Although not exactly the team of physicians that its name suggests, the Denver-based Castle Rock Medical Group would welcome doctors as investors in its hospital projects.
For now, Castle Rock Medical's only physician shareholder, an orthopedist, has chosen to remain a silent partner; but the leader of the 2-year-old, for-profit corporation said the company wants to forge alliances with the local medical community on one of its first projects--building a new hospital in the booming town of Castle Rock, Colo., about 27 miles south of downtown Denver.
Castle Rock Medical is among a growing number of small corporations that are hoping physician investors can help make their new hospitals come to life.
"We've talked about the local physicians having an equity position in the corporation that owns and operates the center," said Roger Zumwalt, chairman of Castle Rock Medical's six-member board of directors. "We don't have any of the community physicians involved as yet, but we would not turn our backs on the idea."
Zumwalt said the group is banking on the 100-plus years of collective financial and hospital management experience of its board, as well as the "ideal" demographics of the Castle Rock area, to build a profitable hospital. The group also plans to acquire and operate other small rural hospitals.
Last week, Castle Rock Medical signed a letter of intent to buy 35-bed Alfalfa County Hospital in Cherokee, Okla., which has been shuttered for five years. Zumwalt did not disclose the price or the name of the private seller. He said he hopes to reopen the hospital, with fewer beds, in four to six months.
So far, the group's capital to build the Castle Rock facility, which is expected to cost
$20 million to $30 million, has come from board members, Zumwalt said. They have looked at several possible sites and are talking with a local developer, he said. The exact size and scope of the Castle Rock project have not been defined, nor has its time frame for completion; but Zumwalt estimates the facility will start with about 50 beds and maybe expand to 100.
In recent years, Castle Rock has averaged a 5% population growth per year, according to Meme Martin, executive director of the Castle Rock Economic Development Council.
With a population of 20,000 within city limits and another 25,000 in the surrounding area, Castle Rock finally can support a full-service hospital and 24-hour emergency care, Martin said.
The perceived need and the low number of Medicaid and Medicare patients among Castle Rock's mostly young, middle-to upper-class population give Zumwalt and his partners confidence.
But Colorado Health and Hospital Association Chief Financial Officer Peter Freytag, who lives in Castle Rock, said it won't be easy. "Their problem will be getting the financing," Freytag said.
Even Douglas County's being the fastest growing county in Colorado might not overcome the perception that the Denver market is substantially over-bedded, he said. That issue could make it hard to find project underwriters, bond councils and investors, Freytag said.
Zumwalt acknowledged that there are a lot of beds in Denver, but he argued that Castle Rock is large enough and far enough away to merit its own hospital. Based on the interest already expressed, his company can develop a workable debt and financing structure that could include outright stock purchases, he said.