Denver-area Hospitals Fuel Flurry of Growth
September 10, 2010
Denver-area hospitals fuel flurry of growth
By Greg Griffin
The Denver Post
Posted: 09/05/2010 01:00:00 AM MDT
Denver-area hospitals are moving ahead with a $2 billion building boom that will add hundreds of beds, replace aging structures and boost local employment.
There are five expansion or replacement projects underway or planned in the metro area, and another opened last month. A number of smaller medical buildings and campuses also are in development.
The hospitals are responding to rising demand and forecasts of both population growth along the Front Range and increased insurance coverage nationally because of health care reform. In some cases, they're making needed transitions to more modern and efficient facilities.
"What you're seeing is what people have been planning for many years, now going forward," said Steven Summer, president and chief executive of the Colorado Hospital Association. "Hospitals are trying to anticipate what will be needed and what demographics will drive it. Time frames are so extended in health care. You can't do it quickly."
The growth comes as the state and national economies struggle to recover from a deep recession. High unemployment has reduced the number of people covered by insurance, cutting into visits at many hospitals. Capital for new projects is tight.
Yet Denver hospitals are coming off a year of healthy profits, and some are sitting on significant cash reserves. Part of the reason is that Colorado's economy is in better shape than many states', experts said. Also, hospital investment portfolios rebounded sharply in 2009, and they began reaping the benefits of cost cuts and moves toward efficiency made during the recession.
University of Colorado Hospital is so flush with cash that it plans to build its $420 million expansion without debt. Children's Hospital could pay cash for its entire $228 million addition but is borrowing $60 million to take advantage of low interest rates and to preserve its endowment, hospital officials said.
Demand has spiked at both hospitals since they moved to the former Fitzsimons campus in Aurora a few years ago. Both borrowed heavily to build their new facilities.
Hospitals are major regional employers, with roughly 40,000 workers in the Denver metro area and countless more in indirect employment.
The construction will add several hundred beds to the Denver market, which already has about 4,700. While University and Children's are expanding to meet rising demand, others are being more cautious by including "shell space" in their new buildings that they can open in phases.
Competition between hospitals may result in too much capacity in certain areas of care, said Minnesota health care analyst Allan Baumgarten, who follows the Colorado market. But hospitals are constrained by the risk of giving insurers an opening to negotiate lower rates, he said.
Beds aren't the only or best way to size up new hospital space, Summer said. New facilities are more efficient in many ways, including bed utilization, and are better suited to current health care practices, with more space to accommodate quickly growing outpatient services and modern equipment.
A look at the projects:
Exempla St. Joseph
The downtown hospital, sponsored by the Sisters of Charity of Leavenworth Health System and managed by nonprofit Exempla Healthcare, plans to build a $600 million replacement building just west of its current location.
St. Joseph bought the adjacent former Children's site in 2007 with plans to build there but found it unworkable. Hospital officials still plan to use the Children's site for part of their project as well as for medical office buildings.
The facility, still in planning but set to open by 2015, will be funded by a combination of cash and tax-exempt bonds issued by Sisters of Charity and paid off from hospital operations, said St. Joseph president and chief executive Bain Farris.
St. Anthony Central
The west Denver hospital, run by nonprofit Centura Health, will move to a new $435 million facility in Lakewood near the Federal Center in mid-2011. When St. Anthony Hospital opens, it will have much more room and a modern facility to replace its 118-year-old building, said chief executive Peter Makowski.
Basics such as moving specimens throughout the hospital are problematic at St. Anthony Central, Makow ski said. The landlocked hospital also has no space for doctors' offices, a major drawback, he said. The new building will resolve those and other issues while giving St. Anthony room to grow and operate more efficiently. Accompanying the new hospital is OrthoColorado Hospital, an orthopedic and spine-care center, which opened in June.
Capital was provided by St. Anthony sponsor Catholic Health Initiatives. CHI told Makowski in mid-2007 that the project would have to be scaled back from $700 million. St. Anthony reduced the size, planned phased-in space, made the design more efficient and brought on partners to build and run separate outpatient buildings on the campus.
The privately run, nonprofit academic teaching hospital is the Denver area's largest, and its move to the Anschutz Medical Campus in Aurora has solidified that position. Inpatient visits to University, now in the process of an expansion due to be finished in 2013, increased 9 percent from 2007 to 2009, and its revenue jumped 57 percent, according to Baumgarten's Colorado Health Market Review 2010. Its patient visits grew while many Denver hospitals saw declines.
CEO Bruce Schroffel attributes the surge to the aging population, the new campus, marketing and University's growing national reputation.
Rising revenues, combined with cost cuts and a focus on efficiency, have helped University grow its cash reserves to about $515 million. That's more than double what it had a few years ago, Schroffel said.
Still, University has about $530 million in debt, mainly from bonds issued to pay for the new hospital.
Children's, pursuing a 350,000- square-foot expansion, also has benefited from its move to the An schutz campus, as well as a growing reputation that's attracting out-of-state patients. Inpatient days were up 14 percent from 2007 to 2009, and revenue rose 45 percent. It has grown its endowment to $400 million and is supported by a strong community fundraising effort.
Much of the demand resulted from the capacity added when Children's moved, said Jim Shmerling, president and chief executive.
Medical trends are fueling growth in children's hospital care. More children are going to these specialized centers, and their success in extending life spans has resulted in more continuing-care needs, Shmerling said.
Children's, an independent, nonprofit academic teaching hospital, has the cash to fund its expansion, but officials don't want to squander an endowment that's large by regional standards but not compared with other leading children's hospitals, Shmer ling said. The hospital has $374 million in debt outstanding, including its most recent bond offering.
Exempla Lutheran Medical Center in Wheat Ridge opened the first phase of a $225 million expansion in June that will add 295,000 square feet. The remainder of the five-story North Pavilion will open in stages over the next year, with "shell space" on the fifth floor set to open when needed.
HealthOne, a joint venture of health giant HCA Inc. and the nonprofit Colorado Health Foundation, is set to open its new Rocky Mountain Hospital for Children at Presbyterian/St. Luke's. The $128 million, 160,000-square-foot building expands and enhances Presbyterian's ability to provide pediatric and neonatal intensive-care services.
Greg Griffin: 303-954-1241 or firstname.lastname@example.org
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