Market Focus: Miami (March 2006)

Things have settled down a bit in Miami



By John Mugford


Two years ago, the Miami-Dade County healthcare development scene was so robust that observers likened it to the “Wild West.”

Even though some industry insiders reported that the area had an oversupply of beds, hospital projects were being proposed throughout the growing region, which has a well-documented aging population. Estimates put the population of Miami-Dade County at about 2.42 million as of April 2005. That’s an increase of 7.5 percent from 2000. The Miami-Fort Lauderdale Consolidated Metropolitan Services Area (CSMA) population was 3.9 million in 2000 – ranking it as the 12th largest CSMA in the country.

The development scene has settled down a bit since March of 2004, most notably when it comes to major hospital projects in the pipeline, according to sources in South Florida.

“It looks like most of the hospital systems have either completed, started, or started to plan their major rounds of projects,” says Kenneth Weston, a medical office developer and consultant with his own firm, Miami-based Kenneth Weston & Associates.

But that doesn’t mean the cranes are completely quiet in Miami-Dade.

Demand continues

“There are always going to be projects going on here because of the demographics,” says Jose Estevez, a principal with Miami-based MGE Architects. About 80 percent of MGA’s work is in healthcare, with recent projects including a 51,000 square foot emergency department expansion at Mercy Hospital in Miami, and the future 80-bed, West Kendall Baptist Hospital in the western part of the metro area.

The health system with the biggest plans is undoubtedly Baptist Health South Florida, which is in the midst of new construction and remodeling projects that total nearly $1 billion, according to Thomas Tulloch, corporate vice president in charge of construction for Baptist. Included are a replacement hospital under construction in the booming area of Homestead, a new 80-bed hospital with new beds in the West Kendall area, a new emergency department and new bed tower at the main Baptist Hospital campus in Miami, and numerous other projects taking place in the six-hospital system.

“Obviously, all of the projects are in response to growth,” says Mr. Tulloch. “For example, the growth in Homestead is simply tremendous. When we started our replacement hospital out there, it was surrounding by nothing but farms. Now, it’s all filled in.”

About 12,000 homes are planned so far for the area, with about 80 percent of them completed. There might be plans for an additional 6,000 residences in the future.

As for the West Kendall area, Mr. Tulloch says the area is in desperate need of beds. “We opened a clinic there and had 100 patients the first day, without even advertising,” he says.

Kendall Healthcare Group, a part of Nashville, Tenn.-based HCA Inc. (NYSE: HCA), also has plans for an 80-bed hospital in West Kendall.

MOBs keep pace

In addition to plenty of hospital projects, medical office buildings (MOBs) continue to be developed at a rapid pace.

According to Mr. Weston, at least 1.2 million square feet of MOBs are either under construction or in the planning stages in Miami-Dade County, with another 1 million square feet or so planned for Broward County just to the north. Some of the MOBs in the pipeline include converting general office space to medical office or medical office condos, Mr. Weston says.

“Even though the general office market still has a high vacancy rates, there’s still a lack of space for medical offices,” Mr. Weston says. “And many of the doctors want to own a part of the project, or want to own their own spaces as condos. So we’re still seeing a lot of demand for condos.”

Mr. Weston has his hand in the marketing and development of several projects, including two medical office projects near Baptist Health South Florida’s future Homestead replacement facility. One is the Portofino Professional Center, a 60,000 square foot MOB being built next to the new hospital. The other is the 90,000 square foot Portofino Plaza, which also includes retail and other space. Both projects are being developed by Prime Commercial Developers, whose parent company has built more than 1,000 homes in the booming Homestead area.

Other major medical office projects are under way throughout South Florida. One is a 100,000 square foot MOB under construction on the campus of Mount Sinai Hospital in Miami Beach. Also, Indianapolis-based Lauth Property Group, which has opened an office in Florida, is working on two major MOBs with a total of 257,000 square feet of space. Both projects are being built on campuses operated by the North Broward Hospital District, which, by the way, has plans for a $200 million, 144-bed acute care hospital on the campus of Nova Southeastern University in Davie.

CON means competition

As has been the case for years now, the Miami-Dade healthcare market is highly competitive. And in a state with a Certificate of Need (CON) requirement for new freestanding hospitals, nursing homes and some other healthcare projects, many hospital projects in recent years have been formally opposed by competing health systems.

A case in point is Mount Sinai Medical Center Inc.’s longstanding plans for a new hospital in northeastern Miami-Dade County. Officials with Aventura Hospital, about four miles from Mount Sinai’s proposed site, opposed Mount Sinai’s CON application to the state’s Agency for Health Care Administration (AHCA). Mount Sinai’s application, by the way, was been rejected by the state in December. Mount Sinai officials say they are planning an appeal.

