Hopes renewed for Granby medical campus
June 10, 2010
A new medical campus in Granby may come to fruition despite recent financing hurdles.
The Kremmling Memorial Hospital District’s attempts to secure Housing and Urban Development funding for a new medical campus in Granby fell through this year, but the district remains on track to acquire funding elsewhere, district officials say.
Encouraged by an updated market feasibility study compiled by health care strategy consultants at Stroudwater Associates of Portland, Maine, district officials are moving forward with plans to build the Middle Park Medical Center in Granby on 10 acres of land donated by Granby Ranch in 2009. The site is an open field off of U.S. Highway 40 southeast of the highway bridge, between the Fraser River and Ten Mile Creek.
Momentum on the project slowed during the past year when financing from the HUD, which offers a credit enhancement program for rural hospitals that offer emergency services, backed out of potential financing for the Granby project in February due to complexities associated with Colorado’s TABOR Amendment.
“HUD’s policies were in conflict with TABOR, an issue that is beyond KMHD’s control,” said Hospital District spokesperson Eric Murray.
A private approach
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Through a newly formed “Middle Park Facilities Corporation” – the board of which would be responsible for paying off bonds for the project – district officials are now seeking to borrow about $20 million with the help of an investment banker.
The district would enter into a lease-purchase agreement with the corporation, Murray said, and when the lease is fully completed, the land and building would be owned by the Hospital District. The Hospital District would have the option to pay off the bonds at any time and take ownership.
The bonds would be federally subsidized Build America Bonds, according to Cole White, chief financial officer of Kremmling Memorial Hospital District.
Hospital District officials say they have no plans at this time to seek more funding from taxpayers, but White explained there likely would be the need to start a capital campaign for operating expenses to carry the district through the first few months of Middle Park Medical Center operation, covering payroll, supplies and utilities.
Lag times in health-care billing are the main reason, he said. The district would need cash reserves of about $2 million to $3 million “to sustain ourselves in the short-term.”
Beyond that, the facility is planned to be financially viable on its own, White said, and that is “using very conservative numbers.” He said feasibility studies show Middle Park Medical being able to “capture market share with a decent profit margin on top of servicing the debt.”
That’s not to say there isn’t some risk involved.
“There’s always a risk of any new venture,” White said. If the facility were to fail, there’s the possibility the district could sell it to recoup the bulk of its investment – “but what the actual risk exposure is, I couldn’t say at this time,” White said.
Because of the change in the economy, the Hospital District board decided in February to spend $30,000 to update its 2007 Stroudwater feasibility report, an important component in evaluating the need for another facility in Granby and to secure its financing.
The update has since been completed and is being examined by an independent accounting firm to verify the district’s ability to service the debt.
“In general, the report is favorable to construct this facility, showing that there is market potential for more quality health care in the county,” Murray said. “It is anticipated that the examination of the management report will support the required project funding.”
Although the district has not yet released the newest study, the 2007 report stated that the east side of the county will have 87 percent of the population growth from 2005 to 2015 and that Grand County as a whole is one of the fastest-growing counties in Colorado, according to a Hospital District board discussion recorded in January meeting minutes.
In a board discussion in March, hospital officials said that the Hospital District presently services about 7 percent of the potential Grand County market, but “with a new facility on the other side of the county,” it would capture “about 35 percent.”
Helping Kremmling’s hospital
The Middle Park Medical Center may be the salvation of the Kremmling Memorial Hospital, according to district officials.
In the January meeting, district board members spelled out that the existence of the hospital is “in jeopardy if nothing is done,” according to meeting minutes.
About 60 percent of District revenue is generated from people who live outside the District but within Grand County, said White. Another 10 percent is derived from property taxpayers, and 30 percent is from revenue generated from patients living within the district.
In the early 1990s, the hospital operating revenue that came from district taxpayers was much higher, at 65 percent. According to figures provided by White, the District mill levy generated $928,021 in 1991 but will produce only $852,180 this year.
In other words, the population base alone in West Grand is no longer enough to sustain the hospital in the face of increasing operational costs.
How long would the Kremmling hospital survive without a new project in Granby – one built to attract a new market?
“A couple of years at best,” Murray guessed.
“We have a team of highly experienced professionals working on this project and a dedicated board of directors who want to see both the survival of the hospital in Kremmling and the development of services in East Grand,” said Bill Widener, Kremmling Memorial Hospital District CEO.
“But remember that there are no guarantees on anything: in life, in business, in health care … We need the support and encouragement of both communities – East and West Grand – to make this happen.”
The Kremmling Hospital District has already spent roughly $400,000 on feasibility studies, engineering, civil engineering and consulting on a Middle Park Medical Center project that has been in the works for about five years, according to White.
About half of that amount has been out of the District’s budget, the other half from a $1 million Colorado Department of Local Affairs grant. The remaining $800,000 of the grant money is planned to be used toward engineering and early ground work for the project, White said.
The District hopes to break ground and pour concrete by this fall, he said, assuming the needed financing is secured.
The District has retained the design-build healthcare-facility specialist The Neenan Company of Denver, which had already completed some work on the project.
“We can and want to use local subcontractors wherever possible,” White said, adding that those jobs will likely be put out to bid.
White estimates the new Granby facility will generate about 30 new jobs when open, with some sharing of staff between the district facilities.
Although there are no plans for inpatient beds (estimated they would add another $15 million to the project), there is a plan for observation beds where patients could be monitored overnight.
The 40,000 to 45,000 square-foot facility (square footage has been decreased slightly from earlier plans for the facility) is also planned to accommodate services such as digital radiology, digital mammogram, traveling MRIs, a new physical therapy center and expanded specialty clinics. District officials hope to partner with other providers to bring in more women’s health, urology, dermatologists, orthopedics and general surgery.
One possible partnership could be with Centura Health, which operates the Granby Medical Center and the Granby Specialty Clinic.
“We are optimistic about recent communications with (Centura) officials and many of the physicians representing this reputable provider,” said Jeff Miller, Vice President of the Kremmling Memorial Hospital board.
Yet, Miller added, the door is still open to other potential partners that may want to step in.