Editorial: Hospitals can help stimulate economy if California moves fast

October 22nd, 2008

Silicon Valley/San Jose Business Journal,

Hospital construction is one of the few bright spots for builders today.

Several Silicon Valley hospitals — El Camino, Regional Medical Center of San Jose, Stanford and Good Samaritan — all have projects under way or planned.

A shortage of beds, state-mandated seismic retrofits and building replacements accounted for more than 5,000 health care construction projects either in plan review by the California Office of Statewide Health Planning Development, awaiting construction or just recently completed. OSHPD estimates that there is more than $20 billion in projects currently being reviewed or built in the state.

At a time when state and federal leaders are touting infrastructure spending as a way to restart the economy, hospital spending could clearly play a significant role.

But at a time when the construction industry is suffering significant job losses, the state makes it almost impossible to get a project built in less than four to five years. In other parts of the country, industry leaders say that they can design and build health care facilities in as little as 18 months.

State law requires OSHPD to act as the building department on hospital construction, with its team of architects approving or rejecting every project. Industry leaders suggest that takes too long. They say that state-licensed architects and local building regulators could effectively and responsibly do the work. This is how it’s done already in a number of states, and it speeds up the review process.

While we agree that there needs to be oversight, and we accept that California’s building requirements are more extensive due to earthquake standards, we don’t believe it should take as long as it does now to get a project approved.

In an economy like this one we believe that the process of approving hospital construction projects needs to be fast-tracked. Doing so would allow builders to employ construction workers in good-paying jobs. It would help keep the costs of the project down because the price of construction materials has dropped significantly. It would help hospitals that are found to be structurally unsound meet their 2013 seismic retrofit deadline.

Finding a way to get more projects completed would employ hundreds of workers in the communities that the hospitals serve. Finally, it would help alleviate the shortage of beds in the state.

This is another example of where government, by being more efficient, can encourage private investment and job creation. Hospitals and builders aren’t asking for a handout; they are asking for better and more efficient decision making.


Study: Hospital Plans Will Generate $18M

By Diana Samuels — Palo Alto Daily News,

The city of Palo Alto would receive $18 million in construction fees and tax revenue if Stanford University Medical Center’s proposed hospital expansion is built, according to a fiscal impact study released Wednesday.

Hospital officials say that money would help the city weather the difficult economic times, but Palo Alto wouldn’t see one dollar of the sum until after construction begins in 2011, at the earliest. In addition to the one-time construction revenue, the city also would receive an extra $4,000 each year from utilities, sales and other taxes, the study says.

The medical center commissioned CBRE Consulting to conduct a study to accompany an environmental impact report it hopes to release in mid-April, said Michael Peterson, vice president for special projects. The Palo Alto City Council and hospital representatives will discuss the $3.5 billion expansion project, including architectural plans and community impacts, at an 8:30 a.m. study session Saturday at City Hall.

According to the study, building the hospital expansion would generate $10 million in various city construction fees and another $8.2 million in tax revenue. Construction materials probably wouldn’t be purchased in Palo Alto, Peterson said, but certain permits allow sales tax from construction projects to go to the city where the construction site is located.

The Palo Alto Unified School District also would receive about $616,000 from construction fees, the study finds.

Each year, the hospital could generate roughly $639,000 in utility, sales and other taxes, according to the study, but the expansion would also cost the city about $635,000 in expenses, including extra police and fire services. Overall, the city’s general fund would receive an additional $4,000 annually as a result of the expansion, the study says.

Mayor Peter Drekmeier said the $18 million “sounds to me like a lot more than we would normally expect” from a large construction project. The financial impact would be beneficial, he said, but the city will have to weigh it against negative impacts like traffic.

“We’re definitely going to have to factor in all of these issues, the benefits and the costs to the community,” Drekmeier said.

The project is expected to add an estimated 2,200 jobs, and council members and hospital representatives have debated for months who should be responsible for creating housing for the new employees and those generated by the proposed Stanford Shopping Center expansion. Council Member Yoriko Kishimoto questioned how housing costs were factored into the fiscal impact study.

“It’s a tough choice for Palo Alto because even though we welcome the hospital,” Kishimoto said, “we also have to face the fact that we have the worst housing and staff balance.”

Another consulting firm will peer review the medical center’s study on behalf of the city.

Peterson said the expansion is needed so the hospital can meet state seismic regulations and increase capacity. They are forced to turn cases away because they don’t have room.

“These aren’t just ‘nice-to’s,'” Peterson said. “These are really ‘have-to’s’ for the community.'”