Inpatient Projects (Febuary 2007)

Deadline danger for California providers


By John Mugford

For several years now, plenty of folks associated with the California healthcare scene have realized that many of the state’s hospitals are struggling to meet strict seismic safety requirements passed in the aftermath of the 1994 Northridge earthquake.

Initially, the state Legislature set a 2008 deadline for compliance with Senate Bill 1953. For all intents and purposes, however, that deadline has been extended to 2013 and, in some cases, hospitals have been granted extensions to 2015. But, by 2030, even stricter standards will require that all hospital buildings be able to provide patient care following a major earthquake.

But a recent study by Rand Corp. indicates that more of the state’s hospitals are in danger of not meeting the deadlines than most observers had believed.

In fact, of the 1,000 or hospital buildings deemed unsafe during an earthquake, more than half are not likely to meet the 2013 deadline. Many probably won’t even meet the 2030 deadline, according to the Rand study, which was commissioned by the California HealthCare Foundation.

The buildings that are in the most danger of missing the deadlines are spread over 305 hospital campuses statewide, with more than 80 percent located in the densely populated areas of the San Francisco Bay Area and Greater Los Angeles.

On top of that, the costs associated with making the necessary upgrades are far more costly than earlier estimates. Statewide, about 40 million to 70 million square feet of hospital space needs to be rebuilt over the next 23 years, according to Rand Corp.

In its report, Rand indicates that the upgrades are expected to cost about $110 billion, which is nearly triple an estimate made back in 2002. When financing costs are added to the $110 billion estimate, the total cost could reach about $220 billion.

The report’s findings are likely to cause more debate at the capitol in Sacramento, where lawmakers are trying to keep healthcare costs from spiraling while still making sure the state’s hospitals are safe during earthquakes.

For several years, hospital administrators from throughout the state have lobbied for extending the deadline, noting that the shorter timetable was forcing hospitals to make quick fixes and divert money from other necessary investments. In addition, the California Hospital Association reported that about half of the state’s hospitals are operating in the red.

Help on the way?

Amid the calls for help from hospitals, the California Office of Statewide Health Planning and Development (OSHPD) said it is considering a proposal to re-evaluate the definition of high-risk buildings. The program could reclassify some structures to lower-risk status and extend their compliance deadlines until 2020 or 2030.

To help it evaluate the earthquake readiness of the state’s hospitals, OSHPD is considering using a software program developed by the Federal Emergency Management Agency (FEMA) and the National Institute of Building Sciences to estimate how much damage hospitals would suffer during an earthquake. The software program is called “Hazards U.S.,” or “Hazus” for short.

OSHPD recently hired San Francisco-based structural engineering firm Rutherford & Chekene to review and possibly reclassify some of the at-risk hospitals using Hazus. According to its preliminary studies, the firm believes that a “significant number” of hospitals might be reclassified to a lower risk category, which could delay their deadline for meeting the seismic guidelines.

The impact of such reclassifications could provide huge cost savings and deadline reprieves for many providers. For example, Catholic Healthcare West says it could reduce its rebuilding and retrofitting costs by as much as 60 percent if the Hazus software program is used. The California Hospital Association estimates that 50 percent fewer hospitals would need to be replaced than originally estimated should the state decide to use the Hazus system to classify hospitals.

Even though such a change would need to be approved by the Legislature, some observers believe that Gov. Arnold Schwarzenegger could be in favor of adopting a new plan for classifying the earthquake readiness of the state’s hospitals. The governor has indicated he would like to “reduce regulatory barriers.”

OSHPD has been using Hazus since May 2006, when it began analyzing the risk associated with all of the 975 of the hospital buildings now flagged as SPC-1, or high risk. The agency subsequently recommended that any buildings with a 10 percent chance or smaller of suffering “complete” damage in a quake be reclassified as SPC-2. Buildings with a 10 percent to 15 percent chance of total damage would be placed in a new category, SPC-1E, under OSHPD’s recommendations.

Under OSHPD’s proposal, hospitals in the SPC-2 category would have until 2030 to meet seismic requirements while those in the SPC-1E category would have until 2020.

Ohio State looks

for new revenues

for massive project

COLUMBUS, Ohio – Ohio State University Medical Center has come to the conclusion that its capital fundraising efforts will more than likely come up short – timing-wise – as it tries to keep moving forward on a massive $780 million expansion.

