Washington providers are capitalizing

AGING (AND GROWING) POPULATION, OUTDATED FACILITIES KEEP D.C. AREA HUMMING

By John Mugford

 

While healthcare development might not be booming in the Greater Washington area like it has in recent years – one industry insider pegged the activity level at “medium” – the number of current and planned projects remains abundant in the District of Columbia and its suburbs.

And there’s certainly been one major headline grabber.

We’re talking about the proposal to construct a $420 million, 250-bed hospital that would be called the National Capital Medical Center (NCMC). Building NCMC was viewed by many as a chance to finally replace D.C. General. According to many, the closing of that facility in 2001 left a hole in the city’s healthcare coverage – especially in Southeast D.C., and especially for the poor.

The NCMC proposal, however, hit a snag in April when D.C. Mayor Tony Williams reconsidered his longtime support for the project. Just as planning for the hospital was heating up – an agreement had been reached between the city and Howard University to be financial partners of up to $212 million each – the mayor called on a task force of healthcare experts to consider alternatives to building an acute-care hospital in Southeast.

Mr. Williams pondered aloud whether an alternative plan to build a series of ambulatory centers instead of a new hospital would be more prudent and helpful to Southeast residents. Such a plan had been touted by NCMC opponents.

By pulling his support for NCMC, Mr. Williams received a public tongue-lashing from Howard University President Patrick Swygert, who called him a “lame duck” mayor.  

However, the conclusion of the task force’s two-month study was announced just as Healthcare Real Estate Insights^™ was going to press. The 15-member panel voted 10-5 in favor of plan scrapping the idea of National Capital Medical Center. Instead, the task force is advocating that the city’s $212 million be used to develop three $50 million, freestanding emergency healthcare clinics, or healthplexes, in Southeast.

The remaining $62 million would be used to make improvements at Greater Southeast Community Hospital, a financially challenged for-profit hospital owned by Scottsdale, Ariz.-based Doctors Community Healthcare. In order for city money to be spent at Greater Southeast – the only acute-care hospital in that part of town – the panel recommended a change in ownership to a not-for-profit operator.

Officials with the Scottsdale-based health system have indicated they would be willing to sell the 477-bed hospital if such a plan was in the best interests of the city. Past plans to improve Greater Southeast have included upgrading its trauma center to Level II, extending its outpatient center, launching a walk-in ambulatory clinic, adding 40 pediatric beds and transferring to its campus the district’s St. Elizabeth’s Hospital, a mental health facility slated for its own renovations.

D.C. is in stable condition

Away from the political controversy of NCMC, quite a bit of healthcare development is taking place in the Greater Washington area, a growing metro that continues its outward march away from the central city. The 2000 U.S. Census Bureau put the population of Washington’s Consolidated Metropolitan Services Area (CSMA) at 7.6 million – fourth largest in the country. The population of D.C. itself was an estimated 553,000 in 2004 – quite a decline from the actual count of 638,333 in 1980.

Even so, folks involved in healthcare development note that the District is enjoying a bit of a residential renaissance as new condos, townhomes and apartments are being added to the city’s mix.

“The healthcare development market is pretty stable, but the residential population in the city is booming,” says Mervyn Alphonso, a director with the D.C. office of Alvarez & Marsal, an international consulting and advisory firm. “There are lots of infill projects taking place – young people want to come back to the city.”

The biggest growth in the Greater D.C. area continues to take place in the exurbs of northern Virginia, in counties such as Loudoun and Prince William.

“Most of the hospital systems are in good shape, especially those where the demographics are solid, and they’re either wrapping up or looking at doing some projects,” says Jim Kornick, the director of national office and industrial sales at the D.C. office of Marcus & Millichap. “Some of the systems in certain parts of D.C. and Prince Georges County are in tougher shape right now.”

“We’re wrapping up a few projects in the D.C. area,” says Tara O’Connell, a spokesperson for the Washington office of Bovis Lend Lease. “We’re closing out a $70 million upgrade at Potomac Hospital, and recently completed a $62 million project at Holy Cross Hospital in Silver Spring (Md.). In addition to that, we’re doing quite a bit of housing in the city.

“But as for healthcare, right now we’re looking up to the Baltimore area, where we have some projects and where there is a lot of activity, including some very big projects at places like Johns Hopkins.”

