When you see construction along metro Augusta, Ga.'s busy thoroughfares, don't assume it's for stores, restaurants or hotels. The workers might be building a new physician's practice, outpatient clinic or primary-care center.
The region's three largest health systems — University Health Care System, AU Health and Doctors Hospital — are in expansion mode.
Fueled by population growth, demographic changes and competition for metro Augusta's health care dollar, the sum total of construction and renovation projects the systems have planned, completed or in progress exceeds a quarter-billion dollars.
The noticeable uptick in local health-care spending appears to be bucking the national trend.
"Augusta is somewhat anomalous for having so much happening at one time," said Ken Simonson, the chief economist for the Associated General Contractors of America, a construction industry trade association. "Nationally, health care is one of those (industry sectors) that is performing a little less strongly."
Throughout most of the country, new construction has declined since peaking during the enactment of the Affordable Care Act nearly a decade ago. Simonson's organization forecasts flat growth for 2019.
Locally, it's a different story.
University Health's flagship facility, University Hospital, is wrapping up a $42 million emergency department expansion and investing nearly $20 million into renovations and new equipment at its University Hospital Summerville campus, the former Trinity Hospital of Augusta facility it acquired in 2017 for $16 million. The region's largest health-care provider also is building its 14th urgent-care center on Furys Ferry Road, a build-and-lease investment totaling nearly $5 million.
The state-affiliated AU Health, the market's No. 2 provider, snipped the ribbon on a 6,400-square-foot ambulatory care center on Furys Ferry Road this month, and is awaiting a court ruling next year that could clear the way to develop a $150 million hospital in Grovetown. The 100-bed facility near Interstate 20's Grovetown exit would be Columbia County's first and only hospital if courts reject the legal challenge filed by Doctors Hospital to its state-issued certificate of need.
Doctors Hospital, in the meantime, is hoping to increase its west Augusta and Columbia County market share with a newly opened $23 million emergency department, one piece of a $100 million bond-financed plan that includes a parking garage and an expansion to the Joseph M. Still Burn Center that would convert semi-private rooms to private. Earlier this year, the for-profit provider opened its expanded Advanced Burn & Wound Clinic, a $7.5 million project that created 8,200 square feet of new clinical space.
Aiken Regional Medical Centers, the market's No. 4 provider and the operator of a 273-bed hospital in Aiken, did not respond to requests for comment on current and future expansions.
Changing with the times
Like the rest of America, metro Augusta's population is aging. Although the median age of the market's 600,000 residents is 39, one in every three is 50 or older. Nearly one in four is 65 or older.
"That whole baby boomer group going though the system is going to require more care and more intensive care," said Jim Davis, the president and CEO of University Health Care System, a nonprofit community-based provider.
The increased demand is a mixed bag for hospitals, as most elderly patients are enrolled in Medicare, which generally reimburses at lower rates than commercial insurers. The three health systems' acute-care hospitals also are more likely than independently operated ambulatory care centers, surgical centers and outpatient clinics to care for the market's uninsured patients and those covered by Medicaid.
Declining payments and increased business costs have forced providers to operate hospitals more efficiently and, for the most part, invest heavily in outpatient services to allocate hospital beds only to patients in need of critical or complex care.
"The actual need for beds isn't going up very fast. It's rising at the same rate as population growth, which is not huge," Davis said. "What's going to really grow is outpatient. I don't see the number of beds growing. I see people maybe investing in aging facilities."
University Hospital's board of directors generally allocates $5 million to $10 million each year for floor-by-floor renovations to keep the nearly 50-year-old hospital looking contemporary because all consumers — regardless of age — expect hospitals to look nice and modern. University Hospital's sixth-floor renovation last year cost $7 million and required the hospital to obtain a certificate of need from the Georgia Department of Community Health.
Davis said existing regulations put undue constraints on hospital growth, and he cited the sixth-floor renovation as an example of why he believes reform is needed.
"We were not adding beds, we were not adding services, we were just trying to make the rooms more presentable and more efficient," he said. "But I have to go out and hire a CON consultant and a CON attorney and go through all kinds of stuff to spend money my board approved to spend. It makes no sense at all."
