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Hospital Market 101

Sept. 1, 2011
Need an overview of the sales opportunities available now with hospitals and other healthcare facilities? Read on.

Hospitals and other health-care facilities are a niche market offering electrical distributors special sales opportunities for some very good reasons: the continuing expansion and construction of these facilities; the specialized electrical equipment they require; the tremendous amount of voice-data-video (VDV) cabling for computer, signaling, communications and security systems installed in these buildings; and the demographic fact that as the United States population as a whole ages, more of these facilities will be necessary.

Several thousand hospitals and other medical buildings, outpatient care centers, doctor's offices, clinics and other facilities exist in the U.S. The 72 million square feet of construction that McGraw-Hill Construction forecast for the healthcare segment in 2011 is 11 percent of all new construction this year. In terms of contract value, at $22.9 billion, health care market facilities will account for 16 percent of the market (see chart on page 34) says McGraw-Hill's 2011 Construction Forecast.

The construction climate in this market segment is a bit sluggish right now. At press-time construction was running behind these McGraw-Hill Construction forecasts, although it has improved significantly since the recession. According to the U.S. Census Dept.'s most recent data, construction of new private hospitals in June 2011 was down 6.3 percent YTY, but the much smaller public construction segment (approximately half the size, in the case of hospitals) was up 19.8 percent YTY from June 2010. Reed Construction Data, which includes retrofit work, also pointed toward a sluggish market, with annual figures down 1.1 percent. That being said, some truly humongous hospital projects have broken ground during the past two years, including several dozen projects of at least $100 million and several projects many times that size (see sidebar on page 36).

Market Movers

While the order that a contractor or facilities manager brings to an electrical distributor for a hospital job may not look much different from the list of materials they buy for other commercial jobs, some important differences exist in the types of equipment required for the health-care market. Tight National Electrical Code (NEC) regulations on installations in these facilities and some key trends influence the electrical products purchased. Let's take a closer look at these important factors in the health-care market.

Cost consciousness

With all the consolidation in the hospital market and the changes in health-care coverage, hospital administrators, purchasing managers, engineering supervisors and other key buying influences in this market are always looking for ways to slash their operating costs. Like many of your customers, hospitals have trimmed maintenance staffs and are looking for products that require less maintenance, last longer and cost less to install.

This presents electrical contractors with a great opportunity to install energy-efficient electrical products in this market, because much of a hospital operates 24-hours-a-day, seven-days-a-week, driving up energy costs. In the cost-conscious health-care market, you can easily prove to customers that an energy-efficient retrofit can save tens of thousands of dollars in the facilities' electrical bills and pay for itself from these savings in two to three years. Not only are large medical facilities ripe for energy upgrades, smaller doctors' buildings, nursing homes and other buildings of less than 100,000 square feet of space are prime targets, too.

Before making your pitch, make sure you see an upgrade through a customer's eyes. While lighting equipment, motors and other electrical loads can account for over 30 percent of a building's energy usage, the customer may also be thinking about non-electrical upgrades to improve the building's energy efficiency, such as replacing inefficient air-conditioning units, windows and adding new insulation. Energy-services companies (ESCOs), which are very active in this market, often will install a broad package of these products, and they may compete with you for business.

Group purchasing organizations

An offshoot of the trend toward increasing cost-consciousness is the growth of group purchasing organizations (GPOs). These purchasing groups allow hospitals to pool their purchases of medical supplies, office equipment and maintenance supplies to get volume discounts. The largest groups include VHA, Irving, Texas; Premier Inc., Charlotte, N.C.; and AmeriNet, St. Louis, Mo. GPOs cover a lot of territory and offer a ton of sales potential. For instance, the Premier healthcare alliance, which services more than 2,500 U.S. hospitals and 76,000-plus other healthcare sites, announced in June that new agreements for lamps, ballasts and fixtures have been awarded to Acuity Brands Lighting Inc., Conyers, Ga.; EarthTronics Inc., Muskegon, Mich.; GE Lighting, Cleveland; and Philips Lighting Co., Somerset, N.J.

These purchasing agreements cover many other products. AmeriNet announced earlier this year that Graybar and Schneider Electric were offering its members a special promotion on electric vehicle charging stations. According to information at, the company also manages contracts with Premier Inc. and MedAssets Supply Chain Systems Inc.

