Cal projects reeling from sky-high costs
UCSF, PALOMAR, SUTTER, OTHERS DELAYING – EVEN CANCELING – CONSTRUCTION
By John Mugford
Things aren’t always sunny and carefree in California.
Take the cost of construction. Several major healthcare providers have indicated they might possibly delay, or even cancel, previously planned construction projects because of escalating costs. Providers feeling the sting or rising prices include the University of California San Francisco (UCSF) Medical Center, the Palomar Pomerado Health District near San Diego, Sutter Health, and others.
Experts say costs for hospitals and other large projects have escalated in recent years, in large part due to mammoth construction labor and materials demand in China, and more recently, due to damage caused by Hurricane Katrina and other storms. Sources say that in California the cost to build new hospitals is no longer in the $1 million per-bed range; instead, costs are now in the neighborhood of $2 million per bed – even more in some cases.
The first example can be found in San Francisco, where UCSF Medical Center will most likely delay its plans to build a new hospital in Mission Bay for nearly a decade. The 210-bed hospital, which UCSF has been formally planning since 2003, was to focus on women’s, children’s and cancer services. But since then, the costs for the proposed facility have skyrocketed from $700 million to an estimated $1.2 billion.
As a result, UCSF Medical Center officials say the health system might instead focus on expanding and retrofitting its 75-bed campus in Mount Zion, possible enlarging it to 150 beds.
Initial plans called for completing construction on the Mission Bay hospital by 2012 in order to meet the state’s seismic safety standards. But now, UCSF officials say they might wait until 2015 to even start the project.
Other Bay Area hospital projects that could be delayed by soaring costs include a potential rebuild of San Francisco General Hospital, the rebuilding of Laguna Honda Hospital skilled-nursing-facility, California Pacific Medical Center’s proposed new medical campus in Cathedral Hill, the controversial Marin General Hospital retrofit or rebuild in Marin County, and uncertain plans for a rebuild or retrofit of Alta Bates Summit Medical Center’s campuses in Berkeley and Oakland.
Down in the San Diego area, Palomar Pomerado Health District officials say inflated costs could delay aspects of their plans for a district-wide expansion program.
The health district has plans to build a replacement for its Palomar Hospital – currently located in downtown Escondido – in the Escondido Research and Technology Center. Back in 2004, the replacement project had an estimated price of $530 million. Today, the estimate stands at $690.2 million, an increase of $159 million.
In addition, the district’s plan to expand its hospital in Poway has estimated price tag of $189.7 million, an increase of $50.7 million since 2004. Also, the district’s plan to renovate the current Palomar Hospital building into offices, an urgent care site and other uses after the replacement facility is complete now stands at $92.7 million, a $20 million increase since 2004.
While rapid inflation won’t put a halt to all of the projects – for example, ground was broken in recent weeks on the replacement hospital in Escondido – district officials say they are looking at revising the construction schedule, which could include delays for some aspects of the overall plan.
District officials had planned to pay for all of the projects with a $496 million bond measure approved by voters in November 2004, with the remaining funds coming from $205 million in revenue bonds issued by the district and about $100 million in cash reserves.
Delaying certain aspects of the overall project has its supporters and dissenters. For example, some district executives argue that delays could give the district more time to raise additional funds. Others, however, such as certain board members, say delaying construction could cost the district millions per month as costs will continue to increase.
Sutter’s costs double
In Sacramento, officials with healthcare giant Sutter Health were all smiles recently when the city gave the system the go-ahead for its massive expansion project at Sutter Midtown Hospital. But, when Sutter first proposed the project back in 2002, the costs were estimated at about $225 million. After more than three years of planning and gaining necessary approvals, the most recent estimate puts the costs at about $500 million.
The big spike in price is nothing new for Sutter. Across its vast system, the provider in recent years had planned to spend between $4 billion and $5 billion to expand and upgrade facilities – in many cases to meet state seismic requirements.
Today, those costs are estimated at between $10 billion to $11 billion, which is probably more than the provider can afford, according to officials. Sutter officials say they are still committed to the Sacramento Midtown project, even though rising costs could force the system to delay, or even cancel, other construction projects throughout the system.
in Triad, N.C.
GREENSBORO, N.C. – As 2006 kicks off, the boom in hospital construction shows no sign of a slowdown in the Triad area of North Carolina: Greensboro, High Point and Winston-Salem.
In fact, hospitals in the Triad area currently have more than $115 million worth of projects on the drawing board, with more projects likely on the horizon in 2006. The information comes from a recent report in the Triad Business Journal.
While the biggest proposal is a new emergency room and intensive care unit being considered by Wake Forest University Baptist Medical Center, hospitals throughout the Triad are planning major outpatient facilities and emergency room expansions, plus numerous smaller renovations and expansions. In North Carolina, most hospital projects need to receive Certificate of Need (CON) approval from the state.
The area with the most construction projects on the docket is Forsyth County, which includes Winston-Salem. There, more than 90 new beds could be are proposed at Forsyth Medical Center and Wake Forest Baptist, where the provider is considering seeking CON approval for a $45.6 million patient tower that would add 51 beds. Forsyth Medical Center is considering adding 39 beds.
Elsewhere in the Triad area, High Point Regional Health System is planning a $10 million to $12 million outpatient facility that would include a fitness center and medical office space for physicians at its main campus in High Point. Also, Randolph Hospital in Asheboro is planning a $17.4 million outpatient center on its main campus.
