Hospital to explore possible expansion

In its regularly scheduled meeting Monday night, the board of directors of the Heart of Texas Memorial Hospital heard a proposal that has put an entirely new spin on the possibility of bringing an assisted living facility to McCulloch County. The idea of an assisted living facility has been bounced around the community for several years by several different entities. Late last year, after nearly a two-year lull in discussions, two separate entities approached the hospital with hopes of joining forces with the local entity to piggy back on opportunities that could possibly be afforded by working in tandem with the hospital. Discussions with one privately-funded team ended after considerable effort was expended to devise a mutually-beneficial plan that involved the hospital possibly providing land as part of the deal. After those efforts concluded, discussions with the second party resulted in the main portion of Monday’s meeting. Rosa Rios Valdez, executive director of the Cen-Tex Certified Development Corp., attended Monday’s meeting with an eye-opening proposal that could possibly be the answer to the question of how to best bring an assisted living facility to McCulloch County. Cen-Tex Certified Development Corp. is a non- profit 501 C (3) Texas corporation chartered by the U.S. Small Business Administration to process and service 504 loans on a fee basis. It has two sister organizations, Grand Central Texas Corp., which helps community leaders and city officials revitalize rural Texas communities, and Country View Development Corp. which is designed to facilitate assisted living facility construction and management. Mrs. Valdez and Cen-Tex CDC have had a working relationship with McCulloch County for the past several years and have worked to implement a small business revolving loan fund and also have provided feasibility studies for a variety of projects, including one on assisted living facilities. “What we would like to do is possibly pursue the idea of renovating the existing hospital into an assisted living facility,” said Mrs. Valdez. “The market study that was completed a few years ago indicates that there is a strong need for a facility of this nature here in McCulloch County.” In the discussion that followed, the idea of renovating the current facility was coupled with the need to have a viable plan for hospital services and facilities. “We have to remember that our first priority is the hospital,” said board member Dr. Richard Lane. This sentiment was echoed by all members of the hospital board. According to Mrs. Valdez, she and her company are available as project consultants on only about three projects a year. The main focus of her company’s goal is to assist communities in finding and obtaining the best opportunities for funding and overall development of projects. “We (Cen-Tex CDC) can bring our skill sets and expertise to this project to help the community,” said Mrs. Valdez. Where it started For the past year, the hospital board has been planning for capital improvements to the physical plant centered around an air conditioning system that is original to the 30-year-old facility. An engineering study last year revealed that initial estimates of approximately $1.5 million to replace the system were actually going to cost in excess of $2.5 million. Research in the past six months into the costs of building a separate assisted living facility has revealed that building a new facility from the ground up would be extremely cost prohibitive. The high costs associated with building an entirely new facility is what has prompted the idea of renovating the current facility and adding on a new, modern replacement of the patient care portion of the hospital at an additional cost. “We are looking at having to pay $2 to $3 million just to fix the internal workings of the air system,” said Tim Jones, adminstrator of the hosptial. “This option will spend about that much money and completely change the purpose of this facility. With what Mrs. Valdez is proposing, we would be looking at renovating the entire facility and adding a new revenue stream that could add as much as $800,000 to the annual operations of the hospital. “What we have to do now, is see if we can feasibly implement the addition of a new patient care facility.” Why now’ In the meeting discussion, Mrs. Valdez and the board explained the unique opportunity that is afforded the local hospital due to the fact that it is designated as a Critical Access Hospital. A federally-funded cost reimbursement program that centers around participation in Medicare and Medicaid patients, essentially would allow for the hospital to be reimbursed for approximately 60 percent of the actual costs of the loan. The initial discussion with Mrs. Valdez centered only around the cost estimates of renovating the facility. The cost of renovation would be approximately $3 million. The cost of building a new hospital (patient care facility) will exceed $5 million. Based upon rough construction estimates, building a new addition that has modern capabilities similar or better than the current hospital, will cost approximately $250 per square foot. The size of the expansion would be approximately 20,000 square feet for a cost of $5 million. According to Mrs. Valdez, with the proper funding requests and applications, it is possible that the hospital can participate in a USDA loan program that would provide a 40-year note at four percent interest. In a mock calculation provided by Durbin and Co., the accountants for the hospital, the payment schedule for a $5 million loan at four percent calculated as follows: Yearly pmt. $250,763 Less reimbursement ( $172,504) Total $72,259 Monthly payment $6,521 Less amount budgeted for on notes that were paid off ($4,900) Additional amount to budget monthly $1,621 “Durbin and Co. were contacted to determine the financial feasibility of new facility construction,” said Jones. “The cost-based reimbursement model for that new construction is based upon 60 percent ‘which means that we are eligible to be reimbursed for 60 percent of the cost by Medicare and Medicaid.” According to the cost reimbursement schedule, the amount reimbursed would change on an annual basis and would ratably decrease in future years as the loan is repaid. The estimate above is designed only to provide a brief summary of the potential impact that reimbursement program could have. “This could be a perfect opportunity for the hospital to take advantage of an opportunity that will allow for increased diversification by bringing in an assisted living facility as well as to take advantage of the reimbursement program,” said Mrs. Valdez. “The reason I am here tonight is to offer the services of Cen-Tex CDC in pursuing this possibility.” In recapping the information discussed in the meeting, Jones challenged the board with the question, “It is going to take $3 million to repair an old facility. Is it the best use of the hospital’s dollars to spend $3 million on an old facility or consider spending $5 million on a new facility'” The board voted unanimously to formally invite Mrs. Valdez and Cen-Tex CDC to participate in the development of possible plans and strategies. In other business during the meeting, the financial status of the hospital was presented in summary form by finance officer Linda Hudson. The report showed that the hospital has dramatically improved its financial standing over the past two years and now has almost $2 million in certificates of deposit in addition to significant cash reserves with all current liabilities paid in full. The order of election was called for the joint election with the City of Brady and Brady ISD for May 12. The positions of board members Dr. Richard Lane, Knute Blomstrom and Verona Garner will all be on the ballot. A grant application for a new autoclave system was also approved and a discussion about the concerns of Dr. Lonnie Vickers being called up for a third tour of reserve duty was also voiced. “I want to assure everyone here at this meeting, that if Dr. Vickers is indeed gone for his tour, no one will be ‘without medical care’ as it was stated in a letter that has been sent to military affairs,” said Dr. J.H. Allen. The board also appointed a three-person committee to research and make recommendations about the financial aspect of the possible assisted living facility and new hospital. Michele Derrick, Gary Schroeder and Blomstrom were named to that committee. With no other business, the board adjourned.

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