Inpatient Projects (May 2006)

Report calls for new hospital for New Orleans


By John Mugford


BATON ROUGE, La. – Even before Hurricane Katrina ravaged the Gulf Coast region last August, LSU Healthcare Services had considered building a single replacement facility for the aging Charity and University hospitals in downtown New Orleans.

Now, eight months after the devastating hurricane and subsequent flooding that brought the city to a halt, a replacement plan has won an endorsement – with a bit of a caveat – from the Louisiana Recovery Authority (LRA), which is studying ways to revamp the state’s healthcare system.

In a report by PricewaterhouseCoopers that was recently presented to the recovery authority, the consulting firm indicates that a replacement hospital should not simply replace the two facilities. Instead, the future hospital should focus on teaching, research and “niche specialty areas of national excellence.” PricewaterhouseCoopers was hired by the LRA to make recommendations for revamping the state’s healthcare system.

The report also calls for building a public teaching hospital in Baton Rouge and sharply reducing LSU’s role in managing the Charity Hospital System.

“The combination of this facility with the LSU Medical School in New Orleans should be regarded as a potential magnet for the city for new investments in teaching, research and sub-specialty medical care,” the report says.

A draft version of the report recommends that the state take a cautious approach in deciding whether to replace Charity and University hospitals, which were damaged beyond repair by Hurricane Katrina’s floodwaters.

The report indicates that the hospital infrastructure of New Orleans was “right-sized” by Katrina, as the city had too many beds before the storm. The report indicates that the city is not in need of additional acute-care hospital beds, but notes that there is room for high-end specialty care and research, which a new hospital could provide.

If the displaced populace of New Orleans returns to the city more quickly than experts expect, the specialty beds at the new hospital could be converted to general use, the report says.

The revised findings appear to coincide with the wishes of LSU officials and Louisiana Gov. Kathleen Blanco, who support building a new teaching hospital downtown. LSU officials are negotiating with the U.S. Department of Veterans Affairs on a possible joint venture to build separate hospitals connected by a shared physical plant, cafeteria and other common features to keep costs down.

LSU’s goal is to have a framework in place by June that would spell out the governing structure for a new hospital, along with estimates on cost, a proposed location and other details. Should the LRA formally approve the plan, it would forward its recommendations to Gov. Blanco.

System overhaul?

While developing and implementing a plan for the downtown hospitals might seem to be an easy, necessary proposition for observers from outside of the state, healthcare issues are quite complicated in Louisiana. For years, the state’s Legislature has been reluctant to pull the trigger on other, fundamental changes to the state’s healthcare system, which has been accused of being too costly and inefficient.

Critics say that the problem lies with how the state distributes federal Medicaid money. The PricewaterhouseCoopers’ report recommends that such funds be spread out among the nine regions of the state. Those regions would then decide how to provide care for uninsured patients.

Currently, the indigent-care dollars flow mostly to charity hospitals. Critics say this has created an unequal system of care in which those who are insured receive a certain level of care while the 19 percent who are uninsured receive a different level. State observers are interested to see how Gov. Blanco responds after she promised in her 2003 campaign to preserve the Charity Hospital System.

The report also recommends that LSU’s oversight of the current LSU hospital network be limited to its medical education programs in New Orleans, Baton Rouge and Shreveport. According to the report, the academic mission of the teaching hospitals is incompatible with the work of the other hospitals, which focus mainly on primary care for the uninsured. It recommends that the non-academic hospitals be pulled out of the LSU system and compete for dollars and patients in their regions.

Under the scenarios laid out in the report, the country’s only state-run network of public hospitals would be drastically altered from its current model. The report indicates that the state’s current network model is out-dated, as other states typically divide the burden of caring for uninsured patients among private and public hospitals, with the largest amount of federal reimbursements flowing to the hospitals that provide the largest portion of that type of care.

Louisiana, on the other hand, funnels most of its reimbursements to charity hospitals, which then provide free care to the uninsured. But the report indicates that the state’s charity hospitals have a poor track record of attracting Medicare and private-pay patients whose care brings the highest reimbursements.