Several projects are ongoing in D.C., including:

• § Sibley Memorial Hospital’s $300 million expansion and renovation that is expected to take a number of years,
• § Children’s National Medical Center’s 140-bed expansion that could be complete by early 2007
• § Washington Hospital Center’s $1 billion, multi-year plan, and
• § MedStar Health’s plan to expand and upgrade its Georgetown University Hospital to the tune of hundreds of millions of dollars.

 

Georgetown University has launched a $50 million fundraising campaign.

In nearby Maryland suburbs, Suburban Hospital, part of the MedStar system, is in the midst of a major expansion, as is Montgomery General in Montgomery County, Shady Grove Adventist Hospital in Rockville, and Fort Washington Medical Center in Fort Washington.

More clinics are needed

Mr. Alphonso says his firm, along with Jair Lynch Cos., was recently hired by the DC Primary Care Association (DCPCA), a consortium of healthcare organizations, as a development consultant to manage site selection and construction for a series of outpatient clinics throughout D.C. The initiative is called Medical Homes DC and would entail building new clinics or redeveloping aging facilities.

“We’re looking to establish a design template that can be used whenever a site is found, or whenever a current clinic needs to be renovated or redeveloped as part of the effort,” says Mr. Alphonso. “The clinics would typically range in size from 8,000 square feet to 22,000 square feet. It would be a shot in the arm for those who need healthcare in the city.”

The D.C. office of architectural firm Ellerbe Beckett has done some work on the template, Mr. Alphonso says.

Is Inova indomitable?

Northern Virginia’s healthcare scene is dominated by one entity: Falls Church, Va.-based Inova Health System, which has six hospitals and is on the verge of adding to its presence. Observers say the not-for-profit system provides high-quality care and is determined not to give up its turf without a good fight.

“It’s not just an 800-pound gorilla in northern Virginia, it’s the only gorilla,” says one source. “But they do provide quality healthcare.”

Such an example of Inova’s tenacity can be found in growing Loudoun County, where the system in recent years acquired Loudoun Healthcare and now operates the only full-service acute-care hospital in the county, the 155-bed Inova Loudoun Hospital in Leesburg.

When Nashville, Tenn.-based HCA Inc. (NYSE: HCA) proposed a new hospital for Loudoun County, the 164-bed Broadlands Regional Medical Center in Ashburn, not too far south of Leesburg, Inova opposed the plan. Inova officials said a new hospital should be located farther from its Inova Loudoun Hospital.

Even though the Virginia Department of Health has approved Broadlands’ Certificate of Public Need (COPN) application on two occasions, the Loudoun County Board of Supervisors denied the application for a rezoning late in 2005. Officials with Broadlands and HCA have filed an appeal of the decision, saying there is indeed a need for the facility.

HCA also owns the 160-bed Reston Hospital Center in Reston, Va.,  and two facilities that would transfer beds to Broadlands if and when it is approved by Loudoun County: 164-bed Northern Virginia Community Hospital in Arlington and the 100-bed Dominion Hospital in Falls Church.

Meanwhile, Inova in late 2005 entered an agreement to acquire 94 acres of farmland in the southern Dulles area of the county with plans to first establish a healthplex and, eventually, a hospital with about 100 beds.

“Inova continues to make improvements to their facilities, and they’re looking to grow to meet the demand in Northern Virginia,” says Joe Kranz, a project manager with Alexandria, Va., office of Turner Construction, which does quite a bit of work for Inova.

“The whole D.C. area has been pretty busy lately, but there are still a lot of large projects that could be announced soon. In Virginia, the reason for the activity is growth, while in D.C. the reason is an aging population, aging infrastructure, and the need for new technologies.”

For example, in northern Virginia Inova is in the early stages of planning for a new children’s hospital at the Inova Fairfax campus, a project that could end up in the $300 million range. The project is likely to start in 2008.

Farther into northern Virginia, down in Stafford County, MediCorp Health System, which operates the 412-bed Mary Washington Hospital in Fredericksburg, has filed a COPN application to build a new 100-bed hospital about 50 miles south of Washington. The growing county population is putting heavy demand on Mary Washington, where the emergency room sees 90,000 patients a year, according to officials. q

Selected Washington area medical real estate projects

• § Montgomery General Hospital, Olney, Md. The smallest hospital in Montgomery County, just north of Washington, has big plans for a multi-phase, $101 million expansion. The project would include constructing a new patient tower, converting all current patient rooms to private rooms, constructing a 25,000 square foot emergency room, adding 450 parking spaces, and partnering with a private developer to build a 60,000 square foot medical office building on hospital-owned land across the street from the main facility. The project would add 42 new beds, bringing the hospital’s total to 186. The hospital still needs to obtain Certificate of Need (CON) approval from the Maryland Health Care Commission.