Two years ago, Mount Sinai opposed plans by Kendall Regional Medical Center for its future West Kendall Baptist Hospital. The objection came even though Baptist’s future hospital is being built about 25 miles away from Mount Sinai’s main hospital.

As a result of Mount Sinai’s objection, Kendall Health Group, which is also planning an 80-bed hospital in West Kendall, at one opposed Baptist’s plans for a its new hospital. Kendall Health Group is a part of Nashville, Tenn.-based HCA Inc.’s vast system of for-profit hospitals.

After all of the objections and appeals, the state eventually approved both the Baptist and HCA projects in the West Kendall area, according to Karen Rivera of Florida’s AHCA.

Ms. Rivera added that the state’s CON requirements were loosened a bit back in 2004, when the state decided that expansions of existing hospitals no longer needed state approval. Instead, health systems need to simply inform the state of their plans and how many beds they are adding when planning expansion projects.q

Selected Miami-Dade County Healthcare Projects


  • § Homestead Hospital, Homestead. Baptist Health South Florida, the area’s largest not-for-profit health system, is building a new $135 million, 388,000 square foot replacement hospital in the growing community of Homestead, south of Miami. When completed this coming fall, the 120-bed facility will be the first new hospital built in Miami-Dade in 30 years. Baptist Health officials call the future replacement facility a “prototype hospital for the future” because of the extra space it will have for improved technologies, private patient rooms, additional operating rooms, and clinical space for outpatient care. The hospital, which can eventually be expanded to 300 beds, will be three times larger than the existing Homestead Hospital. The hospital will include an attached, 33,000 square foot hospital-owned MOB. The architect on the project is HKS Architects, while the general contractor is Skanska USA.


  • § West Kendall Baptist Hospital, Miami. Baptist Health South’s newest project is slated to be a 300,000 square foot, 80-bed hospital at Kendall Drive and 162nd Avenue in Miami. Eventually, the hospital could be expanded to 300 beds. The project is in the final stages of construction drawings. The architect on the project is MGE Architects in Miami; the contractor is Bovis Lend Lease. In addition to the future hospital, Baptist is developing a 50,000 square foot MOB on the campus.


  • § Baptist Hospital of Miami expansion. Plans have been approved for a $122 million expansion and upgrade plan at Baptist’s flagship 551-bed hospital in the southeastern part of Miami-Dade County. The project includes a new emergency department, a patient tower with 100 beds, a parking garage with 900 spaces, and a new energy center. Construction will begin when Baptist receives its building permits. The architect is HKS; the contractor is Skanska USA.


  • § Mount Sinai Medical Center, North Miami, Fla. The state of Florida’s Agency for Health Care Administration (AHCA) in December denied Mount Sinai’s plans for a $185 million, 120-bed hospital in North Miami. Plans call for eventually expanding the hospital to 260 beds. Part of the reason for the denial, according to the AHCA, is that two existing hospitals near the proposed site have occupancy rates in the 50 percent to 60 percent range. Mount Sinai officials say they intend to appeal the decision, citing a growing need for a not-for-profit hospital in the area.


  • § Kendall Healthcare Group’s new hospital, West Kendall area, Miami. Kendall Healthcare Group, which operates Kendall Regional Medical Center, and its parent, Nashville, Tenn.-based HCA Inc., applied for and received state approval for a new 80-bed hospital in the West Kendall area of Miami. Further details were not available.


  • § University of Miami Hospitals and Clinics, Miami. The University hospital system is in preliminary design stages for a 144-bed replacement for its existing, cramped hospital. Included in the future project will be an MOB with 200 exam rooms. In all, the project will entail the construction of 664,000 square feet of space. The existing hospital will be converted to clinical space, according to Rich Jones, who is in charge of design and construction for the hospital system. “We’re bursting at the seams,” Mr. Jones said. Groundbreaking is scheduled for 2007, with completion slated for 2010. Perkins + Will is the architect; Bovis Lend Lease is the construction contractor.


  • § Jackson South Community Hospital, Miami. Jackson Health System has plans for a $102 million expansion that would double the size of the 180,000 square foot, 199-bed Jackson South Community Hospital. In all, the hospital would add between 50 and 100 beds, thanks to $52 million from a Building Better Communities Bond and $50 million from the Public Health Trust of Miami-Dade County.


  • § Jackson Memorial Hospital expansion, Miami. Jackson Health System has decided to expand its flagship hospital in Miami. Even though the hospital is licensed for 1,500 beds, it has only about 1,200 because of overcrowding. By expanding and rearranging space, the hospital plans to add 50 beds, mostly in intensive care. The hospital’s plans also call for expanding the emergency room and spending more than $100 million to expand its information technology infrastructure in the five years or so. q

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