physician involvement and investment, it's still a strong market, says Mr. Taylor. Sliding professional reimbursement makes a share of facility fees an attractive source of ancillary revenue. "There's never been a loss of opportunity on the outpatient surgery side," he says. "It's kinetic energy waiting to be unleashed."

As long as, in addition to having control of the project, you have a clear-eyed view of where it's going. "You want as tight a footprint as possible. It's not something you want to grow into," says Mr. Taylor. "And you want a futuristic view of what a facility is going to be when it grows up," from equipment needs to workflow patterns. "You can always accommodate changes in a late stage of construction, but you'll end up spending more money."

Thawing an Alaska freeze
There are 5 ASCs in Anchorage, Alaska's largest city. In Fairbanks, the second largest, there are none yet. Orthopedic Surgeon Mark Wade, MD, of Interior Alaska Orthopedic and Sports Medicine, is founding the first ASC in the city's history, a 9,000-square-foot, 2-OR, multispecialty center. The $19 million project will also include an adjacent medical office building, imaging center and physical therapy facility, with investment and utilization by about 10 other physicians.

For Dr. Wade, the scheduled October 2010 opening of the Surgery Center of Fairbanks will be a victory 5 years in the making. Plans were initiated in 2005 and a CON obtained in 2006, but before ground was broken in August 2009 he faced years of litigation from Fairbanks Memorial Hospital, which holds a monopoly on surgical care in the city.

"There was an argument that we were going to hurt the hospital financially, and as a result the community," says Dr. Wade, who twice approached the hospital foundation about the possibility of a joint-venture ASC. "But never has an ambulatory surgery center been built that's caused a hospital to go out of business."

Ultimately, his project won out. For a surgeon who says 90% of his orthopedic and sports medicine surgeries are outpatient, for local surgeons who clamored for the efficiency and patient advantages offered by ambulatory surgery, and for a community of about 100,000 that needed the type of surgical options available in the rest of the country, building an ASC was "the right thing to do," says Dr. Wade.

The community agreed. About 250 people showed up at the groundbreaking ceremony, including physicians, healthcare employees, patients, the local media, 2 state representatives and the mayor. One advantage of the struggle to establish the surgery center, in fact, was the wealth of community support it built among bankers and builders, says Dr. Wade, which can open many doors even in a time of economic uncertainty.

For instance, he had little problem finding investors or securing loans. "I felt strongly about being able to raise capital, and I was right about that," he says. He declined offers from corporate partners as he generated investment interest among physicians. The scarcity of surgical facilities in Fairbanks (which the state's CON laws would ensure for the foreseeable future) plus the physician participation equaled local bankers sitting up and taking notice.

"One of the places people are still looking to invest money into is medical facilities," notes Dr. Wade. "People are still going to need health care, and doctors tend to be good workers."

Granted, there's been an economic decline between the awarding of the CON and the groundbreaking, but 5 years is long enough to wait to open a surgery center. "The rule of thumb about construction always is, the cheapest time to build is now," he says. "The cost of labor always goes up, the cost of materials always go up. It never gets any cheaper to build in the future."

On the other hand, there are deals to be had in the equipment market. The purchases have to wait until there's a finished structure to secure them in, but "we've been shopping," he says. "That's an advantage, the economy being what it is: Everyone's willing to negotiate."

While the construction of the Surgery Center of Fairbanks is currently on a planned hiatus due to the Alaska winter — "You can't pour cement when it's 40 below," says Dr. Wade — the snow begins to melt and the weather begins to warm up in April. And wherever the economy is then, he says, there will be a need for outpatient surgery.

Business case for building
"Any facility that is considering outpatient surgery renovation or building should evaluate their specific business case," says David Olejniczak, chief operating officer of St. John's Hospital in Springfield, Ill. "What are your operational needs, and when should you initiate the project?" In his view, there are 2 main rationales for new surgical construction, no matter the economic weather: to replace a worn-out facility, or to grow and gain market share.

There's a little of both driving a St. John's project. Demo-lition begins this month to gut the second floor of the hospital's pavilion building, which will make room for a 16,000-square-foot, 5-OR, multispecialty ASC. The $8 million renovation is scheduled for a summer 2010 opening.

On the growth front, "we were finding in our particular community that more than half of our surgeries were outpatient," says Mr. Olejniczak. Patients have become more ambulatory, he says, and the baby boomers and their need for elective outpatient surgery aren't going away anytime soon. For the hospital, building a new outpatient facility would allow it to supply the demand, particularly if demand increased.

On the replacement front, the hospital had found that the demand for outpatient surgery also demanded a self-contained, separate outpatient facility. "Ambulatory patients didn't like to maneuver through the main part of the hospital," he says. "They wanted easy access, to be able to enter and leave." Developing this contemporary model driven by customer expectations also let the hospital update its look. "We're doing a lot to emphasize a calming, soothing effect when patients arrive," he says, including warm colors and the use of wood, stone and water.

The ORs will be bigger — 480 square feet instead of the hospital's standard 400 square feet — in order to better accommodate surgical technology. And input from surgeons across a range of specialties means layouts conducive to more efficient flow. There'll be a waiting room for pediatric patients as well as one for adult patients.

While the St. John's project hasn't scored any labor discounts by putting contractors to work in a slow economy, Mr. Olejniczak reports volume-buying breaks for equipment that wouldn't be available if the hospital were only renovating 1 room.