Code consciousness

One of the best ways to learn about the types of products that your customers may purchase for installation in hospitals and other health-care facilities is to peruse the NEC's Article 517 — Health-care facilities. After a few paragraphs, you will soon realize the NEC has such stringent requirements on electrical installations in health-care because these systems power equipment that's used in critical-care areas, such as operating rooms, intensive-care units or other areas where an electrical-system malfunction can affect the health of the patient. For instance, the 2011 NEC instituted a change that prohibits the use of receptacles with insulated grounding terminals in patient-care areas because of concerns over the safety of patients. According to Mike Holt, Electrical Construction & Maintenance magazine's NEC expert, wiring methods in these locations require two different grounding conductors, “one of the wiring method type; the other in the form of an insulated green conductor.” Here are the health-care products NEC regulations affect most:

Hospital-grade and tamper-proof receptacles

A familiar NEC requirement in health-care facilities is the use of hospital-grade plugs and receptacles. Marked with a green dot, these receptacles are designed to take a lot of punishment so they do not malfunction in what could be life-or-death situations. Before launching a new hospital-grade receptacle about a decade ago, Pass & Seymour/Legrand, Syracuse, N.Y., did extensive market research on how hospitals buy wiring devices. From this research, the company estimated the average hospital purchases 50 to 75 hospital-grade wiring devices a month, or about 900 per year. The company also found that because of the extensive modernization and renovation of hospitals, the average hospital wing is reworked every five to eight years and that 2,500 devices may be purchased and installed each time.

The NEC requires these wiring devices for the entire wiring systems of hospitals and for the patient-care areas of other medical facilities such as clinics, dentists' offices, outpatient facilities and the examining rooms of doctors' offices. An additional requirement for specialized wiring devices exists for pediatric and psychiatric locations, where receptacles must be tamperproof to prevent patients from inserting pins, pieces of wire and other objects into the outlet.

GFCI equipment

Many areas of a hospital and other types of health-care treatment centers are exposed to wet or damp conditions, so GFCI circuits are a must. Some of the applications for GFCI equipment in these facilities include standard bathroom applications, dialysis facilities, laboratories, treatment areas involving whirlpools or other types of hydrotherapy, laundries, kitchens and boiler rooms.

Back-up generators

Hospitals have extensive backup systems for a very good reason: patients' lives depend on the equipment to function at all times. All hospitals must have emergency generators ready to provide power to critical-care areas very quickly if the primary power system is disabled or shuts down for any reason.

EC&M magazine once published an article on an electrical contractor who installed the emergency-power system for the wing of a new hospital in California but forgot to connect the backup system to the automatic transfer switch, which detects a downed circuit and switches to emergency power within seconds. The problem was discovered when a lightning strike knocked out power to the grid servicing the hospital. Fortunately, no patients at the hospital were hurt when the emergency power did not kick in.

Data-handling systems

Hospitals require monstrous amounts of data on patients, billing, supplies, scheduling and other applications unique to the health-care market. If your company is into VDV, you are that much more valuable to customers in this market.

Other low-voltage wiring

Few industrial or commercial applications use as much low-voltage wiring as medical facilities. Nurse-call systems, intercoms, fire alarms, security systems and smoke detectors are just a few of the low-voltage wiring systems they rely upon.

Future sales opportunities

Industry observers expect hospitals and other health-care facilities to continue adding onto their computer and communications systems to improve access to patient data and treatment options, cut down on paperwork and make it easier to respond to emergency situations. Computers are also replacing the manual collection of patient records and treatment charts. This cuts down on the errors that can occur with manual transcriptions of this information.

Communications systems also promise good sales opportunities. Many of the low-voltage wiring systems mentioned above are all monitored from a central point, such as a nursing station. All of these trends translate into sales opportunities for electrical contractors in VDV products and low-voltage wiring and components for signaling systems, and give them yet another reason to get involved with this growing market segment.

Where to Find the Business

Don't drive past other opportunities to sell electrical products on your way to a sales call at the local hospital. Here are a few examples of other medical facilities that need much of the same equipment that you sell to hospitals.

Urgent-care facilities

HMO centers

Health-care clinics

Cat-scan or radiology facilities

Nursing homes

Dental offices

Doctor's offices (single or group practice)

Who to talk with:

The most common titles of purchasers of electrical equipment at the larger medical facilities include:

Maintenance manager

Electrical engineer

Facilities manager

Shop foreman

Some Healthy Hospital Projects

Even in a down construction market, some huge hospitals are breaking ground. Here are some of the largest new hospital projects that broke ground during the past two years, according to McGraw-Hill Construction.

  • $1 billion medical center for the University of California at San Francisco (UCSF)
  • $750 million rebuild at the New Orleans VA Medical Center
  • $690 million Parkland Hospital replacement in Dallas
  • $500 million Veterans Administration hospital in Orlando
  • $470 million medical center in San Antonio, Texas
  • $412 million medical center in Dallas
  • $394 million Wishard Hospital in Indianapolis
  • $316 million Naval Hospital at Camp Pendleton Calif.