The Community Hospital: We Must Change But Where Do We Find the TIME, the STAFF, and the MONEY?

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1 The Community Hospital: We Must Change But Where Do We Find the TIME, the STAFF, and the MONEY? Many rural hospitals across the country are experiencing a loss of community, loss of revenue and loss of patients. The challenge for these care giving facilities is the need to change, but they find themselves in the position of NO TIME Most hospitals are over tasked and have no time to properly plan for future projects. NO STAFF Hospital staffing levels are typically very lean and cannot be devoted to work on future projects. NO MONEY Limited access to capital and soaring operating costs hinder future projects. Although the answer is not clear for all rural health care facilities, there is new hope for those facilities with less than 100 beds. Availability of HUD unsecured financing under the FHA 242 program can secure up to 110% of new construction or renovation costs. The requirement? The facility must evolve into a 25 bed Critical Access Hospital (CAH) which can operate under cost based reimbursement. It may not be the solution for all, but over 30 community hospitals in West Virginia have less than 100 beds and are faced with this opportunity. This article can provide valuable insight for those who also see the need to transition to an efficient, profitable and state-ofthe-art facility in the community. Over the last decade the state of health care has changed in numerous ways. The industry has been threatened with tremendous cost increases, both to the provider as well as the institution. Costs of operations for a healthcare facility have risen more than 20 percent in the last ten years. Costs of service have risen over 40 percent in the same period. The ability to provide quality services has changed with the introduction of new technologies that help both the patient and caregiver, but that also comes at an added cost. The environment of nursing and doctor recruitment has been difficult, especially in rural areas with hospitals of 100 beds or less. Not only do these issues impact the health of a provider system but they also impact the issue that faces all hospital administrations Where do they find the TIME, STAFF, and MONEY to make the necessary changes? Today every small community hospital in a West Virginia rural setting is being challenged with these changing times. While they have a need to support the local community, they are struggling for survival. Times have been difficult for the community hospital in that limited TIME, STAFF, and MONEY have affected them more than most other institutions. While they cannot go out of business, they struggle to stay the course and suffer with facilities that are old and inefficient in utilization and infrastructure. Many large city hospitals have made some of these smaller institutions a part of a system wide approach and have begun a plan for the smaller hospital to be a feeder to the larger city hospital. For many rural West Virginia hospitals the need is far different. They need to move toward a new existence by renovation or new construction and still provide quality care, maintain state of the art operations and contain costs.

2 Most of these hospitals are strapped with staff that have no time to plan for necessary changes because they are over worked already. Most have also been drained of their resources and have no strong financial means to meet the community need with state of the art facilities. So where do such institutions go to survive in this new world of Care Giving? Sixty percent of the hospitals in this country are less than 100 beds in size and many were built during the time of the Hill Burton Program. These facilities built in the 50 s and 60 s were sufficient for that time and the health needs of the period. Unfortunately these same hospitals felt the pinch of the mobile society and the move to the bigger cities by the community that surrounded them. They still had to provide services for those that remained but with a facility that was generally larger and had too many beds to meet new utilization requirements. They also were in desperate need for facility infrastructure changes and efficiencies. Buildings constructed under the Hill Burton Program were simply not designed to accommodate the current medical technology that is available for health care. Today there are many of these types of facilities in West Virginia. The under 100-bed facility still provides a quality service to a community, but has a new challenge. They must be a doctor to the community verses being the place where one would go for pure critical care needs as directed by the family doctor. The community hospital of the future will be the one that provides day to day care for individuals and as needed will associate with larger hospitals of their region, creating regional health centers. William R. Sharpe, Jr. Hospital Transitional Facility, Weston, WV The need to reduce building size and associated operating costs can be developed using a new model of health care provider. The consideration of reducing beds is the likely key to the survival of these community hospitals. The expansion of both Pediatric and Adult Out Patient Services, Emergency Services and Ambulatory Care are a very big part of this new approach. Having NO TIME and NO STAFF to implement such changes results in the