So, instead of counting on philanthropic sources to be in place to fund about $100 million worth of the construction project, the medical center is hoping to tap into funds normally used for starting new programs and hiring new faculty members. The plan, of course, must gain the approval of Ohio State’s board of trustees, which has expressed reservations about the project. The proposal was to be presented to the board in recent weeks; the results of any vote were not known at press time.

In recent months, OSU officials came to the realization that they were not on track to raise $100 million in time to continue with the construction schedule as planned. The funding plan also calls for issuing $680 million worth of bonds.

Officials say they do not want to harm the university’s AA bond credit rating and therefore have come up with the alternative funding proposal. According to medical center officials, OSU has received pledges for $100 million in donations for the projects, but the bulk of the commitments are for 2009 and beyond. In the meantime, OSU’s trustees are requiring that 75 percent of any fundraising goal must be received as cash-in-hand before certain aspects of the project can proceed.

The building projects include a cancer hospital, an outpatient and diagnostic treatment center, and a critical-care patient tower.

As noted, the difficulty in raising funds is just one of the concerns of the board and OSU President Karen Holbrook. Holbrook has indicated she is in favor of the project, but would like to see more due diligence in order to protect the university. Medical center officials say further delays will further drive up costs.

In midst of boom,

Philly seeing new

type of hospital

PHILADELPHIA – For about a decade, the Greater Philadelphia healthcare real estate scene was one of little action; hospital closures and consolidations garnered the headlines. But, currently, Philly is in the midst of $4 billion healthcare construction boom – and it’s a boom that’s ushering in a new breed of hospital.

In fact, many of the latest projects are using evidence-based design – the nascent science of configuring the physical structure of hospitals to improve care and reduce errors. An example can be found in nearby Camden, N.J., where Cooper University Hospital is building a 10-story, $218 million inpatient pavilion that includes private rooms, dispersed nursing stations, noise-reducing ceilings and plenty of natural light that is believed to enhance the healing process. Not only is the facility and its amenities remindful of a five-star hotel, but the staff has received hospitality training from folks at Ritz-Carlton. Leading the design effort is Andrew Jarvis of Philadelphia-based EwingCole Architecture.

Several of the hospitals are making sure to design their new facilities with single-patient rooms, better air flow, and bacteria-reducing filtration systems to reduce the spread of infection between patients. Still others are using noise reducing features and are designing facilities

At the new Perelman Center for Advanced Medicine, part of the University of Pennsylvania Health System, a high-tech ventilation system is designed to improve air quality and fight germs.

Tri-City considering

options in wake

of referendum defeat

OCEANSIDE, Calif. – Tri-City Medical Center’s governing board is taking its time in crafting another proposal to replace its “aging” buildings. The board is trying to determine its next course of action after voters last fall once again did not pass a $596 bond issue that would have provided funds to upgrade the hospital’s facilities. Even though more than 64 percent of those who went to the polls voted in favor of Proposition T, the vote required a two-thirds approval to be passed.

Hospital district officials say upgrades and replacements are needed at the hospital’s campus in order to comply with California’s Senate Bill 1953, which requires all hospital structures to meet seismic safety standards by 2013. The board said it plans to scrutinize voting data from the Nov. 7, 2006, election before deciding on its next course of action. It is also working closely with its consultant and lobbyist in determining a course of action.

Officials say they will not necessarily call for another bond measure in fall 2007, as the district needs to change its proposal if it plans to go to once again ask voters to approve such a measure. Tri-City has had bond proposals turned down each of the last two years. Had the 2006 referendum passed, it would have paved the way for a new 335-bed Tri-City Medical Center, an outpatient services building, and other construction projects.

District officials said in recent weeks that they do not believe the state would shut down Tri-City in 2013 if the hospital does not meet the seismic requirements. That’s because recent study by Rand Corp. indicates that 50 percent of California’s hospitals are not likely to meet the seismic retrofit deadline in 2013.

U of Florida begins

large cancer

center project

GAINESVILLE, Fla. – Construction was set to start in January on the 500,000 square foot Shands at University of Florida Cancer Center in Gainesville. The plans calls for a an eight-story patient tower with 192 private rooms, a critical care center for emergency and trauma services, an operating suite and an 800-stall parking garage.

The hospital plans to pursue Leadership in Energy and Environmental Design (LEED) certification by the U.S. Green Building Council, which would make Shands the first hospital in Florida with that distinction.

Construction is scheduled for completion in 2009. Skanska USA Building Co. Inc.’s Tampa office is the construction manager.

