El Paso Times
January 30, 2012
View Original Article
Shiny floors, state of the art equipment and that brand-new smell await the arrival of the first patients at the $122.5 million El Paso Children’s Hospital in a little over two weeks.
The children’s hospital is part of a massive makeover costing close to $300 million on the grounds of University Medical Center (UMC), formerly Thomason Hospital, which has been under way since 2007.
The grand opening for the public is next Saturday, Feb. 11. On Feb. 14, the 122-bed hospital taking up the top four floors in the new 10-story building will start moving patients in from UMC and accepting new ones.
Also on Valentine’s Day, the 103-bed Women’s Pavilion – its’s new quarters for its’s labor and delivery department – will be moving its patients over and accepting expectant moms.
The price tag for the new building, which includes other services on the first floor, is close to $235 million.
Many see the not-for-profit children’s hospital as a huge community achievement, on par with the four-year Paul L. Foster School of Medicine – one that will raise medical care for children to a new level and serve as a beacon to pediatricians and pediatric specialists El Paso badly needs.
But the children’s hospital’s financing is complex, and some wonder where the money will come from to run it and pay the high salaries of pediatricians and pediatric specialists recruited to work there.
Ultimately, the question is whether the El Paso Children’s Hospital, a private, non-profit corporation that will not have direct access to local tax revenues or a wealthy corporate parent to cover losses, will be financially viable in the long run.
Few are willing to raise those questions publicly, given the level of popular and political support for it in the biggest U.S. city without a separately licensed children’s hospital.
One physician is.
Dr. Jesus Arturo Castro Sandoval, a cancer specialist who works closely with Las Palmas Hospital, had questions in March 2007 when he cast the only no vote on the Thomason Hospital board against putting a $120 million bond proposition to the voters to build the children’s hospital.
That bond proposition passed by a 768-vote margin in the November 2007 election.
While Castro supports the idea of another children’s hospital and hopes it does well, he still harbors the doubts that led him to cast that no vote five years ago.
“I‘m not a financial advisor, and I’m not an economic expert,” Castro said. “What I can tell you is that I knew several studies that had been done in the past. They stated it was not feasible to do the hospital because of the financials.
“Finally, somebody did a study that said the hospital was feasible. I felt that maybe they modified the numbers. I gave my honest opinion at the time.”
Either the 2007 feasibility study by Kurt Salmon Associates was mistaken or, he said, “They knew something the rest of the people didn’t.”
“What I see now is a struggle for the hospital,” he said.
The reasons why El Paso has never had a stand-alone, dedicated children’s hospital are no mystery.
Long one of the nation’s poorest big cities, El Paso also has the largest percentage of residents who lack health insurance of any major city in Texas, which happens to be the state with the most uninsured people in the nation.
That puts El Paso in a club of its own.
What the Salmon study and others before it did say, however, was that a children’s hospital “could be financially viable” if it were affiliated with an acute-care hospital like Thomason, the county hospital since renamed University Medical Center.
Another physician, Dr. Raj Marwah, has questions of his own about the salaries that pediatricians and specialists recruited to work at or serve in the children’s hospital are being paid.
“It’s quite a bit of money,” said Marwah, who serves as spokesman for the El Paso medical Society. “It was the heavy contracts that enticed them to come.
“That’s an obvious concern. We want the hospital to succeed, obviously, but there are some issues. How long can they sustain those salaries?”
Obtaining a full list of the names of the recruited physicians and their salaries from the Texas Tech University’s medical school, children’s hospital and UMC proved more than difficult.
But a partial list of seven physicians from Texas Tech showed Dr. William Spurbeck, a pediatric surgeon, as having a $421,000 base salary, followed by Dr. William McIlvaine, a pediatric anesthesiologist, at a $400,000 base salary.
The children’s hospital’s chief physician and head of pediatrics, Dr. Bradley Fuhrman, has a $348,000 base salary plus $100,000 for two medical school chairs he holds.
The Tech list shows Fuhrman’s wife, Dr. Lynn Fuhrman-Herman, a pediatric critical care specialist, as having a $185,000 salary.
However, those salaries are only a starting point. There are additional payments for various duties, such as being on-call.
Since 2007, a lot has changed economically for hospitals and for El Paso’s children’s hospital.
For most U.S. hospitals, the biggest change has been the reductions in Medicaid reimbursements that generally cover less of hospitals’ expenses for poor patients than those services cost.
But the CEO of the El Paso Children’s Hospital, Lawrence “Larry” Duncan, said the outlook for his hospital has actually improved compared with others, including the Regional Children’s Hospital at Providence, a 148-bed “hospital in a hospital.”
Although the number of beds is somewhat comparable, Providence’s children’s hospital is not independently licensed while El Paso children’s hospital will be.
Duncan said that will make a big difference because his hospital will be getting more money for the care of children covered by Medicaid – a significant part of the hospital’s income.
“What has not changed is that, as a separately licensed children’s hospital, we will still be cost-base reimbursed for our Medicaid patients,” he said. “So, the cuts that you heard about from the state Legislature and Medicaid will not impact us.
