Plans reflect different values for hospital

Projections from Georgia Regents Health System and University Hospital show very different pictures of how each would fare financially if chosen to join with Columbia County to build a hospital there.

The two hospitals are among three in Augusta to submit plans to the Columbia County Commission that will be taken up at its meeting Tuesday. The county is hoping to choose a partner to work with it on submitting the required certificate of need to build at least a 100-bed hospital in the county, Georgia’s largest without one.

Neighboring Augusta is licensed for more than 1,600 hospital beds, a little more than half of which are filled on average, so the county hopes to exploit one of three loopholes to the need standard it would ordinarily have to meet.

One is if the facility is the sole community provider and the county puts up 20 percent of the cost. Two Georgia hospitals have previously used that exception to get more beds that went beyond what the state calculated to be the number needed. That is the exception University would apply under.

The other two loopholes are if the facility is part of an existing trauma center or an existing teaching hospital. Those are the exceptions Georgia Regents might exploit, without cost to the county.

Doctors Hospital also hopes to use the trauma exception in its plan if it receives a designation as a trauma center this summer. Doctors did not provide financial projections for its proposed hospital after repeated requests from The Augusta Chronicle.

University’s proposed $144 million hospital would require more than $28 million from the county as its financial match, but the hospital has offered to forgo its nonprofit exemption and make, up front, 30 years’ worth of tax payments to the county that would cover that amount, CEO Jim Davis said.

“That pretty much levels the playing field as far as the cost to the county,” he said.

The size and financial performance of Georgia Regents’ and University’s projects are strikingly different.

Georgia Regents is proposing a 144-bed hospital that would have an average daily census of 72 patients in its first year and $86.4 million in net patient revenue, rising to 122 patients and $149.9 million in year five. It would employ 719 people initially, increasing to 1,081 by year five.

“I think we’re proposing more of a full-service (hospital),” said Greg Damron, the chief financial officer for Georgia Regents Medical Center. In fact, the philosophy would be to increase less complex, less intensive procedures at the new facility and free the downtown hospital for bigger cases, he said.

“There are patients here, even Richmond County patients, that we would try to encourage to go to that facility just because it would be a better experience and we could do it more efficiently in that kind of setting,” Damron said.

The health system projects borrowing more than $126 million to finance the $245 million facility and would annually pay more than $23 million in depreciation, amortization and interest. The new hospital would lose $16 million in operating income in its first year and would not become “net positive” until year six, Damron said.

University, on the other hand, projects a positive income from the beginning, which it shows as 2017. Even its 100-bed facility, however, might be larger than needed based on estimates from consultants who factored in Columbia County’s having 150,000 people by then, Davis said.

“You need probably a 55-bed hospital to service the whole county” based on those estimates, he said. “I don’t know what GRU is using to justify 144 beds. We’re trying to be more conservative.”

Part of its projected success – it would have a 6.4 percent return of $5.8 million by year five – is a much lower overhead because many office functions would actually be done downtown instead of at the new facility, Davis said.

University’s new hospital would employ about half of what Georgia Regents projected, about 350 in the first year and rising to 600 by year five, with patient census rising from 40 to 80 a day over that period.

“Maybe we just have a different operating philosophy,” Davis said, projecting more general surgery and orthopedic cases at the new hospital and more complex cases still downtown.

There were 10,057 hospital admissions from Columbia County in 2012, according to data that Doctors submitted in its initial proposal, with most going to Doctors, University and Georgia Regents, in that order. University’s consultants projected that the number of admissions will rise to 13,000 by 2017, said Dave Belkoski, the senior vice president and chief financial officer for University. A new hospital will capture a chunk of that current and new population, officials said,

“If we had the facility out there as a system, we would expect to see market share move our way,” Damron said, with more simpler cases than it is currently getting.

University said about 80 percent of its cases would be people it would have seen at its main hospital and 20 percent would come from people who would have gone to other facilities, Belkoski said.

“We weren’t aggressive out there to say we were going to hurt Doctors or GRU and what they are already getting,” he said. “We think this is going to have a bigger impact on our downtown facility than it does to the other two facilities.”

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