 

• § Fort Washington Medical Center, Fort Washington, Md. Plans submitted to the Maryland Health Care Commission call for a $66.9 million expansion and renovation at the hospital in this small city south of Washington. The number of licensed beds would increase from 41 to 70, and the emergency department would expand from 14 treatment rooms to 30. The plan is currently under review by state regulators.

 

• § Shady Grove Adventist Hospital, Rockville, Md. Shady Grove Adventist is in the midst of a $100 million building program to add a four-story, 207,000 square foot tower with 144 private rooms, a new surgery center and an expanded emergency department. The tower is scheduled for an opening in January 2008. In addition, the project will include renovating 54,000 square feet of existing hospital space. That portion of the project is scheduled to begin this fall and conclude in spring 2009. The overall project is slated to expand the number of beds from 238 to 296. Whiting-Turner is the general contractor on the project.

 

• § Dimensions Healthcare System Planned Hospitals in Prince George’s County, Md. Despite being strapped for cash, Cheverly, Md.-based Dimension Healthcare is planning a $100 million, 100-bed hospital in Bowie, Md., a growing city between Washington and Annapolis, Md. The system is proposing to build the future hospital on land where it operates an outpatient center, called the Bowie Health Campus. Dimensions’ predecessor company actually received Maryland CON approval for a 176-bed hospital in Bowie 30 years ago, but the facility was never built. Now, Dimensions is expected to reduce its request to 100 beds. The system will also need to show state regulators how it plans to finance the project, as the system has reportedly lost about $50 million since 1999.

 

• § Washington Adventist Hospital Replacement. For now, Washington Adventist has delayed its plans to build a 292-bed, $200 million replacement hospital for its 318-bed facility in Takoma Park, Md. Rockville, Md.-based Adventist HealthCare was hoping to file a CON application by the 2006 deadline in April, but ran into delays finding a proper site. As a result, the system is looking to file in 2007, at which time it hopes to have land secured for the future facility. The system was reportedly in negotiations for a site in Calverton. However, administrators with other Montgomery County, Md., hospitals have spoken out against any new hospital proposal outside of Takoma Park, saying such a move would impact other existing hospitals.

 

• § Inova Health System, Falls Church, Va. Inova dominates the northern Virginia healthcare scene, and the system has plans to increase its presence in these growing suburbs and exurbs in coming years with projects expected to total hundreds of millions of dollars. For example, the system in recent months announced a plan to merge with the Prince William Health System, which operates the 170-bed Prince William Hospital in Manassas, in Prince William County. The merger gives Inova an entry into the Virginia county just south of D.C. As part of the merger, Inova has pledged to pump $200 million into capital projects at the hospital as well as at new healthplexes in other area towns. The system is also planning a $50 million expansion at the 339-bed Inova Alexandria Hospital in Alexandria, where Turner Construction is the general contractor. The project, which would add a total of about 125,000 square feet, would include expansions of the emergency department and operating rooms, as well as adding more labs and shell space for future growth. Inova also entered an agreement to acquire property in growing Loudoun County, where it plans to establish a healthplex first and eventually a hospital with about 100 beds. At the 833-bed Inova Fairfax Hospital in Falls Church, the system recently applied for a COPN to add beds to shell space built earlier. The system is also planning to build a new children’s hospital at Fairfax, a project that could be in the $300 million range.

 

• § MediCorp Health System’s Proposed Hospital in Stafford County, Va. MediCorp has applied for a COPN with the State of Virginia for a 100-bed acute-care hospital in Stafford County, in an area north of Fredericksburg and with easy access to I-95. The system already operates the 412-bed Mary Washington Hospital in Fredericksburg, about 50 miles from D.C., but officials say that facility is overcrowded, especially the emergency-room. The new hospital would likely offer outpatient services, including an MOB.

 

• § HCA Inc.’s Proposal Hospital in Spottsyvania County, Va. Spottsylvania Medical Center Inc. and its parent, HCA Inc., have applied for a COPN for a new 130-bed hospital south of Fredericksburg, where MediCorp Health operates Mary Washington Hospital. Further details of the plan were not available. q