Industry Pulse (August 2007)

HOUSTON – The trouble doesn’t seem to be over for the former physician-owned Town & Country Hospital in Houston. Recently, doctors leaving a medical office building (MOB) on the campus filed two lawsuits against Houston-based Memorial Hermann Healthcare System, which acquired the hospital and MOB in early 2007 from Medical Properties Trust Inc. (NYSE: MPW), a Birmingham, Ala.-based real estate investment trust (REIT). The doctors are part of part of Memorial Clinical Associates, the largest tenant in the MOB. The clinic is moving to a nearby facility owned by and developed by Charlotte, N.C.-based Hospital Partners of America. Memorial Clinical Associates, a seven-doctor group, was the lead investor in a partnership of 105 doctors that invested $70 million in Town & Country Hospital in 2005.  The hospital closed in January 2007. Two lawsuits filed by the partnership allege that Memorial Hermann kept the hospital from getting managed care contracts from major insurers, which ultimately led to the failure of the hospital.  All current tenants in the medical office building were hospital investors. Many indicate they won’t be tenants much longer. Memorial Hermann, the largest hospital operator in Houston with a 25 percent market share, says the lawsuits are without merit.
STUART, Fla. – The seventh time looks to be a charm for Stuart-based Martin Memorial Health Systems in its quest to build a $117 million hospital in western St. Lucie County. Florida’s Agency for Health Care Administration (AHCA) recently approved the hospital’s latest proposal, which calls for an 80-bed hospital near the Tradition development west of Interstate 95. The facility would be called the West Port St. Lucie Hospital. The AHCA granted the approval after rejecting six previous proposals from Martin Memorial – a string of proposals that dates to 2002. Even with the approval, all is not necessarily rosy for Martin Memorial because Nashville Tenn.-based HCA Inc., the nation’s largest for-profit hospital system, is expected to challenge the AHCA approval. HCA owns two hospitals in the county and asserts that the area’s growth has slowed. Officials with Martin Memorial say the area has grown and will continue to grow in the future. However, Martin Memorial received backing from the Torrey Pines Institute for Molecular Studies, which is using state and local funds to open a research center in Tradition. Officials with Torrey Pines voiced strong support for the new hospital, saying such a facility is needed for collaborative research efforts.

MINNEAPOLIS – A battle between children’s hospitals is brewing in the metropolitan area of Minneapolis and St. Paul – otherwise known as the Twin Cities. Children’s Hospitals and Clinics of Minnesota recently announced that it intends to spend $300 million for renovations on its campuses in Minneapolis and St. Paul. The construction project would entail privatizing all patient rooms and enlarging and upgrading operating rooms and the emergency department. In Minneapolis, the neonatal intensive care unit would be expanded and a Ronald McDonald House would be built inside the hospital. Earlier this year, the University of Minnesota Children’s Hospital announced that it plans to build a new $175 million facility on its Fairview Riverside campus at the university. Local political and community leaders are concerned that the high level of competition will damper the quality of pediatric care in the Twin Cities, as the two systems will be trying to recruit medical staff and attract patients. Both of the Children’s projects are scheduled for completion in three to five years. Construction on the 207-bed University-Fairview children’s project is scheduled for completion in 2010.
 
PITTSBURGH – Pittsburgh can point to a solid example of what healthcare and healthcare real estate can mean to a city. When the University of Pittsburgh Medical Center (UPMC) recently entered an agreement to lease 185,000 square feet – and eventually up to 500,000 square feet – in the city’s signature 64-story U.S. Steel Tower in the central business district, the deal helped boost the health of the downtown office market. According to a report by the local office of Grubb & Ellis Co., the lease agreement contributed to a drop of more than a percentage point – from 20.7 percent in the first quarter to 19.6 percent at the end of the second quarter – in the vacancy rate in the city’s CBD. Grubb & Ellis calls its report “Office Market Trends Pittsburgh.” UPMC won’t move into its first 185,000 square foot space until next March, but the space is no longer counted as vacant, according to Grubb & Ellis. The system will be moving into some of the space that will soon be vacated by the H.J. Heinz Co., which plans to move its world headquarters from the U.S. Steel Tower to another Pittsburgh property. The move will have another effect on the Pittsburgh skyline. Reversing a previous decision, the Pittsburgh Planning Commission last month voted to allow UPMC to put its well-known initials on near top of the U.S. Steel Tower in 20-foot-high illuminated letters. Opponents say that the sign will detract from the historic significance of the building. But UPMC officials contend that the new sign will symbolize Pittsburgh’s emergence as a leader in science, medicine and technology, and will send a message that the city is no longer dependent on the steel industry.
CHARLOTTE, N.C. – It looks as if Charlotte-based Presbyterian Healthcare System will be able to move forward with its plan to build a $90 million hospital in the Mint Hill section of the city – located in the far southern part of Charlotte.  In recent weeks, both CMC-NorthEast and Stanly Regional Medical Center of have dropped appeals filed with North Carolina officials regarding the state’s approval of the 50-bed facility.  The new hospital is slated for a 21-acre parcel near U.S. Interstate 485 and is part of a 50-acre plot that Presbyterian already owns. Presbyterian officials have not set a groundbreaking date for the Mint Hill hospital, but say they plan to open the facility in fall 2009. The state had previously denied a proposal from CMC-NorthEast to build a $70 million hospital and freestanding emergency room just off I-485 at N.C. Highway 51 in Charlotte. CMC-NorthEast is still hoping to receive approval for the free-standing emergency room. CMC-NorthEast recently completed a merger with Charlotte-based Carolinas HealthCare System, which applied in late 2006 to build a 50-bed hospital in the Charlotte area. Stanly Regional dropped its appeal against the Mint Hill hospital in April, at about the same time that CMC-NorthEast agreed to drop its appeal of Stanly’s proposal to build an imaging center at its $6.9 million Stanly Regional West Campus medical facility in Locust, N.C.

CINCINNATI – TriHealth Inc. of Cincinnati is in the midst of a $270 million building plan that will add capacity at two hospitals – one in the city and one in the growing suburbs. The first project is a $150 million expansion at Bethesda North Hospital in the Cincinnati suburb of Montgomery. The project is slated to open in coming months and will add 135 beds, a seven-story tower and 300,000 square feet of patient-care space. The next biggest TriHealth project is at Good Samaritan Hospital in downtown Cincinnati, where $122 million is being spent during the next three years on a 10-story, 165,000 square foot tower. Included will be 21 new patient rooms, a 32-bed surgical care unit, 20 intensive-care rooms, 12 delivery rooms, a 21-bed dialysis unit and two new open-heart operating rooms. The project also will add 400 new parking spaces. For both projects, the general is Turner Construction Co. and the architect is HDR Architects. q