Portland is latest

city to experience

hospital boom

PORTLAND, Ore. – Portland is one of the latest metropolitan areas to see a hospital building boom. With one new hospital recently opened and two more in the pipeline, Portland’s metropolitan area is on the cusp of its first major hospital expansion in decades.

And like in many other metropolitan areas across the country, the area’s hospital systems are heading to the suburbs to building new facilities to serve a growing number of insured patients in the suburbs.

In August, Legacy Health System opened its Legacy Salmon Creek Hospital in the northern suburb of Vancouver, Wash. It was the first new hospital to open in the Portland metro area in more than two decades.

In January, Providence Health System announced that it had purchased property in Clackamas County’s happy Valley that could eventually be home to a major medical center. In addition, Kaiser Permanente has purchased land in Hillsboro near the Sunset Highway for a potential new hospital.

Portland-area healthcare experts say the potential new facilities are not just about serving the growing suburban population, but about helping hospitals find paying customers demanding procedures that provide revenue for the providers.
Until now, say officials with Providence Health System, Portland’s healthcare scene has been dominated by inner-city hospitals. People living in the suburbs had no problem traveling to the city for healthcare services, as the inner city is not blighted, according to Providence. But these days the metro area’s suburbs are moving farther away from the city and hospital systems are responding.
The hospital business is very different from many other industries, according to officials with the Oregon Association of Hospitals and Health Systems, the trade association for Oregon’s hospitals. The association says the driving force behind the healthcare expansion is demographics, or predicted demographics. For example construction at Providence’s Happy Valley site might be 10 years away, but officials at Providence say they needed to purchase the land now while property in the fast-growing Southeast area still was affordable.
Advocate Lutheran

in Chicago area

faces civil lawsuit

PARK RIDGE, Ill. – While Advocate Lutheran General Hospital in Park Ridge, Ill., prepares for a $239 million expansion, it must also prepare for a civil lawsuit. The suit contends that Advocate’s parent company, Advocate Health Care of Oak Brook, has chosen to spend hundreds of millions of dollars upgrading its hospitals in wealthier Chicago suburbs while neglecting facilities in lower-income neighborhoods.

Advocate drew fire from activists in January when the provider announced plans to convert Bethany Hospital on Chicago’s West Side into a long-term acute-care (LTAC) hospital. The lawsuit was filed in Cook County Circuit Court by Clergy Committed to Save Bethany and the local Service Employees International Union.

The lawsuit contends that Advocate Lutheran received its Certificate of Need (CON) from the state on the condition that it provide the Illinois Health Facilities Review Board with information on the system’s five-year capital investment plans for facilities serving the medically indigent.

A spokesperson for the clergy group said Advocate provided the review board with information about past investments in a closed-door meeting, which the spokesperson said was in violation of state law. The suit seeks revocation of Advocate Lutheran’s CON, a public board meeting to vote on a new CON, and disclosure of the system’s long-term investment plans. The SEIU has attempted unsuccessfully to organize Advocate employees.

In news reports, a spokesperson for Advocate said the system was not prepared to comment on the lawsuit just yet.

California system

details $596 million

plan for facilities
OCEANSIDE, Calif. –– Tri-City Medical Center, which serves residents in three cities roughly midway between Los Angeles and San Diego, recently released a report detailing how it would spend $596 million in bond money should voters approve Proposition F in a June primary election.

After two years of planning for the facilities behind closed doors, the hospital system in April made public its 150-page building plan, which would entail the renovation or constructing of about 700,000 square feet of space. The plan includes tearing down about 70 percent of the system’s current facilities.

The system, which comprises the communities of Oceanside, Vista and Carlsbad, estimates that if the construction were completed in today’s market, the cost would total about $348 million. However, with construction costs continuing to rise at rapid rates, the system is including about $104 million in “escalation” costs. That puts the overall cost of the building plan at about $500 million by the time the project is completed in 2011.

The estimate also lists an additional $68 million contingency fund to cover unplanned expenses and $80 million in “soft costs,” including engineering, permits, fees and architectural bills.

The building project is needed, system officials say, because the hospital’s primary service area is expected to see an increase of about 85,000 people between now and 2013, according to statistics provided by the San Diego Association of Governments. By then, the system will also need to conform with the state’s seismic safety requirements, also known as SB 1953.