Amid controversy,

Aurora increases

size of new hospital
SUMMIT, Wis. – Aurora Health Care recently announced that it plans to increase the size of its future hospital in a growing area of Waukesha County, in the far western suburbs of Milwaukee. Aurora is now planning a 110-bed, $189 million hospital – an addition of 22 beds and $23 million to the original plans. Overall, the future hospital and adjacent Aurora Wilkinson Medical Clinic will have 792,000 square feet of space.

The announcement was met with opposition from other nearby hospitals, who questioned the need for the new hospital in the first place. Aurora officials, however, say the increase is needed because more than two years has elapsed since the system first proposed its new hospital and clinic. Demand has increased in that time and will continue to increase until the project’s scheduled completion in 2009, officials say.

Aurora first proposed a new hospital for Waukesha County – at a different site – back in 2001. Since then, the system has battled with local cities over the right to build a new hospital. Eventually, Aurora decided to focus its attention on a site in the emerging, multi-use development called Pabst Farms, located just off U.S. Interstate 94 in the Town of Summit. In August of last year, Aurora reached a legal settlement with several local jurisdictions and Pabst Farms officials over the land zonings for the site which have paved the way for the new hospital and clinic.

The 13-hospital Aurora system has built four new Wisconsin hospitals since 1999 – in Kenosha, Two Rivers, Green Bay and Oshkosh. However, the new additions to the system’s hospital lineup have yet to produce big profits, as Aurora had net income in 2005 of $42.5 million on revenue of $2.8 billion – that’s a net profit margin of 1.5 percent. In 2004, Aurora had a net income of $31.8 million on revenue of $2.6 billion.

In addition, the new projects have added $1.2 billion in long-term debt for the health system. As noted, local competitors are not welcoming Aurora’s proposed hospital with open arms. One competitor, ProHealth Care Inc.’s Oconomowoc Memorial Hospital, is located about three miles north of the Aurora site and is in the midst of a $37 million renovation and expansion. The project would increase the number of beds from 79 to as many as 90. ProHealth officials argue that Aurora’s future hospital will contribute to increases in the region’s healthcare costs.

Select Medical,

Akron systems

partner on LTAC
AKRON, Ohio – Select Medical Corp., which operates long-term acute care hospitals nationwide (LTACs), is teaming with two health systems in Akron in the development and operation of a future 60-bed, $19 million facility.

Privately held, Mechanicsburgb, Pa.-based Select Medical plans to partner with Akron General Medical Center and Summa Health System in the redevelopment of a former Pontiac dealership on five acres in Akron. When the project is complete sometime in 2008, Select will close its units within other Akron hospitals.


Akron Legacy Real Estate Development LLC is pursuing a deal to acquire the five acres needed for the project from the city. Legacy would development the facility in partnership with Akron-based Wojno Development.

A major driver of the project is Medicare reimbursements – freestanding LTACs receive higher reimbursements than hospitals within hospitals. In addition, officials with the two health systems and Select Medical note that the partnership makes sense in several other ways, including managing costs and improving access for patients.

Maryland hospital

launches campaign

for replacement

HAGERSTOWN, Md. – Washington County Health System is fighting back in its effort to build a $255 million replacement hospital for Robinwood Medical Center in this city about 75 miles west of both Washington and Baltimore. The health system, in fact, recently embarked on a campaign blaming five local residents and their attorney for holding up construction of what officials call a needed replacement facility.

The residents have challenged a zoning decision that would allow a replacement to be built next to the current Robinwood Medical Center. The residents say the health district’s campaign is not working and they do not plan to drop their court appeal.

In a recent ad in the local newspaper, the health system displayed a rendering of the future hospital, laying out the photo as a puzzle with one piece missing. The piece is missing, according to the ad, because “five citizens and their attorney want to prevent us from building at Robinwood Medical Center.”

Health system officials say the appeal process could take up to 18 months, which would cause further delay and add up to $150 million in additional costs to the project.

