DFW Healthcare Providers Hustle To Keep Up With The Region's Explosive Growth

Being busy is a good thing. That’s how most industries caveat the growing pains they have experienced as a result of Dallas-Fort Worth’s population boom.

For healthcare, those pains are especially acute, and nearly every part of the system is feeling the pinch. Providers are responding by ratcheting up care inside hospitals and out in the community, but labor shortages and rising costs remain a threat to progress.

Innovative solutions to serve more patients more quickly are beginning to emerge, but buy-in from the healthcare community will be critical to meeting the need, industry professionals said during Bisnow’s annual Healthcare Conference Wednesday at the Renaissance Dallas Hotel.

“Hospitals have always been the place where communities go for hope and healing … and they will always be,” Perkins & Will Director of Healthcare Strategies Ashley Dias said. “We can’t forget that we must be sustainable, resilient, regenerative, inclusive and focused on well-being.”

Texas added nearly half a million residents between July 2022 and July 2023, making it the No. 1 state for population growth in the nation. Dallas-Fort Worth is home to more than 8 million people, with 453,000 new residents moving to the area between 2020 and 2023.

That growth has prompted facilities expansions at nearly every major healthcare system in North Texas. Two years ago, Texas Health Resources opened the largest hospital in Fort Worth, a project that was supposed to sustain the region for 10 years. It only took 12 months to max out capacity, hospital President Joseph DeLeon said.

“Fort Worth is growing pretty fast,” he said. “But healthcare is growing even faster.”

One of the ways healthcare providers are responding to growth is by improving access to care in more rural communities. THR has opened smaller facilities in Burleson and Willow Park, two Parker County cities with rapidly expanding populations. 

Methodist Health System has also brought facilities to peripheral DFW communities, including Prosper, Celina and Mansfield. Methodist is focused on serving low-income communities in Dallas’ Southern Sector, which means it leans on income from the wealthier communities it serves for financial support.

“Our hospitals operate in the red more so than the black,” Methodist Chief Operating Officer Pamela Stoyanoff said. “We have to have some other options to fund and fuel that mission.”

Getting new projects propped up as quickly as possible has been challenging amid supply chain issues and high interest rates. One way DPR Construction has cut down on its timeline is by prefabricating certain structural elements, Senior Project Manager Ashish Gupta said.

“That has really helped us flatten the peak on construction, but don’t get me wrong, prefabrication is not a silver bullet. It’s not the answer,” he said. “It’s a step forward, but everyone needs custom, and two words that don’t go along with each other are ‘custom prefab.’”

Technology has also helped to streamline the design and construction process. Project previews at DPR are always facilitated using augmented or virtual reality, Gupta said.

UT Southwestern is considering the impact of artificial intelligence and robotics on its future hospitals, but it is hard to plan for the implementation of technology when it changes so fast, UTSW Director of Planning, Design and Construction Gena English said.

“When we start planning an institution, by the time we get it built, the technology is completely different,” she said. “Remaining flexible and knowing whatever we plan for right now is going to change is important.” 

Technology should also help curb the labor shortages healthcare systems have been battling since the pandemic. 

Before the pandemic, turnover at Methodist was below 10%. About a quarter of the system’s employees resigned during the pandemic, prompting the use of agency and external staffing. Today, turnover is around 15% annually, and Methodist has had to budget for bigger salary increases to stay staffed up, Stoyanoff said.

“There’s a big demand for labor and limited supply,” she said. “It’s gotten a lot better, but it’s still the biggest challenge we have because it has added a lot of permanent costs to our income statement that probably won’t ever go away.”

The surge in demand for services is a silver lining, in that it has helped Methodist shoulder increased personnel costs, Stoyanoff said. Growing need has also spurred interest among investors looking to buy existing healthcare facilities, Big Sky Medical Director of Acquisitions Chris Morgan said.

“DFW corridors are among the most sought-after locations in the country,” he said. “We will see more private practices acquired in those areas, which is a good thing for real estate investment.”

The medical office market remains a relatively stable investment despite the rising cost of debt. Pricing challenges have prompted Big Sky to pursue more value-add deals, but it is also adding in bigger rent accelerations to offset increased costs, Morgan said.

“That helps with the thinner returns we are dealing with and helps us weather the current debt environment,” he said.

Tight margins are an even bigger issue in the behavioral health space because insurance doesn't reimburse those services at the same level as more mainstream inpatient care, said Allan Brown, partner and co-founder at Prevarian Cos.

Behavioral health hospitals have a budget of about $400K per bed, while sizable acute care hospitals have budgets of up to $3M per bed. Efficiency in the construction and design process is paramount for that reason.

“On a very limited budget, we are asked to build beautiful buildings,” he said. “For any healthcare facility, what the architects and the engineers are putting forth and designing is incredibly important, but with behavioral health, it’s massively important.”

Moving forward, healthcare professionals see endless opportunities to counteract rising costs with more growth, particularly in Collin County, where the population is projected to double to 2.4 million people by 2060.

“These cities will continue to develop, and the need for healthcare will be there,” Gupta said. “Nobody wants to travel 20 miles to get their healthcare.”