Tri-City officials estimate the hospital will need at least 46 more beds by 2013. Currently, the hospital has 397 inpatient beds, but administrators say only 284 are usable. The master plan indicates that Tri-City’s new campus would have about 330 beds.

The plan also calls for expanding and renovating the emergency room, which would have 43 emergency treatment stations – an increase of three stations. Critics of the plan say they believe the plan should add more l emergency room capacity, especially after the system indicated in TV advertisements that the hospital is overcrowded and unable to meet the demand of a growing number of emergency-room visits.

Administrators, however, say the master plan calls for an urgent care center to be built across the street from Tri-City’s emergency room. That facility would siphon off a significant number of emergency room visits by patients who do not necessarily need emergency care, administrators say.

S&P points out

credit risks of


NEW YORK – Standard & Poor’s says there are inherent short- and medium-term credit risks in building replacement facilities for not-for-profit hospitals. In a new report issued in April, the credit-rating agency said the trend toward replacements is expected to increase in states such as California, where earthquake-proofing requirements will force some providers to rebuild or retrofit by 2013.

Currently, there are 15 stand-alone hospitals undergoing replacement projects that are rated by S&P. These hospitals are relatively small when compared to other hospitals in S&P’s portfolio. All 15 have less than $250 million in net patient revenue, with about half having a revenue base of less than $100 million. These organizations are typically more financially vulnerable because of their size, S&P said.

Hospitals and health systems navigating these projects should have a management team focused on detailed planning and oversight to maintain their credits, S&P said. Although it is increasingly cheaper and more efficient to build a new hospital than renovate an old one, the effort typically requires debt of $1 million or more per bed, S&P notes.

The agency does not, however, that the risks are offset by the promise of more capacity, better use of technology, more attractive patient spaces and more efficient design features. q

