Renovating Allen County Hospital would take longer, cost more and result in a larger building compared to building anew, was the news Monday night from experts hired by Allen County commissioners to study the issue.
Unless a new hospital is built or the present one substantially remodeled, the county can expect to lose its hospital in the next seven to 10 years — that’s how long the building could limp along with Band-Aid solutions, the consultants said.
About 215 people gathered at Wesley United Methodist Church to hear the results of the long awaited architectural and financial assessment study.
The bad news came first.
As a building, the hospital is on life-support.
From stem to stern, the aging facility is in need of significant upgrades, including its boilers, chillers, plumbing, and air handling systems.
Specifically, two of its three steam boilers have exceeded their life expectancy at 45 years each. Its air conditioning chillers are so old, available parts are difficult to find. The hospital’s sanitation system is compromised because of its aging infrastructure. Significant rainfall causes the basement to flood, sometimes so much that the city’s sewer lines back up into the hospital’s basement. And, for what should be as germ-free of a facility as possible, its ventilation system is compromised by inadequate air space between the floors of the two-story structure, prohibiting the installation of adequate ductwork.
That said, the hospital is in compliance with all regulating agencies, said Joyce Heismeyer
The building is also out of compliance “on many, many codes,” said Steve Lewallen, of Hospital Facilities Group, Wichita. Many of its patient and procedural rooms do not comply with the Americans with Disabilities Act, he said, where doorways are not wide enough to accommodate wheelchairs.
Most of these things could be remedied through an extensive remodel, Lewellan said. It would be the fourth for the hospital. Since its construction in 1950, the hospital redid its kitchen area in 1965; added a clinic in 1980 and redid its surgery and emergency wing in 1992.
What’s needed this time is much more comprehensive than any of the previous updates, Lewallen said. To accommodate the needed changes on its current site, he estimated the building would need to be expanded to about one-third size larger, to about 94,000 square feet.
That would include 18,000 square feet that the hospital would not use, he said, referring to the basement which would be abandoned.
Renovating the current hospital would cost about $34 million and would take about 39 months, Lewallen said. A big challenge in this scenario is keeping the current hospital open while doing the renovation.
BUILDING NEW would cost an estimated $30 million, including purchase of land, said Charles Wells, a healthcare financial adviser. Wells estimated about 12 acres of land would be sufficient. He put a price tag on that parcel, which has not been decided on, of $250,000.
For county commissioners, that’s about in line. In 2008, they spent $75,000 for 3.3 acres in Gas. In August 2009, the county purchased the Heartland Rural Electric Cooperative building for $185,000, where dispatch services are today. Later that year the county purchased the remainder of the Heartland property, the shop building and a warehouse, for $200,000, bringing the total to $460,000 for the 4-acre site and its three buildings.
A new hospital could be built in about 35 months and would have about 60,000 square feet of floor space.
Financing for a new hospital, compared to a renovated model, also would be easier to come by, Wells said.
Because ACH is a critical access hospital, Wells said it can expect to receive $1.4 million a year from Medicare to go toward interest and depreciation expenses if the hospital is built new. If it renovates, Wells said to expect $300,000-$400,000 a year less from Medicare. The federal agency determines how much space a hospital dedicates to the care of its Medicare patients in determining the payment. The renovated structure at 94,000 square feet would not be dedicating as much of its space to those patients, as would the 60,000 square foot model.
THE ARGUMENT for either a renovation or a new hospital is that it would regain the hospital’s market share of patients, Lewallen said.
“You have room to grow,” he said.
Over the years, the hospital has been losing patients to newer facilities. Ten years ago, the hospital retained 61 percent of area patients. Today, it sees about 55 percent of the county’s potential patients. A big percentage, 21 percent, chooses Neosho Regional Memorial Hospital in Chanute, the study showed. Another 15 percent go to a variety of hospitals primarily in metropolitan areas.
Of those who stay at the hospital as inpatients, the hospital has seen a drop of 10.5 percent from 2005 to 2009.
Acquiring a general surgeon and at least a part-time orthopedic surgeon would help attract and retain patients, Lewallen said.
Iolan Nancy Maier, who recently broke her wrist, said she would have “gladly had surgery at Allen County Hospital” if a surgeon had been available. Instead, she went to Parsons for the procedure.
“My real concern is for the future of Allen County if we lose our hospital,” she said.
The hospital is the third-largest employer in the county and with likely the largest payroll.
Jolyne Alexander, Iola, said that as a baby boomer, she saw an increased need for the county to retain its hospital. “Our ranks are growing,” she said of her generation.
Wells confirmed Alexander’s remarks, saying that those over 65 use a hospital on average 5.6 times more than those younger.
Jay Kretzmeier, an Iola accountant, was concerned that the county’s steadily declining population would have to carry more and more of such a big investment. According to U.S. Census reports, the county continues to lose almost 1 percent of its population a year. That trend is predicted to continue, said Todd Van Deventer, an analyst with Piper Jaffray, an investment banking firm. Those 30 and younger are fleeing the area, he said.
A new hospital will help attract young professionals, Wells said.
In Neodesha, population 3,800, its new hospital of two years has grown revenues by 29 percent the first year; 25 percent the second year, and is attracting a younger clientele, Wells said.
ACH makes about $1.6 million a year in profits, Wells said, that goes into the pockets of Hospital Corporation of America, which leases the hospital from the county.
Wells expected the hospital to see a 15-30 percent jump in revenues with a new facility.
Larry Macha, Iola, an asphalt contractor who is familiar with the construction business, said an advantage to acting now on a new hospital is that construction costs “have never been lower.”
In a discussion this morning with Virginia Crossland-Macha, of the Crossland Construction family, she said new construction is most cost effective because renovation projects often have “hidden costs, because you don’t know what problems you may encounter with the existing structure.”
Wells said construction costs are now $60 to $80 a foot less compared to just two years ago.
Banking on the low costs to continue is risky, he said. “When they spike, expect to see an 18 to 20 percent jump,” he said.
THREE INCOME SOURCES would support the funding of a $30 million project, Wells said.
First is a $5 million loan preferably from local bankers to get initial operating cash. Because for the past 20 years the hospital has been operated by outside interests, the county has no savings from operating profits set aside for such an endeavor.
Second is the need for county commissioners to request Public Building Commission Bonds for $25 million to pay for the construction of the hospital.
Third is to ask Allen County citizens to support a 10-year half-cent sales tax dedicated to the hospital which is estimated to yield $750,000 annually. County commissioners have approached Iola city commissioners about dedicating a portion of the city’s existing sales tax revenues for the hospital. If the city agrees, the county would need only a quarter-cent sales tax hike.
“What if the public doesn’t go for it,” asked a member from the audience.
Then that paints a grim picture, Wells said.
“I’m afraid your hospital is at the end of its useful life,” he said. “This is very much a watershed moment.”
