Cost and volume trends in health care facility construction

In 1987, the Health Care Financing Administration proposed adding capital cost reimbursement to the prospective payment system. A data base was developed from which an index was calculated to adjust for geographic variation in construction cost. Findings from the data base, along with a description of trends in health care facility construction from 1970 through 1986, are presented. Spending (in constant 1986 dollars) and volume of health care facility construction declined from 1970 to 1986. Construction cost per square foot increased until 1983, followed by a decline to pre-1980 levels after the 1983 implementation of the prospective payment system.