The attorney representing the residents said in local news reports that the appeal is designed to “protect the integrity” of the county’s zoning ordinance. The appeal challenges the city’s decision to allow helicopters to serve the hospital and to allow the building to exceed the current maximum height ordinance.
For the Record

Lahey Clinic of Boston has decided to pursue a $50 million, 63,000 square foot expansion at its 162,000 square foot facility in Peabody, Mass. Part of the new project would be occupied by Children’s Hospital Boston. Other aspects of the project include expanding the emergency department, as well as cancer treatment and cardiology services. The project is slated for completion in 2009… Voters in Booneville, Ark., have approved a change in the local sales tax that will result in the building of an $18 million, 25-bed county-owned replacement facility for Booneville Community Hospital. The new facility would replace a current 25-bed hospital built in 1961. The new hospital would have about 40,000 square feet of space. The project is slated for completion in March 2008. The general contractor is Russellville, Ark.-based EWI… Construction is nearing completion at the $100 million, 171-bed Centennial Hills Hospital in northwest Las Vegas is scheduled for delivery In September. The hospital is Valley Heath System’s fifth hospital in Southern Nevada and its only acute-care facility in the northwest area of the city. The general contractor is Sandy, Utah-based Layton Construction and the architect is Dallas-based HKS IncSt. Luke’s South Hospital in Overland Park, Kan., is set to break ground in August on a $43 million, 92,000 square foot expansion and renovation. The project would add up to 50 new private inpatient rooms, a women’s health unit, a hip and knee joint replacement center, an outpatient wound care center and outpatient chemotherapy and radiation services. Plans also call for the renovation of 20,000 square feet of patient care and support service areas… A new replacement for Kennewick General Hospital in Kennewick, Wash., is expected to cost about $100 million and contain about 200,000 square feet of space. The hospital district’s current facility contains about 113,000 square feet. The hospital would be built on 40 acres that the hospital district already owns. The general contractor is Bouten Construction in Richland, Wash…. Tulsa (Okla.) Spine and Specialty Hospital would almost double in size under a planned $16 million expansion. The project is about five years ahead of the original schedule, according to officials of the 78,000 square foot provider in south Tulsa. The expansion would add 52,000 square feet. The architect is Moore, Okla.-based Costigan and Associates and the contractor is Clark Construction of Oklahoma City. Completion is scheduled for early 2008… The state of Indiana recently closed its call for bids for the building of a $90 million to $100 million psychiatric hospital near the Indiana University School of Medicine in Indianapolis. The facility would be a replacement for the Larue D. Carter Memorial Hospital. While the number of future beds has yet to be determined – estimates call for between 110 and 164 – the facility would have more than 200,000 square feet. The facility would be part of a neuroscience center, a partnership with IU’s medical school and Indianapolis-based Clarian Health Partners. The project would also include a 200,000 square foot medical office building, a 90,000 square foot brain research center, and a parking garage for 1,500 to 2,000 cars… Howard Memorial Hospital, in Nashville, Ark., is hoping to build a $24.1 million hospital to replace its 58-year-old, county owned facility. Hospital officials are set to ask voters in early March to approve a temporary, 1-cent sales tax to cover debt from construction bonds for the 60,000 square foot, 25-bed project. Officials would like to break ground in late 2007 and have the project completed by early 2009… Ohio Valley General Hospital in Pittsburgh recently opened its new 50,000 square foot Surgery and Maternity Center. The contemporary styled, four-story wing of the hospital will be phased into operation during coming months. Pittsburgh-based Burt Hill was the architect and Burchick Construction Co. was the general contractor… Central Peninsula General Hospital in Kenai, Alaska, recently opened its 82,000 square foot addition, which includes 50 new private patient rooms. The new addition is part of a three-phase, $50 million expansion. The latest phase cost an estimated $31 million, while the third and final phase, which begins this month, is slated to cost about $9.14 million. That phase entails renovating about 25,000 square feet of the original hospital and adding another 8,100 square feet of space… An administrative law judge recently sided with Health First of Rockledge, Fla., paving the way for a new 100-bed hospital in Viera, Fla. The hospital is expected to cost about $75 million and be completed by 2010. In making his ruling, Judge Robert Cohen stated that he found Health First’s arguments “more persuasive” than those of rival Wuesthoff Health System, which had challenged Health First’s proposal… A Sacramento Superior Court judge recently ruled that Sutter Health’s $600 million plan for an expansion at its Sutter General Hospital in midtown Sacramento complies with state environmental laws. As a result, the project has the green light to proceed, pending state approval. Sutter General has faced opposition and a lawsuit filed by the Service Employees International UnionBenedictine Health System (BHS) of Duluth, Minn., is looking into the financial feasibility of developing a new 25-bed, critical access hospital in rural Walker, Minn. The hospital would be part of a larger healthcare campus that would include a rural healthcare clinic as well as assisted living and independent living facilities. Frauenshuh Health Care Real Estate Solutions of Minneapolis has been selected as the lead developer on the project and is in the process of assessing its feasibility. q

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