For the Record

Thompson Peak Hospital in Scottsdale, Ariz., took a big step toward reality in recent weeks as bulldozers began clearing ground for the future 64-bed facility. The hospital is slated to become the third in the Scottsdale Healthcare network. Thompson Peak is planned as a three-story structure with an initial 64 in-patient beds, but the shell space will provide enough room for an additional 64 beds when needed. The maximum in-patient capacity will be 184 beds. The hospital is expected to open in late 2007… Sumner Regional Hospital in Gallatin, is in the design phase for a $75 million expansion and renovation that would add 200,000 square feet of space. Hospital Affiliates Development Corp. (HADC), the development unit of Windrose Medical Properties Trust (NYSE: WRS), is managing the project. The design phase is expected to last through late 2006, when a 30-month construction phase is scheduled to begin… LifeCare Hospitals of Plano, Texas, was dealt a blow last fall when it lost three of its facilities in New Orleans due to Hurricane Katrina. But the hospital company is working to re-establish at least one of those New Orleans hospitals. The company is also looking to build a new $16 million, freestanding hospital in San Antonio, near the South Texas Medical Center. The facility would double the amount of beds and square footage of an older, smaller facility located in a portion of Methodist Healthcare’s Specialty and Transplant HospitalNational Capital Medical Center, the proposed new hospital for Washington, D.C., seemed to have a green light in recent years, as the District City Council unanimously approved the plans back in November 2003. The project was to be a joint venture of the District and Howard University Hospital. But now, Mayor Tony Williams says he has reservations about spending $200 million on a hospital. He recently decided to appoint a task force to study the options. Howard University President Patrick Swygert responded by sending an email to students and staff, confirming his displeasure with the mayor’s change of heart. The project was slated as a 250-bed, full-service Level 1 Trauma hospital with a medical office building and a research center… Greater Lafayette Health Services (GLHS), of Lafayette, Ind., has announced plans to build a 175-bed, $210 million, not-for-profit hospital on 103 acres in Lafayette. The future hospital would be built on a site just south of an 11-acres campus owned by a former rival, Unity Healthcare. The two systems started collaborating in 2005, when GLHS acquired half of Unity’s three outpatient facilities. The large tract of the future hospital will provide room for parking, offices and future expansions. GLHS is part of the Sisters of St. Francis Health Services system… A Virginia Health Department analyst has recommended that two applications for new hospitals proposed for the Fredericksburg area should be denied. Shirley Bartley, an analyst for the Health Department’s Division of Certificate of Public Need, based in Richmond, says the Fredericksburg region has plenty of hospital beds and will have adequate supply for at least another five years. The hospitals are being proposed by MediCorp Health System and HCA Health Services of Virginia. MediCorp wants to build a 100-bed hospital near Stafford Courthouse. HCA has proposed a 126-bed hospital for the Massaponax area of Spotsylvania. An HCA spokesman said the company disagrees with Bartley’s conclusions while officials with MediCorp had no comment… Mills-Peninsula Health Services’ plans for a proposed 243-bed replacement for Peninsula Hospital in Burlingame, Calif., recently cleared its first hurdle in the state approval process. The Office of Statewide Health Planning and Development has been reviewing the site plan for the proposed project since November, making sure it complies with the state’s building standards, including seismic safety guidelines. So far it hasn’t found major design flaws, a big relief to the Peninsula Health Care District, which is overseeing the project. The public agency was hoping to keep construction costs stable at $488 million, according to district officials. The district now has to decide when to call an election for residents to approve a 50-year land lease contract with Mills-Peninsula Health Services, a Sutter Health affiliate. The land lease calls for annual rent payments of $1.5 million. With swift approvals, the project could be completed by 2010… CoVista Medical Center, a future $16 million hospital in Arkansas City, Kan., had a groundbreaking in recent weeks to kick off construction of the future replacement for South Kansas Regional Medical Center. The 60,000 square foot facility is planned to have 24 acute-care beds, five beds in an intensive care unit (ICU), and a six-bed obstetrics wing. Construction is slated for completion in mid-2007… University Community Hospital in Tampa, Fla., has proposed a new 100-bed hospital for a site in Wesley Chapel, north of the city. The system joins a crowded landscape, as two other systems are proposing Tampa Bay-area hospitals as well. The other systems are Adventist Health Systems, owner of Florida Hospital Zephyrhills, and BayCare Health Systems, which operates nine Tampa Bay- area hospitals. Both Adventist and BayCare have proposed 80-bed facilities. All three hospitals have filed CON applications with the state. State officials, who are expected to make a decision by June 16, have indicated that more than one of the proposals could gain CON approval… Edward Hospital & Health Services, of Naperville, Ill., faces a big public hearing in mid-June concerning its controversial proposal for a 142-bed hospital in Plainfield, Ill. The proposal has been met by controversy and competition as rival hospital companies are also vying for a piece of the rapidly expanding market in Plainfield, where Edward currently operates an outpatient facility on 60 acres. Back in 2003, the state denied Edward’s proposal for a Plainfield hospital, but company officials vowed to continue pursuing the plan. They filed a lawsuit arguing that the state’s health facilities board was tainted by past corruption and that the board failed to take into account the tremendous growth in the Plainfield area. Opponents of Edward’s proposal include Provena Saint Joseph Medical Center and Rush-Copley Medical Center, both of which say Edward is trying to cherry-pick the most affluent patients while leaving other hospitals to take care of higher percentages of low-income patients… Magnolia Regional Health Center in Corinth, Miss., recently began work on a $43 million project that will renovate about 140,000 square feet of space, expand operating rooms, and add ICU beds and a new medical office building. Construction is expected to be complete in late 2007 Northeast Georgia Medical Center (NGHS), Gainesville, Ga., has received CON approval from the state Department of Community Health for the construction of its $180 million North Patient Tower on the hospital’s Spring Street campus. NGHS will break ground on the new tower in late summer, with completion scheduled for 2009. Plans call for a seven-story complex that would house 32 ICU beds, 96 medical/surgical beds, and other services…  Scripps Memorial Hospital of Encinitas, Calif., has submitted a five-phase expansion plan to City Hall that would eventually double the space of its campus. The expansion is part of a larger construction program planned by the Scripps Health chain, which operates five hospitals in the county. Currently, the 28-acre Encinitas campus has 333,380 square feet of space in five buildings. The construction program would add another 541,312 square feet. The plan includes an 885-space parking structure and a three-story medical office building as part of a first phase. Later phases would include reworking the hospital’s entrance as well as various additions to the 140-bed hospital. q

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