Depending on their orientation, attendees of this week’s BEX Leading Market Series panel on Healthcare could have heard pragmatic optimism or optimistic pragmatism.
Speaking to a standing-room-only crowd at SkySong, the panel was made up of:
- Mark Barkenbush, VP at Banner Health,
- Steve Eiss, VP of Construction and Real Estate for Northern Arizona Healthcare,
- Russ Korcuska, Senior VP of Construction & Special Projects for Phoenix Children’s Hospital, and
- Edward Willard, Director of Business Development and Strategic Planning at Dignity Health.
The group was moderated by Kitchell VP of Preconstruction Julie Garcia.
The Current Projects
Garcia wasted little time getting the discussion on track and asked the panelists in turn what projects they are working on. Banner’s Barkenbush updated the group on the company’s plans to develop in north Scottsdale. After being outbid in a land auction last November for a site it had planned to acquire at Hayden Road and Loop 101, Banner now intends to exercise its option on another north Scottsdale parcel “probably within the next week.”
Barkenbush said Banner is putting the necessary entitlement work in place, adding that all the land the company looked at in north Scottsdale required rezoning. “It’s complex,” he said, “The State Land Department’s involved. The City of Scottsdale is involved. It’s a little bit sticky and complicated and somewhat unprecedented given the zoning overlay that’s on that land.”
Moving on, he said Banner had to pause its planned Verrado Hospital in Buckeye but is continuing with design and entitlement work for when it is ready to resume. The company had also previously put its tower expansion project at Banner Thunderbird on hold. He added Banner is looking at its priorities and considering a number of options for the Thunderbird campus.
Both projects were paused due to capital pressures, which would be a continuing theme throughout the event.
Barkenbush added that despite capital pressures, Banner has undertaken what he called “a tremendous amount” of renewal and modernization work at its existing facilities, including both physical upgrades and, more prominently, technology and services upgrades.
After Barkenbush, next up was Eiss from NAH. He said that, not surprisingly, the bulk of NAH’s efforts are concentrated on its Health and Wellness Village master plan. The 188-acre project looks to combine healthcare, residential and economic programs into a central operation campus. Eiss added the project will have a planning and zoning hearing for entitlement approvals on March 22.
As part of that master project, NAH is self-developing the 50-acre, $865M hospital project at the core of the site, which includes a 185KSF ambulatory care center. The remaining 130 acres will be built in association with other developers and include a research and development park, two hotels, residential units, retail and restaurants.
The entire project is expected to take 20 years, Eiss said, noting that the hospital, itself, will break ground this June and open in late 2027.
In addition to that master plan, NAH is about to start on a master plan for the Verde Valley region. NAH intends to issue an RFP in the near future.
In 2025-2026, much of the focus will turn to redevelopment of the existing Flagstaff Medical Center campus, which he said will likely not be a healthcare project but will involve the repurposing of the 50-acre site and 660KSF physical space.
Bringing the question to Willard from Dignity Health, he said the primary focus is reimagining the hospital’s existing facilities to optimize its service lines. He added that with the physical infrastructure constraints inherent in its St. Joseph’s and Westgate facilities, there is not much that can be done on the construction side.
Externally, the company is examining how to expand and add services for the rapidly growing West Valley. “Our focus is where are we going to expand next, what are we going to put in there, and what’s the combination of acute versus ambulatory (care) that we want to put in those areas.”
Last up was Korcuska from PCH who discussed recent shell buildouts on the tenth and eleventh floors at the main campus as key portions of the company’s current construction. He added that the Arrowhead campus in the West Valley is under construction and that the main campus will open later this year, with the hospital opening in early 2024.
Regarding future plans, Korcuska said PCH is looking at land in both Surprise and Buckeye as eventual expansion options, but that those projects are probably three-to-five years down the road. Also in the very early planning stages is land PCH currently owns in Chandler that will probably house clinic space in the next several years.
Other investments also include modernizing and refurbishing existing spaces, particularly the main campus.
Changing the Trajectory
Garcia next asked the panel if they see the trend of rising costs continuing and if there is anything that can be done to change the trajectory.
Eiss responded that healthcare margins were slim even before the pandemic and its unprecedented impacts, which added to the costs of labor, energy, supplies and capital costs. He added, “Now the numbers are upside down. That’s just a fact… There’s not a ton we can do about it on the money end.”
He went on to say, “There is no short-term answer here. When I think about the question of what can we do about it, I don’t have a great answer for this. What I can tell you is, if you’re in the business of healthcare construction or design in whatever form or fashion, I would seriously be sitting around thinking about what you can do because we are currently in an unsustainable capital market. I think everyone is going to have to get a lot more creative.”
To that end, he discussed considering moving to modular construction where possible. He said individual buildings are not particularly special from an operational standpoint and that much of that work can be templated. Finally, Eiss said the entire industry needs to consider ways to cut waste across contracts and to trim fat in the process wherever those reductions can be made.
Korcuska suggested the industry should consider a master builder or master developer concept in which everything is done under one roof. “It would be interesting to see what the design and construction community could bring to the table on something like that.” He said the idea of a true partnership working together to get projects done would be an interesting approach.
What Can Owners Do to Help
Garcia then shifted the question to asking how projects can be kept from getting over budget and behind schedule.
Korcuska said a key component must be making sure the strategy in a project remains consistent and is not allowed to shift during the process, adding that 95% of the time it is the client that is the cause of delays. “We need to keep our focus.”
Eiss said times have changed and the industry needs to adapt. He advocated building a transparent culture so teams can interact and build solutions together.
To that end, he added that builders have to be more honest and forthcoming with clients earlier in the process than either builders or clients are used to. The earlier a designer or builder brings worries or problems to the client’s attention, the earlier and easier they can be addressed.
After some additional back and forth and touching on some issues with particular types of care and service lines, Garcia brought the session to an end by saying, “These problems only get better if we lean into them, all of us. We need to be solving these problems together. Let’s be really honest and transparent with the news we have to bring, good or bad… Let’s be really creative about the problems we’re trying to solve and the way we’re trying to solve them.”