3 need to seek out the proper professionals. The days of seeking assistance from a local architect to just plan the next addition, or renovate some space, no longer exists. It takes a total team effort to assist hospitals in the planning and programming of new facilities if they hope to create a new picture of operations and redevelopment. New medical programming looks at the existing operations and assesses the future of a facility for the next 10 and 20 years. This team of professionals should have experience of working with other hospitals in the region, expertise with current hospital planning, programming, and have the potential to provide funding for the project. The way of the future for these community hospitals is to obtain designation as a Critical Access Hospital. This new designation can have far reaching and positive impacts on an existing hospital, particularly those in rural communities. The one requirement in the program is to reduce the bed count to 25 beds. In many cases this is not a real problem since many existing beds are not currently being utilized. Also, in some cases the reduction of beds and the resulting spare square footage helps drive renovation of those same spaces into new uses. In other cases a master plan study and medical programming may suggest the construction of a new facility. Given the need and the planning, the question ultimately leads to where can we find the money? Raising the cost of care to cover new facility development is not the current thinking. Both private and public facilities in these categories are looking at a new adventure in providing funding for their critical needs. The HUD provider 252 program for CAH designated facilities is a resource to be considered. It is a program that allows the hospital to explore and develop how the community can be supported in a better way. It also provides critical funding that can be up to 110 percent of the need. This source of funding currently has millions available in the pipeline under the stewardship of HUD. Again, the proper team can provide the resources to interact with HUD, minimizing the time of the staff. The team of Blackwood Associates, Inc. (BAI), MSES Consultants, Inc. (MSES) and Whitney, Bailey, Cox and Magnani (WBCM) was formally established as a result of these needed changes in healthcare programming and planning. BAI and MSES have provided a team with full architectural and engineering capabilities for the past fifteen years. In the late 1990 s, we realized there was a need for advanced health care programming, but that required teaming that was unavailable in West Virginia. BAI/MSES had utilized WBCM engineers on several projects, including the Stonewall Lodge Conference Center. We were aware of their medical programming capabilities, which proved invaluable when we teamed our three firms and were selected to complete the first West Virginia Veterans Nursing Facility. This project of 120 beds is under construction and WBCM programming and interiors personnel continue to work with the State Division of Veterans Affairs representatives in the selection of furniture and equipment. This turn-key project, located adjacent to the Louis B. Johnson VA Center in Clarksburg, will be ready for its first veteran the day that construction is completed.

4 West Virginia Veterans 120 Bed Nursing Facility, Clarksburg, WV 3D Rendering West Virginia Veterans 120 Bed Nursing Facility - Under Construction in Clarksburg, WV Patient Wing and Courtyard Our three firm team has since been selected to design a new facility for Potomac Valley Hospital in Keyser, West Virginia. This 25 Bed Critical Access Hospital of approximately 50,000 square feet will replace an outdated building that had no means to be renovated to adequately meet today s medical technology requirements.

5 Potomac Valley Hospital, Keyser, West Virginia WBCM can also bring financing capabilities on CAH projects. Although not required at Potomac Valley Hospital, WBCM has previously teamed with Suburban Mortgage Associates of Bethesda, Maryland to provide medical project financing. Suburban Mortgage has executive personnel who have arranged more that $4.5 billion financing in the medical market. These include Section 232 Nursing Home, Intermediate Care and Assisted Living Facilities and Section 242 Hospitals. The latter is most important for consideration for the FHA Critical Access Hospital Mortgage Insurance and the HUD Critical Access Capital Financing Programs. Making these programs more accessible to CAH facilities promotes the survival of small rural hospitals that might otherwise struggle or even fail. To date HUD has insured over $95 billion of hospital debt, of which approximately $5.0 billion is outstanding. Suburban Mortgage is able to provide FHA insured financing to hospitals designated as CAH. The NO MONEY dilemma no longer has to be a project killer. Stress on an already overburdened health care system will be reduced by continuing to provide quality health care locally to rural patients and communities. FHA Section 242 characteristics for Critical Access Facilities are as follows: Types: Mortgage Type: Qualifications Mortgage Term: Hospitals, including out-patient surgery centers. Taxable debt and the backing of tax-exempt bond issues for both for profit and nonprofits. Taxable debt and the backing of tax-exempt bond issues for both for-profit and nonprofits. 25 years. Maximum Loan-to-Value For profit 90%

6 Non-Profit 90% Elements Included: Some Nursing Home beds and may include a doctor s office building and garage. Minimum Debt Service Coverage: 1.25 X. Developer Fee: Additional: None. To refinance existing debt, a minimum of 20% of the mortgage must finance renovation or purchase of new equipment. The purchase of new equipment may be 50% of this amount. Selecting the right professional team can easily solve the problem of NO TIME, NO STAFF, and NO MONEY. There is still a future for the many small rural hospitals that provide quality health care to West Virginians. L-R: Jim Blackwood, AIA - Blackwood Associates, Inc.; Jeff Wise MSES Consultants, Inc.; Jack Turner, FSMPS, IIDA Whitney, Bailey, Cox and Magnani, LLC. About the Authors: Mr. James Blackwood, AIA is president of Blackwood Associates, Inc., Architects and Planners of Fairmont, West Virginia. Mr. Jeffrey Wise is a project principal with MSES Consultants, Clarksburg, West Virginia. Mr. Jack Turner, FSMPS, IIDA, is vice president of the Baltimore, Maryland firm of Whitney, Bailey, Cox and Magnani.

7 Blackwood Associates, Inc. and MSES first worked together in the early 1990 s on the $30,000,000 William R. Sharpe, Jr. Hospital which replaced the former Weston Hospital. The teaming of two West Virginia firms with 71 years of service provided full architectural / engineering services. Our combined staff of over eighty people provides seventeen professional disciplines to address every project need. The BAI / MSES team utilized WBCM starting in the late 1990 s. WBCM was able to provide specialty services and medical programming that was unavailable to most firms in the State of West Virginia. Major medical projects from the BAI / MSES / WBCM team include the West Virginia Veterans 120 Bed Nursing Facility at Clarksburg, and the new Potomac Valley Hospital in Keyser, West Virginia. This three firm team is capable in providing all professional needs from initial programming to oversight of furniture installation in your new medical facility. Assistance with financing for both renovation and new construction as well as adaptive reuse of existing facilities is also available from this team.