“That will mean a healthier bottom line.”
Duncan predicts that the children’s hospital will be in the black in 18 months and that optimism is reflected in the budget. Of course, the hospital facilities are provided by UMC, and there will be physician assistance from Texas Tech.
He said the children’s hospital expects the patient breakdown will be 20 to 35 percent Medicaid, about 30 percent managed Medicaid coverage, about 20 percent commercially insured, about 5 percent military.
In addition, about 10 percent of the patients will have no coverage, which doesn’t necessarily mean they’re all poor, and about 5 percent will be indigents or charity-care patients, he said.
Starting in 2013, the new children’s hospital will be eligible for federal disproportionate share funds to help cover the expense of caring for poor children who have no insurance and don’t qualify for Medicaid.
In addition, Duncan said, “legislation is being written that looks very favorable to a stand-alone (separately licensed) children’s hospital, especially in a medically underserved market.”
So, with donations ahead of budget, he said, there’s no reason to think the hospital will not perform well.
The Providence challenge
The moves at the Regional Children’s Hospital at Providence since 2007 represent the biggest change and probably the greatest challenge that the new non-profit hospital is likely to face.
Tenet’s Sierra-Providence Health Network has expanded the children’s hospital it established in Providence in 2005 and has been actively recruiting pediatricians and specialists since 2007.
A list of those physicians was not made available to El Paso Inc. by presstime.
Although Tenet executives opposed the 2007 bond proposition to build the El Paso Children’s Hospital, arguing then against using taxpayer funds to compete against an established private enterprise, the official stance today is more welcoming.
“Kids are underserved in El Paso,” said Greg Deitch, the Sierra-Providence marketing director, who lost a newborn child seven years ago. “We need all the doctors we can get, and we don’t just need one children’s hospital.
“We’ve been here over 50 years. We treat 90 percent of the oncology children in the region. We’re not going anywhere. We’re going to continue to grow and treat children.”
But, the Providence children’s hospital has ramped up, adding services and recruiting new physicians.
Last September, Providence opened a new pediatric emergency room. It has also been working hard to increase its share of the new baby business and, with it, a bigger piece of the market for neonatal intensive care.
Taking care of premature babies and infants born with health and medical issues is very expensive, one health care expert said, addinfg that providing that care also was quite profitable.
For El Paso Children’s Hospital, capturing a significant share of the neonatal care business in El Paso “is essential to financial health” according Salmon’s feasibility study.
There are 50 tiny beds in the children’s hospital’s neonatal intensive care unit and those patients will be looked after by a team of pediatric intensivists.
Bucks, beds and buildings
The El Paso Children’s Hospital has an 18-month budget that begins Feb. 1 and projects a $4.2 million margin – called a profit in the business world – by July 2013.
The budget estimates $111 million in expenses to be offset by $335 million in gross patient revenues, $105 million in net patient revenue, $8 million from Medicaid and $2 million from the children’s hospital foundation.
Because the children’s hospital must be fully staffed on the day it opens, the feasibility study said UMC would have to lend the children’s hospital $18 million to cover the recruitment of doctors, their salaries and other initial expenses.
The study recommended the new hospital repaying UMC for the operating expense loan over five years at 4.8 percent interest.
UMC reports having spent about $9 million on doctor recruitment since 2008. But officials at the new hospital said the doctors that have been recruited have generated about $7.5 million in patient billings while working at UMC (awaiting the opening), offsetting some of the debt.
Although sometimes billed as a “stand-alone” hospital, the reference is somewhat misleading. The children’s hospital will occupy the top four floors in UMC’s new 10-story “East Tower.” The eighth floor will remain vacant until needed for expansion.
Below, the second, third and fourth floors are part of UMC’s 103-bed Women’s Pavilion, which will house 18 labor and delivery rooms along with mother and baby rooms and a nursery.
The Thomason/UMC board of directors approved the women and infants expansion project as part of a $154 million renovation and expansion in 2005 when discussions about a new children’s hospital were in a very early stage.
“We sold $120 million in bonds for the UMC modernization, and we added $34 million out of our reserves to reach the project total of $154 million,” said James Valenti, the UMC CEO.
In addition to the Women’s Pavilion, the project included a new adjacent building for UMC’s surgery, trauma, cardiology and emergency department.
The East Tower’s first floor also will serve as the entrance to UMC facilities, the children’s hospital and a pediatric imaging center, while the third floor will house the mechanical systems.
Although the Women’s Pavilion had its official opening in October, it won’t begin accepting patients until the children’s hospital opens.
$276 million total
With the $122.5 million that has gone into a new children’s hospital, the expansion of the UMC campus carries a $276 million price tag.
UMC will own the entire 10-story building and will lease four floors and 229,000-square feet to the children’s hospital at an annual rate that is still being worked out, Valenti said.
“This is a very complex project and a one-of-a-kind relationship in the state and the nation,” he said, referring to pairing up a tax supported hospital, a public medical school and a private children’s hospital. “We have done it on time and on budget.”