Lawrence Memorial Hospital’s proposed west Lawrence project grows to $93M; work could begin this spring
A big Lawrence Memorial Hospital project in west Lawrence has gotten even bigger.
An LMH plan to build a complex of doctors’ offices, outpatient surgery rooms, physical rehab centers and other services near Rock Chalk Park in northwest Lawrence has seen its estimated price tag grow to $93 million. In December, hospital officials revealed they were considering the project, but they pegged the price at about $64 million.
The price tag has grown as the hospital has looked more closely at its needs and what it likely will have to do to compete in a health care industry that is becoming more competitive.
“We are looking at what our next 20 years are going to look like,” said LMH board member Rob Chestnut, as the board approved several key aspects for the project on Wednesday. “We are financing that future.”
At its Wednesday meeting, the board authorized LMH executives to sign contracts to purchase approximately 20 acres of property in the Mercato commercial development, which is directly south of the Rock Chalk Park sports complex. The hospital will pay $4.356 million for the property, which is owned by a local development group led by the Schwada and Fritzel families. The hospital also will pay $1.1 million for road development needed to make the site ready for development.
The project could break ground in April and open in late 2019 or early 2020, hospital officials said.
Russ Johnson, president and CEO of LMH, said the facility is designed to take advantage of growth opportunities for LMH but also to better position the hospital as the University of Kansas hospital system and other Kansas City and Topeka-area hospitals have eyed the Lawrence market more aggressively.
“If we sit dormant, I have little doubt someone else would come into our market,” Johnson said. “They still might anyway.”
The new facility, though, will give LMH a major presence in west Lawrence. Plans call for a 200,000 square-foot facility that would have good visibility from the South Lawrence Trafficway near the Sixth Street interchange.
LMH officials stressed the new facility won’t take the place of LMH’s main hospital campus at Second and Maine streets in central Lawrence. Any procedures needing an overnight hospital stay still will occur at the Second and Maine facility. The west Lawrence project won’t include any overnight beds. The central Lawrence hospital also will continue to be where the emergency department, the maternity unit and major surgery facilities are located.
The main hospital will continue to provide some outpatient treatments, but the new facility is designed to lessen the need for people to go to the main hospital for outpatient procedures. The main hospital has struggled to provide enough parking to accommodate patients and staff. The hospital’s location in the Pinckney neighborhood in central Lawrence also isn’t always convenient for residents in newer areas of town.
The building is expected to house a variety of doctors and health care providers. Hospital officials provided details about several groups that are expected to locate at the center. They include:
• The Lawrence Surgery Center, currently at Sixth and Maine streets, tentatively plans to move to the location. The surgery center’s board is scheduled to vote on the move soon, Johnson said.
• OrthoKansas, which does knee, hip and other joint and orthopedic procedures, will move to the center and have significantly more space than the practice has at its current Sixth and Maine location. An affiliated practice focusing on rehabilitation for athletes also is planned for the facility.
• A large imaging lab that will include equipment for CT scans, MRIs, X-rays and other such work will be located at the building.
• The LMH Breast Center plans to move from its space at LMH South, a smaller campus at Clinton Parkway and Kasold Drive. The new center will be larger than its current location.
• At least two primary care doctors’ offices will be located at the facility. Mt. Oread Family Practice will move its offices to the center, while the Internal Medicine Group will keep its current location but open a new office at the west Lawrence center.
• The hospital is recruiting a retail pharmacy to locate in the building. Karen Shumate, chief operations officer for LMH, said the hospital has reached out to all the local pharmacy operators but has not yet reached a deal with a company.
• The building will have about 30,000 square feet of space available for specialty medical practices. That is expected to include plastic surgery specialists, orthopedic surgeons, and could include ophthalmologists and other specialists.
• Shumate said plans even call for the building to have a cafe, to serve what is expected to be a large number of people who will be at the site each day. Shumate doesn’t yet have an estimate for the workforce that will be based at the facility, but she said with patients and staff, there easily will be more than a thousand people a day at the site.
Hospital board members on Wednesday were briefed on how the hospital plans to pay for the project. LMH executives are recommending that the hospital issue about $55 million in debt to pay for a portion of the project. The Lawrence City Commission will be required to approve the bonds because the hospital is owned by the city.
LMH also plans to spend about $31 million in cash reserves to help pay for the project. The hospital had about $114 million in cash reserves in 2017. As a result of the project, cash reserves are expected to drop to about $92 million in 2019 before they begin to rise again.
The remaining $7 million is expected to be paid for through lease payments by doctors’ offices and other businesses that want to lease space at the site.
Johnson said the hospital has studied the Lawrence market closely before recommending the project. He said Lawrence population growth and the general aging of the population both point to the hospital being able to grow its revenues in the community. Growing it through outpatient services — versus in-hospital stays — will be important, he said. Insurance companies are continuing to urge patients to better utilize outpatients services. Johnson said the outpatient health care market has many more competitors, which makes having a presence in growing west Lawrence critical.
“We know we have some people leaving the community for services that we can provide,” Johnson said. “Some of that is just related to convenience, and this project will help with that.”