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New legislation will bring more hospital construction to Central Florida and more competition

New legislation will bring more hospital construction to Central Florida and more competition
CEO Jeff Villanueva (4th from left) is joined by other AdventHealth professionals, elected officials and community leaders, for the groundbreaking ceremony for a standalone emergency room center in Lake Nona, Wednesday, June 5, 2019. The 19,000 square-foot facility is slated to open in 2020. (Joe Burbank/Orlando Sentinel) 3081931 (Joe Burbank/Orlando Sentinel)

Ten years ago, there was no such thing as Free Standing Emergency Department in Central Florida. Now the there’s over a dozen of them open or in development, representing over $200 million in investment by the region’s three largest hospital companies.

And the healthcare building boon is just getting started. The Florida Legislature’s passage this year of House Bill 21 will accelerate construction of new hospitals in Central Florida and could bring new players into what’s now an open market to compete for a share of the state’s fastest growing economy.

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The law, which goes into effect July 1, eliminates the requirement for hospitals to apply to the state Agency for Healthcare Administration for Certificates of Need (CON) to build new acute care facilities or add specialized services, such as organ transplant programs. The region’s two largest hospital companies, Orlando Health and AdventHealth, told GrowthSpotter the rule change doesn’t necessarily alter their long term expansion plans, but it does kick them into high gear.

Because it operates across multiple states, AdventHealth already has experience in markets that don’t require CONs. Daryl Tol, Advent’s Central Florida CEO, said the CON process could add months, or even years, and hundreds of thousands of dollars to the cost of new acute care facilities. Meanwhile, healthcare providers would land-bank sites for future growth or plant stakes in the ground with new Free Standing Emergency Departments (FSED) throughout the region.

Daryl Tol, CEO of AdventHealth Central Florida, said the hospital company will grow aggressively now that Certificates of Need are are thing of the past.
Daryl Tol, CEO of AdventHealth Central Florida, said the hospital company will grow aggressively now that Certificates of Need are are thing of the past. (file)

“In non-CON states, you don’t have that threshold, so it’s much more aggressive,” Tol said. “Think of our free standing emergency room dynamic in Central Florida right now. That becomes, in some ways, the acute care dynamic without CON. You have large and small things going everywhere, so we’re used to that."

Orlando Health has new campuses planned in Lake Mary, Randal Park and Reunion. The repeal of CON doesn’t change those plans, according to Erick Hawkins, senior vice president for strategic management.

“We believe, however, that it will allow us to bring to market some of those assets sooner, because there won’t be the process of applying. And then, in some cases, the legal challenges that are put forth," Hawkins said. “So for us, we’re excited to be able to get the Orlando Health value proposition out to the consumer sooner through not having to have that extra step.”

Scroll over a point on the map to find out what’s coming near you.

AdventHealth recently opened a new hospital in Apopka and is building one in Winter Garden. The company also opened a FSED in Waterford Lakes in 2018 and just broke ground on another in Lake Nona. At least two more are in the pipeline near Disney and on U.S. 192 in the Kissimmee-St. Cloud market, according to plans filed in the last month.

“There are two things that are true,” Tol said. “One, we’re aggressive. And two, we always see opportunity, and so this is an opportunity for us, and it can be an opportunity for our community. That’s how we view it, and that’s how we want to approach it.”

The new rules give the providers more flexibility, too. So Orlando Health could add a modest number of acute care beds to allow for overnight stays at its new Tupperware FSED. And it could fast-forward the the full-service hospitals planned at Randal Park and Lake Mary.

At Reunion, Orlando Health recently paid $14.4 million for nearly 28 acres at the I-4 interchange. Earlier this month, HCA announced it had struck a deal with the master developer of ChampionsGate to locate a new FSED-- it’s fifth -- about a mile away, just north of the intersection of ChampionsGate Boulevard and Ronald Reagan Parkway.

Expect to see more of that head-to-head competition, according to Anne Spencer, director of office and healthcare brokerage for Cushman & Wakefield.

“Hospital growth is not driven by what the government says you can and can’t do. It’s driven by population growth," she said. And Orlando is one of the fastest-growing metros in the nation. Hospitals have already built facilities right across from each other - like AdventHealth did with its new FSED across from HCA’s Oviedo Medical Center on Red Bug Lake Road.

“I always draw parallels between healthcare and retail,” she said. “If you look at what a retail user is doing – a Starbucks or a Lucky’s Market, or whatever – they’re looking at demographics, and they’re saying who are our customers? Healthcare’s the same way. Who are our customers – our patients, what’s not here and what should be here. Who’s my competitor and do I make a defensive move or an offensive move?”

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Orlando Health is building a 15-acre medical campus in Randal Park. The first phase includes a freestanding emergency department and medical office building, to be completed by March 2020. Future plans for the campus include a hospital with capacity of up to 240 beds, to be developed in multiple phases.
Orlando Health is building a 15-acre medical campus in Randal Park. The first phase includes a freestanding emergency department and medical office building, to be completed by March 2020. Future plans for the campus include a hospital with capacity of up to 240 beds, to be developed in multiple phases. (HKS)

At Tupperware, Orlando Health invested $32 million on its 60,000-square-foot FSED and medical pavilion. AdventHealth spent $15.6 million on its 19,000-square-foot FSED at Waterford Lakes.

HCA’s ER facilities are typically smaller - at around 11,000 square feet. The Heathrow and Baldwin Park facilities that opened this year each cost around $10 million. The private, for-profit company’s ChampionsGate location, scheduled to open in 2020, will join similar facility in the Millenia area of Orlando which will open later this summer.

The North Florida Division’s Orlando Market is slated to open its fifth hospital in the region, UCF Lake Nona Medical Center, fall 2020. The company was awarded a CON last December to add acute care services at the Heathrow site. The certificate was being challenged, and now that challenge goes away.

While the region’s three main players continue to fight each other for market share, the repeal of CON also opens the door for new healthcare companies to get a foot in the door. Spencer said other states that eliminated CONs saw a spike in development of micro-hospitals, which can have anywhere from 10 to 50 beds.

“I think if we see micro-hospitals, I’m not saying we’re going to, but if we do it will most likely be an out-of-market player,” she said.

Tol absolutely expects new competition from out-of-state.

“I think we’ll see other competitors bringing smaller entities into the community,” he said. “Central Florida is a national target. The systems in the country that have size and scale and that look on a national basis are looking at Central Florida. We know that, and we expect that to be an interesting dynamic.”

And while most of the discussion of the CON repeal has focused on acute care facilities, Tol said not to overlook the changes regarding ambulatory, or outpatient, surgery centers. The bill also cleared the way for those centers to allow patients to stay overnight for a limited periods of time rather than being transferred and admitted to a full-service hospital.

“We have very significant outpatient ambulatory construction plans, and those are at a very fast pace right now,” he said.

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Orlando Sentinel reporters Naseem Miller and Adelaide Chen contributed to this report.

Have a tip about Central Florida development? Contact me at lkinsler@GrowthSpotter.com or (407) 420-6261, or tweet me at @LKinslerOGrowth. Follow GrowthSpotter on Facebook, Twitter and LinkedIn.

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