The law also applies to medical equipment such as imaging machines and surgical robots, whose costs can easily exceed $2 million.
Doctors Hospital's 45-year-old hospital off Wheeler Road is undergoing a $3 million exterior renovation and awaiting a green light from the state to proceed on an $80 million burn center expansion. Like University Hospital's renovation, Doctors Hospital's proposed expansion crosses the state's capital-expenditure threshold but does not increase beds.
Doctors Hospital CEO Doug Welch said the expansion to create all private rooms is needed because "nobody in 2018 wants to be in a semi-private room."
"The rooms were built in 1973 and they were absolutely the standard for that time," Welch said. "But for today, with all the equipment in there and then families, it's too small."
Competing for patients
Although the three main health systems offer different specialties and levels of care, they essentially compete for the same patient population. That is reflected in how the systems invest in new and existing facilities, said Scott Clark, the president and CEO of R.W. Allen, an Augusta-based general contractor that supervises health-care construction projects in a three-state area.
"What's taking place in Augusta, in my opinion, is keeping up with the Joneses," said Clark, a past president of the Associated General Contractors of Georgia. "All of them are competing against each other."
The underlying rivalry bubbles to the surface when the providers seek certificates of need to add new services or expand their footprints.
"When that takes place, guess what? Every hospital is going to contest it because they don't want the other having something that they already have or something they are looking to do," Clark said.
The most prominent recent example of friction is Doctors Hospital's challenge to AU Health's proposed Columbia County hospital, a project the state approved in 2014 following a three-way, winner-take-all contest that included University Hospital. All three systems' hospitals are in Richmond County.
Doctors Hospital, owned by Nashville, Tenn.-based HCA Healthcare, is suing the state for issuing a certificate of need based on a rarely used mechanism that enables a provider — and only one provider — to build a hospital in a county already deemed adequately served if the county itself pays at least 20 percent of the cost. Welch said he is philosophically opposed to the monopolistic aspect of the state regulation.
"I don't think we have a problem necessarily with Augusta University building a hospital in Columbia County, but it shouldn't be the only hospital to build out there," he said. "We believe in free enterprise. Anyone should be able to build out there, not just one. So if the CON went away, our lawsuit would go away."
Following the growth
Columbia County, with more than 150,000 residents, is the state's largest county without a hospital.
As AU Health's hospital proposal hangs in legal limbo, it has spent the past two years expanding its reach beyond its downtown academic medical campus. The result has been the acquisition of the Family Medicine Associates practice in the Summerville neighborhood and a partnership with urgent-care provider Perfect Health to house AU Health primary care physicians at the company clinics in Evans and south Augusta.
AU Health upped the ante this month by developing its own ambulatory care center on Furys Ferry Road — its first independent foray into the rapidly growing and affluent Columbia County market. Located in a medical office park, the facility is less than two blocks from the 11,000-square-foot University Hospital Prompt & Primary Care clinic under construction near the Furys Ferry-Inverness Way intersection.
Lee Ann Liska, the CEO of AU Health's flagship hospital, the 478-bed AU Medical Center, acknowledged the health system has been slow to expand outside its downtown campus, which includes the 154-bed Children's Hospital of Georgia.
"We've been a little behind the competitors, or our partners, in care in Augusta," she said. "We knew we needed to get out into the community where our patients live, work and play, and we were really asking for that because the other health care systems in the Augusta region ... have already done that. So if it seems there are a lot of capital projects, that's probably true, but they are very focused."
Liska said the Furys Ferry care center, which offers adult primary care and cardiac services, already has exceeded expectations.
"We have surpassed our initial target," she said. "So it really says something for the demand for health care right here."
She said AU Health plans to open similar facilities, including a pediatrics clinic in Grovetown, in January. This year the system closed on an $85 million bond issue that will service existing debt and fund future expansion.
As for the proposed Columbia County hospital — the largest health care project on the books for metro Augusta — Liska said she is confident it will break ground in 2019.
"One of the fastest growing counties in the nation demands a hospital of its own," she said.
