Industry Pulse (November 2007)

SPRING HILL, Tenn. – Nashville, Tenn.-based HCA Inc.’s TriStar Health System recently received a rejection right in its own backyard. An administrative law judge has denied HCA’s previously approved Certificate of Need (CON) to build a $110 million hospital in Spring Hill, about 30 miles south of Nashville. The CON for the 56-bed facility had been approved in July 2006. Two local hospitals had challenged the CON approval: Maury Regional Medical Center in Columbia and Williamson Medical Center in Franklin. Administrative Law Judge Leonard Pogue heard the case in April. HCA had wanted to open the new hospital in 2010. It would have been located about 14 miles from Maury Regional and 17 miles from Williamson Medical Center. A local group that had pushed for a new hospital – the not-for-profit Citizens for Spring Hill Hospital – expressed anger about the ruling. Maury Regional and Williamson Medical have been improving their facilities in recent years. Both said they would have lost millions of dollars each year if the new HCA facility were built.

MIDLAND, Texas – Midland Memorial Hospital has proposed an eight-story, $110 million patient tower, a medical office building (MOB) and a new parking structure. Hospital officials hope to complete the ambitious project by 2011. The 231-bed tower, which would have all private patient rooms, would replace much of the patient care areas provided in the hospital’s current 221-bed facility. The project would triple the size of the emergency department, totally renovate the central plant and add all new critical care and medical/surgical patient rooms. The hospital hired New Albany, Ohio-based Aegis Advisors and the architectural firm of Perkins + Will to work on the concept for upgrading the facility. The Midland Memorial Foundation would lead a capital fund drive for the patient tower. The hospital also plans to retain an investment banking consultant to develop debt options and negotiate with Perkins + Will to proceed with design development, refine the project scope and clarify the budget. Much of the hospital’s old facility would be used as an outpatient center that would include office space and leased space for Select Specialty Hospital, a long-term acute care facility that’s part of Mechanicsburg, Pa.-based Select Medical Corp.

POINCIANA, Fla. – The race is on in this unincorporated but growing town in central Florida to build a community hospital that would serve an estimated 65,000 people. Last year, Osceola Regional Medical Center applied for state permission to build a 120-bed hospital in Poinciana, but the Florida Agency for Health Care Administration (AHCA) denied the application. Now, Osceola Regional, which is owned by Nashville, Tenn.-based HCA Inc., is once again making a bid to build a hospital – this time it is proposing a $112 million facility. The plot has thickened, however, as Naples, Fla.-based HMA Inc. (NYSE: HMA), which previously opposed Osceola’s application, has proposed a 120-bed hospital of its own. HMA Inc., which had argued that the area did not need a new facility, owns two central Florida hospitals: Heart of Florida Regional Medical Center in Davenport and St. Cloud Regional Medical Center in St. Cloud.

ROWAN COUNTY, N.C. – Midway between Charlotte, N.C., and the Triangle area, a health system turf war is brewing in southern Rowan County. Recently, Rowan Regional Medical Center submitted an application to the state for a $109 million, 50-bed hospital with a 24-hour emergency department in an area near the city of Kannapolis. The application comes two months after Rowan Regional announced a merger with Charlotte-based Presbyterian Healthcare, which is part of Winston-Salem, N.C.-based Novant Health Inc. Meanwhile, the state has also received an application from Presbyterian’s rival, Charlotte-based Carolinas HealthCare System, for a 24-hour emergency facility in the same area. That facility would be administered by Carolinas Medical Center-NorthEast in Charlotte. Carolinas officials say a free-standing emergency facility would be a more efficient use of healthcare resources. But Rowan Regional’s plans call for transferring 50 from its flagship facility, a 268-bed hospital in Salisbury, to the new facility. They, too, say their plan is a good use of resources. Officials with the competing systems do agree on one thing: The need for healthcare facilities in southern Rowan County is being driven by population growth.

HOUSTON – Irving, Texas-based Christus Health System is teaming with a group of about 80 doctors to launch a new 56-bed hospital on Houston’s north side, near Bush International Airport. The general acute care hospital is slated to open in fall 2009; it would be located about midway between the U.S. Interstate 45 and State Highway 59 corridors. San Antonio-based BPR Investment Properties would develop and own the $75 million facility – the company owns the land where the hospital would be built. Christus would be the majority owner of the hospital’s operations, with the physicians as minority owners. The new hospital has not been named, but it would carry the Christus flag. The area is currently served by Memorial Hermann Northeast, HCA Inc.-owned Kingwood Medical Center, and Northwest Medical Center, owned by Tenet Healthcare Corp. (NYSE: THC).

SONOMA, Calif. – As of recent weeks, a new location had not been finalized for a replacement facility for Sonoma Valley Hospital. Site selection has been delayed, according to board members of the Sonoma Valley Health Care District, because negotiations for a site are ongoing. Members of the board have not revealed news about the site selection process since May, when the Sonoma Valley Health Care Coalition passed its final recommendation for a replacement facility. The hospital hired San Francisco-based Tsang Architecture and an engineering firm to explore two sites to determine which would be the most feasible. One of the options includes building the replacement at the hospital’s current site. Plans call for a 56-bed hospital that would cost about $130 million. q

CASTRO VALLEY, Calif. – The Eden Township Healthcare District is close to entering an agreement that would relinquish control of its Eden Medical Center in Castro Valley to Sacramento, Calif.-based Sutter Health. The deal calls for Sutter to invest $300 million to build a replacement hospital on the Eden campus and to spend $20 million at financially troubled San Leandro Hospital, a nearby facility owned by the district and leased by Sutter. The new Eden Medical Center would have 130 beds, which would be smaller than its current 178-bed facility. But the hospital must meet California’s seismic safety deadline by 2013, and district officials have been exploring cost options. Construction of the new hospital would be funded entirely by Sutter. Construction and would start in the next 18 to 24 months. If the San Leandro Hospital does not turn a profit within two years, Sutter would be allowed to discontinue the hospital’s acute care services, according to the pending agreement. The healthcare district is holding a series of open meetings to inform the public about the possible agreement.

EDMOND, Okla. – Oklahoma City-based Integris Health is planning to build a new $40 million to $60 million, 30- to 60-bed hospital in Edmond on land currently owned by Henderson Hills Baptist Church and a private individual. Because the Edmond area, located north of Oklahoma City, is experiencing such rapid, Integris officials say the hospital could eventually be expanded to 100 beds. The health system, which has a dozen hospitals in its fold, plans to buy 24 acres from the church as well as a contiguous 20-acre plot. The system’s land acquisition costs would total about $5.3 million. Integris would like to begin construction in late 2008 and complete the project by 2010. q