Is Modular Construction the Answer to the Perceived Hospital Bed Shortage?

The modular industry should not rush into the healthcare market in a classic display of the law of the instrument, known as Maslow’s hammer and contemporarily described as, “if your only tool is a hammer, everything looks like a nail .The cognitive bias here is the over reliance on the theme of building repeatable products faster. While that is a reliable assumption of modular construction capability, the predicate is a lack of needed bed space as a result of inadequate construction capacity. This is a deeply flawed assumption.

The pandemic has placed a spotlight on global healthcare capabilities when faced with a crisis. Two distinct weaknesses have been exposed as we discovered places where capacity was already at a breaking point, meaning any increase would make it fail, while for other places, capacity was not an issue but logistics and the specialized care required to respond to a virus was not in place. 

A chronic daily lack of space in the absence of a crisis is normally the result of limited capital. In countries where government controlled socialized medicine is the solution to healthcare, funding is the primary constraint. When funding is a constraint, it becomes a political issue. Where does the money materialize for the newest and latest equipment along with the facilities and clinicians? In these healthcare rationing environments, the ability to make space faster will not solve the lack of funding responsible for the lack of space in the first place, let alone solve the lack of medical supplies and skilled doctors and clinicians required to make use of any such additional space.

Lack of surge space in a pandemic is a combination of poor planning and programming and the improper allocation of resources. A viable solution starts with a reasonable inventory of medical supplies, equipment, adequate staffing of doctors and clinicians and finally, with a place to deliver those necessary services. The physical facility space is normally the least of these challenges and has reasonable alternatives when pressed as was demonstrated by the recent addition of thousands of hospital beds to the New York City inventory in just a matter of days.

Do we need more space?

The average hospital occupancy in the US has been around 65% for many decades. This is why we have seen continued hospital closings over the last twenty years. This low occupancy reflects the manner in which healthcare is delivered, the changes in medical technology and a variety of demographic shifts. However, these average occupancy rates while low, are impacted by regional challenges and specific specialty challenges. Urban hospitals see stress on emergency departments while rural hospitals are in danger of disappearing due to revenue losses. A rural American is expected to drive an hour and forty minutes to receive cancer treatment and urban Americans have the ability to seek alternatives if their trip is more than 20 minutes.

Even in Europe, the WHO reports country occupancy averages of around 85% with Ireland an outlier at about 93%. 

Is more bed space a construction challenge or a policy and political challenge?

A Wall Street Journal article from April 29th titled, Government’s Ambulance Chasers, states that one of the biggest impediments to expansion of services and facilities in the healthcare industry are “certificates of need” or CONs. In 36 states, health-care providers must obtain a CON before constructing a facility (1). For the states that don’t have CON laws, they have different regulations such as OSHPD, ACHA and Labor & Industry, that regulate the design and programming process. In all states, going through the regulatory process to obtain a CON or other approvals for a facility is a long and complicated process making it nearly impossible to respond expediently. Some in the healthcare industry see the CON as protection, like public schools from charter schools and taxis from Uber. 

Even when the regulations are aligned, the challenge is funding. According to the Wall Street Journal article titled, New York’s Ailing Hospitals, NY State only reimburses physicians 56% of Medicaid rates (2). Forget new beds, they can’t even afford their existing beds. 

Is modular construction the answer to the perceived bed shortage?

The combination of the regulatory state challenges and poor resource allocation is the compelling issue. Regional variances in healthcare regulations makes a one size fits all solution even more difficult.

