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Plans reflect different values for hospital

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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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Riverman1
83887
Points
Riverman1 03/12/14 - 09:54 pm
3
2
Has University Modified Proposal?

Does anyone know if University has modified their proposal? There's a letter to the editor in the Columbia County News Times today saying they had to make it more competitive. It appears to be the same deal here with them getting 20% of the needed money from the county. To me, that's a deal breaker.

jbartley
545
Points
jbartley 03/12/14 - 10:53 pm
3
1
Voters

I believe the three choice's should be put on the November ballot and let the votes decide not the Commissioners!

Riverman1
83887
Points
Riverman1 03/13/14 - 05:12 am
2
1
“If we had the facility out

“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."

Does he expect more simple cases to be the result of more people wanting medical procedures done or what?

soapy_725
43678
Points
soapy_725 03/13/14 - 07:44 am
0
0
Logic 101. Half the existing beds are not filled. Why add more?
Unpublished

Logic 101. Half the existing beds are not filled. Why add more?

soapy_725
43678
Points
soapy_725 03/13/14 - 07:46 am
0
0
GRU & Doctors are not approved by some Medicare Plans.
Unpublished

GRU & Doctors are not approved by some Medicare Plans.

soapy_725
43678
Points
soapy_725 03/13/14 - 07:47 am
0
0
Empty hospital beds still cost the same as a full ones. Overhead
Unpublished

Empty hospital beds still cost the same as a full ones. Overhead

soapy_725
43678
Points
soapy_725 03/13/14 - 07:48 am
0
0
Look what UH has already done in McDuffie Co. New Building!!
Unpublished

Look what UH has already done in McDuffie Co. New Building!!

Marinerman1
4846
Points
Marinerman1 03/13/14 - 09:06 am
4
0
Riverman, You Missed a Sentence

University will pay, up front, 30 years worth of taxes to "wash" the 20% that the County would have to provide. Still trying to figure out this "trauma" thing with Doctor's. They should probably stick to the Burn Center.

NrthAugustaSam
475
Points
NrthAugustaSam 03/13/14 - 09:31 am
3
2
Voters Should Decide

Cannot trust the Ron Cross gang with something this big. Cross will do anything to get his name connected with another building.

foster
65
Points
foster 03/13/14 - 11:22 am
2
2
Columbia County Hospital

If the choice is made on a hospital which serves the needs of all Columbia County taxpayers, the commission will choose GRU. Their proposal envisions a larger hospital on a larger site away from the congestion at University Hospital property on Belair Road which will employee more people at no upfront expense to the taxpayers. They already have a level 1 trauma center, Doctor's Hospital hopes to receive approval for a level three trauma center this summer. Doctor's is owned by HCA, a large national hospital chain which will make decisions at an out of state office which affects our local community. I hope the commission will not be swayed by local politics and make the best decision for the citizens of Columbia County which again is GRU.

Mr. Thackeray
905
Points
Mr. Thackeray 03/13/14 - 12:46 pm
3
1
The people elect these folks

The people elect these folks to make decisions. I do not trust the general voting public to make a proper decision and would also open us up to campaigning for each one.

beasyour
36
Points
beasyour 03/13/14 - 03:49 pm
1
2
GRU should get the hospital on the ER they have

University is not even in the loop as they do not operate their ER so why should they have another hospital and still not operate that ER either. GRU on the other hand operates its own ER and would bring that out to Columbia County. Let University stay where they are cause I don't they have the ability to grow. Just remember you want to have a ER that is run by the Hospital

Riverman1
83887
Points
Riverman1 03/13/14 - 04:30 pm
3
1
Marinerman

"University will pay, up front, 30 years worth of taxes to "wash" the 20% that the County would have to provide."

So by them saying they won't be a nonprofit they will incur taxes of about a million a year it appears. 28 million divided by 30 years. But since the county is going to have to give them the 28 million and University will pay that back up front it really is a change. Thanks for pointing that out. It does put them on an equal footing with GRU who doesn't want any money. Maybe our constant admonishments not to give them anything hit home. A Columbia County hospital will be a gold mine.

Gardencity1
88
Points
Gardencity1 03/13/14 - 07:49 pm
1
1
Consultants stated...

OK if the consultants state that only 55 beds are needed to service the entire county, how can you project 80 patients a day? Is the population going to grow by 50% in five years. Also please find me a hospital that turns a profit in the second year of operation. GRU mentions that they would borrow some of the money, which would account for a hit to the bottom line, but even if University pays out of their foundation, their is still a cost to that money that isn't reflected in their financials. The chronicle claimed a few weeks ago that they had to depend on their foundation/investments to assist their bottom line. If they put this money in the hospital, you can kiss that interest revenue goodbye. I also find it interesting that University is claiming lower overhead costs" because many office functions would be downtown" I thought they argued that it would be a locally operated facility, however it appears that the office functions, i.e management and business functions would take place downtown in Augusta... They will still be under the Richmond County hospital Authority. If the county puts up any money then they should be an equity partner with that facility. I can't wait to see how they handle losses at the facility. Will they have to go back to taxpayers?

Why didn't Doctors share their projections? Wouldn't this be public information since the paper stated the commission asked for them last week? Get out of the hospital business. Let free enterprise work.......

Marinerman1
4846
Points
Marinerman1 03/14/14 - 08:32 am
1
0
@Gardencity1

MCG has not only investments, but also a Foundation, too. Doctor's is owned by HCA -- you don't think that THEY have investments to create additional needed revenue ?? Are you kidding me ??

Gardencity1
88
Points
Gardencity1 03/14/14 - 02:30 pm
1
0
Marinerman1

I'm not sure what you are reading into my statement. Of course MCG has investments and foundations, and HCA does have investments..my point was if you remove money from the interest generating entity to pay for a new hospital, there is a cost to doing so. You have an opportunity cost, the cost associated with a new investment that may yield a higher return or a lower return or lost opportunity cost which states that you may choose not to invest in a new venture and you would forgo any future opportunity with that investment. As for adding investments to the success of your bottom-line my point was that it appears that operating net revenue is down at UHS and is being made up by investments versus UHS actually growing their core business...a hospital. So as to your question, no I'm not kidding. At this point I could care less who gets chosen, but I don't want tax dollars going to a project that doesn't require them. The county commissioners shouldn't be involved in this decision. If a hospital can be built and make a margin, then the market will figure out a way to provide this service in the community.

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