The MetroHealth System plans to construct a new hospital to replace its aging patient towers, laying out a path to move forward with its long-discussed campus transformation on its own credit.
Dr. Akram Boutros, MetroHealth's president and CEO, has put forth an aggressive four-month timeline to secure financing for the project, which totals $855 million for design, construction and equipment.
"This doesn't change our relationship with the county. And it doesn't change our mission. We're still here to serve everyone," Boutros said. "What this does do is give us more flexibility."
The move to go to the bond market provides MetroHealth an opportunity to be more cost effective and faster than if it had sought out other sources of funding, Boutros said.
MetroHealth's board of trustees in early November approved a measure allowing the system explore the possibility of issuing bonds to finance the massive construction project. Once the financing options have been further defined and the system receives feedback from the bond market, the board will evaluate the next course of action. Depending on market conditions, trustees could pursue other alternatives. The actual issuance of bonds requires separate board action.
Included in the $855 million is the system's Critical Care Pavilion, which opened during the summer. MetroHealth put about $90 million of its own funds into that project, the first piece of its main campus transformation. It plans to go to the bond market for the remainder as well as to refinance around $170 million of current debt, Boutros said.
The plan doesn't change the relationship to the county or its mission to serve everyone, he said. MetroHealth is still in talks with the county to see how it can participate in the financing, but Boutros said this was the optimal time to move forward. He noted that the credit markets have been receptive to similar bonds.
"This is also a unique moment in the market," Boutros said. "We have near historic interest rate lows that makes this an optimal time to borrow."
In 2011, experts predicted that MetroHealth would end 2015 more than $40 million in the red. Despite the bleak forecast, MetroHealth ended 2015 with nearly $30 million in operating income — its eighth straight year in the black. Boutros said he expects to see positive cash margins again at the end of 2016.
"We've done all that despite cuts from Medicaid, cuts in our county support and a loss of trauma revenue that total $50 million in 2016, alone," he said. "And instead of shrinking, we decided to continue our growth."
In the past three-and-a-half years, the number of patients who have sought care at MetroHealth has increased by nearly 67,000. MetroHealth has also continued to see a growth in its market share of emergency department visits, inpatient discharges and inpatient and outpatient surgeries, all of which grew between January and September of this year. Boutros credits about 70% of the growth to the influx of patients from HealthSpan, the former Kaiser group dissolving this year. The rest he attributes to the system's continued growth.
In the past 10 years, work orders to maintain MetroHealth's facilities have increased by 400%. And since 2005, the system has spent $80 million repairing and patching buildings to keep patients, families and visitors safe.
"The people who live here, our patients, deserve better than the facility we have," Boutros said. "This bond financing is the last piece we need to bring our plan to fruition."
The new hospital, which will be connected to the Critical Care Pavilion, will stand nine stories tall and offer numerous opportunities for added efficiency and improved outcomes. Most of the floors will have around 35-bed units, which Boutros said eliminates the "operational nightmare" the hospital currently faces in staffing 12- to 20-bed units in its current patient towers.
Outpatient services will be pushed to satellite locations, lowering the risk of infections that come with mixing healthy patients with ill patients. A reduced number of entry points into the organization will allow officials to better manage it in case of an emergency.
Taking a strategy from Disney, MetroHealth also will incorporate on-stage/off-stage design in which patients and visitors won't see a lot of the back of house work, with deliveries and other work done from the side of rooms they can't see.
Rooms will be private, with the ability to flex up to double rooms in case of an emergency, just as the rooms in the Critical Care Pavilion. All have private bathrooms as well.
The design will reflect what patients and visitors have seen at the Critical Care Pavilion — bright, colorful and clean rounded lines.
Boutros said he hopes the new hospital building will help change the mindset about MetroHealth for those who haven't seen the operational and care changes in recent years. "A new building can change the impression of the public about the care you deliver," he said.
Boutros said that as construction in the region slows, he has been told by unions that people are having to look out of the state for work. This project will help combat that as well as help accelerate development in the neighborhood, now renamed Metro West.
"Cleveland is undergoing an amazing renaissance, a renaissance that's not going to continue if we provide less than optimal care and services to our entire community — a renaissance that's not going to happen if we leave some people behind," Boutros said.
"MetroHealth plans to construct a hospital to replace its aging patient towers" originally appeared in Crain's Cleveland Business.
