Standards & Legislation

The Health of the Regulatory Landscape

Contractors Find Challenges, Opportunities in New Rules and Regulations

November 4, 2013

Hospitals are highly sophisticated, highly specialized buildings that serve fragile populations. As such, HVAC systems designed for these facilities must not only deliver superior air quality, but need to provide a comfortable environment in which medical staff can work and patients can heal.

Due to this overriding concern for patient safety, hospital mechanical systems are subjected to numerous federal, state, and local regulations, which at times may seem a little overwhelming. Contractors who work in this market must be especially careful to keep up to date on changing requirements if they are to successfully navigate the complex system of regulatory compliance.

Regulation Overload

Layers of complex federal, state, and local laws regulate the construction and renovation of health care facilities, and these laws influence everything from whether a project can proceed, to the schedule of the project, to the ultimate scope and cost of the project, said John Sauer, senior director of engineering design, BSA LifeStructures Inc., Indianapolis. “There is no doubt that it is more difficult for contractors to work in hospitals as compared to other types of facilities like commercial buildings and schools. Part of the reason involves patient safety and ensuring that workers are not being affected by patients.”

To that end, regulations have been written and are constantly being modified by agencies having jurisdiction, such as the U.S Occupational Safety and Health Administration (OSHA), the Joint Commission on Accreditation of Healthcare Organizations (JCAHO), the Nuclear Regulatory Agency (NRC), and the Centers for Disease Control and Prevention (CDC), just to name a few, said Sauer. “These well-intended organizations have greatly improved worker and patient safety through the years; however, there is a cost of material and time to implement these regulations that is ultimately paid for by the public.”

The cost of regulation varies, depending on the geographic location of the hospital, with some areas, such as Chicago, New York City, and Florida having higher regulatory burdens. And then there is California, which has a “ferocious scheme” of regulation and inspection, said Bob Helbing, president, Air-Tro Inc., Monrovia, Calif., as hospitals must comply with the California Office of Statewide Health Planning and Development (OSHPD).

“Due to OSHPD rules, if we install a fan coil in a patient room, we cannot tighten the bolts unless the inspector is present,” said Helbing. “And we have to use a torque wrench, so he can record the amount of torque that we put on the bolts when we tighten them. That’s required by law.”

OSHPD was created as a result of the numerous earthquakes experienced in California, which could cause equipment in hospitals to break free and potentially fall on patients. “Having a stricter set of rules for hospitals makes sense,” said Helbing. “But they keep adding more rules. The amount of effort it takes to comply just gets more and more difficult, and more expensive for the hospital.”

That’s because any costs associated with additional requirements and regulations are passed on to the customer in the form of additional labor or safety adjustments needed to meet the new changes, said Wayne Turchetta, vice president, HMC Service Co., Louisville, Ky. “Most changes present a challenge; however, part of our success is meeting the challenges and moving forward rather than complaining about something we cannot change anyway.”

Changing Landscape

There is no question, though, that contractors working in the health care industry will be affected as regulations continue to be added, said Turchetta. “There will be contractors who will try to do more work for the same cost, and they will eventually lose money or possibly go out of business. Plain and simple — play by the rules, do the right things, comply with the regulations, and you will be safe. Does it mean you will get every job? Hell no. It just means you and your company stand a better chance of getting more negotiated work when you have proven there will be less downtime, less finger pointing, and the job will get done the right way and on time.”

Contractors who continue to work in hospitals will most likely become highly specialized, as they will have a unique understanding of what is required to comply with the health care construction industry, said Sauer. “The increased legal liability of working in the health care construction industry is driving firms to have specialists who examine, advise, direct, and manage the compliance of the regulations. Those who don’t do it well will find it difficult to survive.”

The contractors who do survive will be able to charge a premium for their services, said Helbing, because there will be fewer of them serving each geographic region. “Ordinary commercial, industrial, or institutional contractors may not want to get involved in hospital work anymore because even though it may triple their labor cost, they often find out that that’s not enough to get the job done.”

Rick Tullis, P.E., president, Capstone Mechanical, Waco, Texas, also believes that additional regulations will cause some contractors to exit the health care market, but he sees that as an opportunity. “We are willing to invest in growing our knowledge of the regulatory environment, which is why our company is able to navigate many of the challenges that stump other contractors. We look for opportunities to provide turn-key or design-build solutions.”

Contractors pushed out of the hospital market will have no shortage of work in health care, however, as smaller facilities and clinics with less sophisticated mechanical systems are sprouting up everywhere, creating a new vertical market, noted Joe Nichter, president, Comfort Systems USA Southwest, Chandler, Ariz. “These new, smaller facilities have relatively simple mechanical systems and short construction schedules, which allow mechanical contractors — small or large — to compete for the work.”

The health care industry is in a period of change right now, and nowhere is that more evident than in hospitals which are being challenged by falling revenues, increasing costs, competition, regulations, patient volumes, and fewer doctors and nurses, said Nichter. These issues will also affect mechanical contractors, who may be asked to do more for less while under increased scrutiny from regulatory agencies.

Publication date: 11/4/2013

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