A May 4th, 2020 Financial Times article illustrates how even superior bed capacity, the best in the world, cannot perform when certain fundamentals are lacking. Japan has the highest number of beds per capita in the world, but lacks the critical care space and logistics to handle a pandemic. The article states: “The coronavirus outbreak has exposed longstanding problems caused by bureaucratic inflexibility and a plethora of small hospitals.” Empty hospitals have had to turn away COVID-19 patients. One of the leading doctors in Japan’s fight against coronavirus, Shigeru Omi, stated: “We have a lot of beds but a limited number equipped for critical care.” (3)

A 2012 review in the journal Current Opinion in Critical Care, found that the U.S. has 20 to 31.7 ICU beds per 100,000 people compared to 13.5 in Canada, 7.9 in Japan and between 3.5 and 7.4 in the U.K. (Differences in how countries define “ICU” account for some of the disparity, the article notes.) The U.S. needs more ICU beds because it has a higher incidence of chronic conditions like heart disease. But, importantly, the article finds that health spending is correlated “with increasing delivery of critical care.”

Curative bed space, the typical hospital room, falls short when faced with the need for Critical Care space and the related medical equipment and clinical staff required to make it effective. Europe averages 20% higher occupancy rates than the US. More significantly, they only have about 30% of the critical care capacity of the US. Japan has four times the bed space of the US, but less than one third of the critical care space. The US Labor department reports that hospitals have cut 135,000 jobs just in April following occupancy rate drops below 50% as a result of the pandemic. Hospitals are being overwhelmed, but not in the way expected. In short, the number of available hospital beds is not a limiting factor in most American cities.

Does an inventory of modular resources help?

FEMA has attempted to inventory emergency housing in the past with tragic consequences. In 2008, mold was discovered in federally provided mobile homes that were providing shelter to flood victims in Indiana and Iowa (4). Many of the trailers provided to victims of hurricane Katrina were found to have elevated levels of formaldehyde (5). The theory of having surge space seems reasonable, but what about storage and maintenance during storage? The stockpiling of buildings isn’t the only thing that is difficult. The same goes for equipment. A 2006 pandemic plan warned that New York City could be short as many as 9,500 ventilators. The city only acquired a few hundred, which were ultimately scrapped because it couldn’t afford to maintain them (6). How would critical care bed space and specialized medical equipment fare under the same approach?

More than a solution for bed capacity.

There are many opportunities for modular construction to participate in the healthcare market. Those engaged must first learn to understand the true nature of the challenge and then formulate solutions. Established firms that design and construct large facilities may seek to use modular construction as part of their strategy for providing higher volume repetitive spaces. Such expansion won’t be done under emergency conditions, and modular will soon be seen as a commodity component, much like the hotel industry’s view of modular space, without the politics and policies to inhibit them.

With the speed of medical innovation and ever-changing technology, modular construction can offer the flexibility and speed to market that conventional construction cannot. It can also, avoid capital funding and debt impairment with rentals and leases as chattel rather than as real property. It can respond quickly to changing demographics and regional needs. The space can be relocated to remain relevant. Innovation will continue to drive this market, and changes such as UV disinfecting and supplemental variable air pressures will make future spaces more adaptable and flexible. Sara Marberry has an excellent lecture on this topic. Click Here.

New therapeutics and the need for better geographic diversity will offer increased opportunities. There is a predictable shift in diagnostic and convalescence care going retail and telemedicine will become a mainstay. The modular industry must be better than their past myopic approach and an over-reliance on a familiar tune.

RAD, as a specialty healthcare developer, coalesces the entire process from programming and planning to permitting, construction and funding. The future clients and customers for our services know the industry's challenges and it is incumbent on those seeking to enter these markets to have the knowledge and competence to earn their confidence. 

References

1 - https://www.wsj.com/articles/governments-ambulance-chasers-11588198430

2 - https://www.wsj.com/articles/new-yorks-ailing-hospitals-11585179029

3 - https://www.ft.com/content/b0245aa6-871d-4acf-bce0-80a5aac163d6

4 - https://www.foxnews.com/printer_friendly_wires/2008Jul22/0,4675,FloodingMobileHomes,00.html

5 - https://grist.org/politics/people-are-still-living-in-femas-toxic-katrina-trailers-and-they-likely-have-no-idea/

6 - https://www.propublica.org/article/how-new-york-city-emergency-ventilator-stockpile-ended-up-on-the-auction-block