Chicago is home to
$3 billion healthcare
CHICAGO – How can it be called anything but a frenzy? Currently, the Chicago-area healthcare scene is home to about $3 billion worth of construction projects that are either on the docket or in the planning stages. Here’s a quick look at what’s going on:
■ Loyola University Health System in Chicago recently broke ground on a $103 million expansion and facelift
■ Rush University Medical Center is considering $630 million worth of new projects, including the construction of new hospital and outpatient buildings and the renovation of two other facilities
■ The University of Chicago Hospital system has plans for a new $500 million building, with construction starting in 2007
■ Children’s Memorial Hospital is looking at building a new hospital expected to cost between $600 million to $800 million
■ Northwestern Memorial Hospital is currently constructing the $500 million Prentice Women’s Hospital scheduled for completion in the fall of 2007
■ University of Illinois at Chicago: Board of directors is considering $326 million in projects, including a new pathology building and a 7-story hospital pavilion
■ Sherman Hospital in Elgin is seeking state approval to build a $310 million, 263-bed replacement facility on 154 acres on the city’s west side
Not everyone is excited about all of the construction plans. For example, in Elgin officials at Provena St. Joseph say a new Sherman Hospital, which would be located within several miles of their own facility, would disrupt the delicate healthcare balance in the city.
For the Record
Firelands Regional Medical Center in Sandusky, Ohio recently broke ground on a $150 million expansion, consolidation and renovation. HarleyEllis, a Sandusky-based firm, is providing architectural, engineering and construction services. The project is slated for completion in 2008…Community Hospital North, owned by Community Health Network in Indiana, recently held a topping off ceremony for its $200 million, 1 million square foot construction project that will nearly double the size of the hospital in Indianapolis. The Dallas office of RTKL is the architect on the project, which includes a 400,000 square foot tower that will increase the number of beds from 176 to 334. It is scheduled for completion in early 2007… McCarthy Building Cos. Inc. and joint venture partner Gerald H. Phipps Inc. recently finished up the exterior of the future $360 million Children’s Hospital on the Fitzsimons Campus in Aurora, Colo. The architect on the project is a partnership of Denver-based H+L Architecture and Zimmer Gunsul and Frasca Partnership of Portland, Ore. Completion is scheduled for 2007… Lutheran Hospital in Fort Wayne, Ind., recently opened its new $36.4 million orthopedic surgery center, marking completion of the 366-bed hospital’s largest expansion since 1992. The project includes a new three-story, 114,600-square-foot Musculoskeletal Center and the addition of 77 beds and six operating rooms. Hospital officials say the expansion was needed to keep up with increased demand… St. Agnes Hospital in southwest Baltimore recently announced a $160 million expansion and renovation to be completed in three phases over six years. The project will include a new 192-bed tower to house nearly two-thirds of the beds in the current hospital, which is more than 40 years old. St. Agnes expects to complete detailed plans for the tower over the next year, with construction to be completed until 2011… Methodist Hospital of Omaha, Neb., is planning the region’s first women’s hospital, an $80 million facility scheduled for completion in 2008 in the western part of the metro area. The building could eventually be expanded into a full acute-care hospital, however the focus initially will be on providing women’s services. The provider’s main campus is in an area that is landlocked and does not allow for future growth… Butler Memorial Hospital in Butler, Pa., has hired Astorino, a Pittsburgh-based architecture firm, to develop a feasibility plan for a dual-campus project. The plan calls for having Butler Memorial keep its main campus in the city while building a new outpatient facility and ambulatory surgery center outside of town, in Butler Township. Previously, Memorial officials considered building a new replacement hospital outside of town. Critics said the city could not afford to lose its hospital, nor could the hospital afford to build a replacement. Memorial officials say the hospital can spend up to about $150 million… Fairbanks Memorial Hospital in Fairbanks, Alaska, has announced plans to spend $35 million to upgrade its emergency facilities. The new project comes on the heels of the completion of a $12 million remodel of a clinical lab, the opening of a $34 million outpatient imaging center, and a $36 million project to upgrade electrical, boiler and laundry systems… Mercy Hospital in Portland, Maine, recently announced a master plan for a $162 million expansion at its new site on the Fore River. The first phase calls for a five-story, 150,000 square foot replacement hospital and a three-story, 75,000 square foot MOB. Future phases would include a hospital addition of up to 200,000 square feet, a second MOB and a hospital administration building. Mercy’s current hospital facility in Portland is expected to remain open for several years. Mercy is part of Catholic Health East, based in Portland, Maine… Arlington, Texas-based Texas Health Resources (THR) recently announced plans for a future $76 million, six-story surgical tower at Arlington (Texas) Memorial Hospital. The 200,000 square foot expansion would add 16 operating rooms and 48 private rooms. A groundbreaking is scheduled for this month, with completion expected in September 2007. The project is part of an overall 10-year, $1.5 billion growth plan for the 13-hospital THR system… Barstow Community Hospital in Barstow, Calif., recently moved a step closer to commencing construction on a 60-bed replacement hospital to comply with the state’s seismic safety guidelines. That’s because the City Council has approved the sale of 19.7 acres of city-owned land to Brentwood, Tenn.-based Community Health Systems Inc. (NYSE: CYH), parent of Barstow Community Hospital. Community Health plans to build the new facility within five years. q
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