In the thick of it
Tuesday night the newly appointed seven trustees of Allen County Hospital learned that four key elements concerning a new hospital must begin pretty much all at once and the sooner the better.
Chuck Wells, financial adviser hired by the county to guide the process, discussed the direction he advised trustees to take, including such big ticket items as purchasing land, deciding on a management company, ending the lease with Hospital Corporation of America and securing financing through Public Building Commission bonds.
Wells was well into the thick of minutia when he stopped midstream and declared, “I haven’t even congratulated you on the vote! Talk about unparalleled democracy. Voters approved a tax increase and in Kansas, no less. Holy Moly!”
Then he was right back to work.
About 25 people attended the meeting in the assembly room of the courthouse. All meetings of the hospital trustees will be open to the public.
With a September 2011 groundbreaking as their goal, trustees have a few things to get in place.
Board organization is at the top, including the election of officers. Allen County Commissioners decided their terms, to which all accepted. Debbie Rowe and Harry Lee will serve one-year terms; Sean McReynolds and Patti Boyd, two-year terms; and Jay Kretzmeier, Tom Miller and Karen Gilpin, three-year terms.
Trustees also need to decide if a management team, such as HCA, will be hired to assume control of the hospital. With that comes the decision to end the lease agreement with HCA.
“In two to three months you may want to trigger the termination clause with HCA,” Wells said, which would take effect six months later.
Wells suggested using Joyce Heismeyer, chief executive officer of the hospital, and an employee of HCA, to “carry on conversations with HCA” for trustees in their consideration of it as a management company and on the lease termination process.
If HCA’s terms are not agreeable, “there’s plenty of others,” to manage the hospital, Wells said, mentioning Quorum, St. Francis and Via Christi, who all manage area hospitals.
Having a management group in place, as well as “our CEO, is integral to proceeding with the hospital’s design,” Wells said. If Heismeyer is retained as CEO, she will be an employee of HCA, she said in a conversation after the meeting. “Different groups have different tiers,” she said. If HCA were retained, all of the hospital’s employees would remain with the company. Other companies, however, retain only the top brass and the bulk of the employees become county employees.
THE MOST URGENT item for trustees to decide is where the hospital will be built, Wells said.
“The design of the hospital is site-specific,” he said, and urged trustees to “accelerate getting an option” on East Street and having soil studies conducted promptly.
Wells said the conceptual design of a hospital generally takes two months, the “details of the plan” another two months, and then the construction drawings another four months.
With this time frame, bids would be let in July and August, with groundbreaking in September.
Also of immediacy is finalizing the project’s budget, which Wells puts at $30 million “if we lock in now,” because of favorable interest rates and construction costs.
Wells figures trustees can secure an interest rate of 4.75 percent for 25 years on $25 million of debt to build the hospital. Annual debt service payment is expected to be $1,729,628.
Another $5 million in working capital will be needed once the hospital breaks its relationship with HCA.
“When HCA goes away they’ll strip the hospital of all its working capital. There’s no rainy day money, no receivables, no payables,” he said.
Local bankers have pledged to loan the $5 million at an expected 6 percent interest rate.
Wells ended with one last challenge.
“I don’t know if anyone here has the energy, but a capital campaign is desperately needed,” he said.
Gifts of cash to the hospital “are gifts that keep on giving,” Wells said, referring to the 50 percent match in Medicare funds to gifts received by the time the building begins next fall.
Wells cited many small communities that have raised in excess of $1 million. The gifts are viewed by potential investors as a sign of good faith by a hospital’s local base and a valuable hedge against calamity. Neodesha, for example, has $1.7 million from private contributions. “It’s also money you don’t have to pay back,” he said.
Trustees were urged to meet once a month, all of which will be reported by Register staff.
