Archive for Thursday, June 22, 2006

Hospital advances expansion project

Bonds to provide starting funds, refinance debt

June 22, 2006


Lawrence Memorial Hospital's nearly $50 million expansion project is about to get very real.

Hospital board members were told Wednesday that LMH leaders are ready to issue $55 million in bonds, which will fund the majority of the project and refinance about $15 million worth of existing debt the hospital has. Hospital leaders also were told construction on the first phase of the project could start in August or September.

"It is not just a planning process anymore," said Gene Meyer, LMH president and chief executive officer.

LMH leaders are scheduled to get City Commission approval to issue the hospital revenue bonds on Tuesday. They will then travel to New York to meet with the bond rating agency Moody's to try to secure a higher bond rating that will lower the interest rate the hospital will pay, saving about $250,000 per year in interest costs on the 30-year bonds.

Once the bonds are in place, hospital officials will have the money they need to begin constructing the project. Meyer on Wednesday gave more details about the timeline for the different phases of the project:

¢ Phase one would involve constructing 18 new private patient rooms above the second floor of the western wing of the hospital. That expansion will allow the hospital to then convert all of its remaining semi-private rooms into private rooms. Work on phase one could begin in late summer or early fall. It may take up to 10 months to complete.

¢ Phase two is a new three-story tower that will be built on the east side of the hospital, roughly where the circle drive and main eastern entrance to the hospital are now. The first floor will house an expanded emergency department. An expanded intensive care unit will occupy the second floor. The third floor will allow the hospital's maternity unit to expand by about a dozen rooms. Work on that phase could begin a few months after work begins on the first phase. The tower likely will take 18 to 24 months to complete.

¢ Phase three will be an expanded surgery center in the current emergency room, at the north end of the building. Work on that project couldn't begin until the tower is completed and the emergency department is moved.

"It will be a stressful process for the next three years," Meyer said. "It will be a disruptive process. It won't create any safety issues for our patients or visitors, but we will have noise and relocation issues that we'll all have to deal with for awhile."

The nonprofit hospital in 2005 took in $7.4 million more in revenue than it had in expenses for the year. Through May of this year, the hospital has taken in $4.9 million more in revenue than expenses.

"We really feel like we have put ourselves in the financial situation to take this on," Board Member Lindy Eakin said.

Once the project is completed, it will add about 100,000 square feet of new patient space, which should increase revenues even more, said Simon Scholtz, the hospital's chief financial officer.

Meyer said hospital administrators also are keeping an eye on construction costs. Meyer said discussions with the project's construction manager, JE Dunn Construction Co., indicated that construction costs - currently pegged at about $31 million - had the potential to increase by about 20 percent.

In addition to the bonds that the hospital will be issuing, the hospital hopes to use about $8 million in cash to help fund the project. That money is being raised through a capital campaign conducted by the LMH Endowment Assn. The campaign currently is at the $6 million mark.

LMH to buy land for Eudora office building

A project by Lawrence Memorial Hospital to build a new medical office building in Eudora is a step closer to reality. LMH board members Wednesday agreed to give LMH president and chief executive officer Gene Meyer permission to finalize the $900,000 purchase of 21 acres at the southeast corner of Kansas Highway 10 and Church Street. Construction could begin in late 2007. LMH leaders announced in December they had an option to purchase the property, but they had never finalized the deal. Concerns emerged about the financial feasibility of providing sewer service and new roads to the site. Meyer said those concerns remain, but hospital leaders wanted to move forward on the project anyway. "We're excited about the project because Eudora is such a growth-oriented community," Meyer said. "K-10 is of real strategic importance to us because of competitive issues with the Kansas City and Johnson County areas." Meyer also reported to board members that the hospital treated 71 people who had attended the Wakarusa Music Festival at Clinton Lake State Park earlier in the month.


happyone 11 years, 7 months ago

Glad to hear it!! LMH is a good Hospital but more space is diffinatly needed.

Godot 11 years, 7 months ago

Could the $50,000,000 bond indebtedness ultimately fall back on the taxpayers?

greyhawk 11 years, 7 months ago

I'm curious....if all of the rooms at LMH are converted to private rooms (as is implied) but health insurers will only cover the expense of a semi-private room (assuming, reasonably, that a private room is more costly than a semi-private room), what happens? Does LMH forego the difference? Is the individual responsible for the difference? And what about the substantial number of people with no health insurance? Is LMH calculating an increase in the total dollar amount of charity care that they are currently providing?

Godot 11 years, 7 months ago

Greyhawk, I have heard that the semi-private room requirement for health insurance may be waived if no semi-private rooms are available. But this could be a different situation if there are no semi private rooms in the facility at all. I also wonder how this will affect LMH's contracts with insurance companies.

It is funny, they are making a profit now, the community they serve is not growing, so they are taking on a risky expansion and adding $55,000,000 in debt. Guess that will make them live up to their "not-for-profit" name.

Berserk 11 years, 7 months ago

"Not for profit" simply means that the "profit" goes back into the buisness and not into the hands of investors or GREEDY CEOs. There is not reduction in costs to customers. Bosch in Germany is non for profit, they simply use all the billions they make a year, to buy new companies.

Don't get me wrong, the administrators of the hospital still get paid about 10x what they are actually worth, but at least this situation is not similar to the oil companies, instead of investing 300 million into new technologies or environmental concerns they give it to some overweight balding moron as "compensation".

Hopefully JE Dunn doesn't suck too much profit out of this with thier self-perform crap, sending all your money straight to Missouri. I would hope they use some of the contractors we have in Lawrence for the work.

Godot 11 years, 7 months ago

I know what "not for profit" means. I was making a play on words, a joke, pointing out an irony, and taking a sarcastic jab at a not-for-profit, tax-payer supported organization that, finding itself flush with surplus funds, sees the need to saddle itself with massive debt in order to build facilities that duplicate services provided within 20 miles either direction, and which will require attracting patients from other counties, siphoning them away from the existing services. Let us call it not-for-profit cannibalism.

Finding itself with a $7 million dollar profit, the hospital board sees that as an opportunity to add luxury services rather than fill some obvious unmet needs. The lack of a psychiatric unit comes to mind. Providing a low-fee clinic for the uninsured would have been another option. That step, alone, would have eliminated much of the strain on the emergency room.

Apparently LMH sees the future of the county, and is setting itself to deliver the kind of services only the wealthy can afford. I have no problem with that as long as the organization is profit-driven and totally privately funded. That is not the case with LMH.

Commenting has been disabled for this item.