A 28-percent increase in the cost of steel and concrete this year could potentially vault the estimated cost of the hospital expansion project by $3.4 million, board members heard at their monthly meeting last week.
Wes Murray, chief executive officer at TCMH, presented the preliminary construction cost estimate, which was prepared by JE Dunn Construction Co., the contractor that’s managing the project for the county hospital.
“Certain construction materials costs have increased an average of 28 percent since Jan. 1 this year,” Murray explained. “Based on this estimate, what was originally $13 million in new construction is now $16.4 million.”
Concrete and steel were two of the main materials priced in the “test estimate” done to come up with the new number for the construction project. The proposed project included 38,000 square feet of new construction, a basement under the new construction, existing facility renovations in the areas vacated due to the new construction and furniture, fixtures and equipment for the new construction. When initially proposed, the total project was estimated to cost $17.5 to $18 million.
“This test estimate was done on large ticket items like concrete and steel which have gone up in price,” Murray said, explaining that the 28-percent increase was applied across the board to the entire project after the test estimate.
“There were many assumptions built into this estimate,” Murray said, but the hospital board agreed with Murray that definite cost numbers were needed before the bonds for the project were sold.
In May, UMB Bank, NA of Kansas City, prepared a financial analysis for the hospital with plans of handling the tax-exempt bonds that would be sold to finance the project. The analysis showed that TCMH could service a debt capacity of $17.5 million – enough to cover the new construction, remodeling and furnishing everything in the new and renovated construction areas.
“With this estimate of $16.4 million in new construction costs, the hospital doesn’t have the debt capacity to build the new hospital core, renovate the existing areas and furnish everything,” Murray said.
Hospital officials had expected construction prices to be higher than originally proposed when the hospital began designing the proposed expansion in 2007, but the test estimate could not be done until more design and development of the project was complete.
Murray reminded board members that the $16.4 million dollar figure is “just an estimate.” Plans are already under way to partner with HMN Architects LLC, the architectural firm that designed the project, and JE Dunn to scrutinize construction costs by line item.
“JE Dunn prepares the cost estimate by looking at other hospital construction projects, and some of our materials are quite different than materials used at other construction projects recently completed by Dunn,” Murray explained.
Additionally, TCMH plans to complete the construction blueprints so JE Dunn can send them out for bids.
“The blueprints should be ready for a hard bid in July, and I should have accurate numbers for you by the August board meeting,” Murray said.
Murray believes the construction cost estimates “are too close to not have an accurate price.”
The higher costs will affect the project timeline. Bonds were originally to be issued for the project in July, and should the proposed expansion project move forward after the upcoming “hard bid” process, the timeline would be moved back by at least two months.
“I feel better about telling you the new construction is really $16.4 million than going by assumptions made in an estimate,” Murray told those present.
Murray also reported to the board that the monument located in the circle drive area in front of the hospital will be relocated to the new Texas County Justice Center. TCMH has worked with the Missouri Department of Transportation to obtain a deed to the property and with the county to relocate the monument.
The hospital will utilize the gravel area where the monument is located to park construction equipment and will be responsible for removing the entrances and restoring ditches in the area.
Board members heard that the hospital is looking for creative ways to help physicians and other certified personnel to pay for expenses incurred in obtaining healthcare education. Joleen Senter Durham, director of physician recruiting, noted that federal programs that have assisted in covering physician loan repayment may be cut for future physicians entering the workforce.
“Many hospitals are just paying a physician’s student loans as a recruiting and retention tool,” she explained.
Currently, TCMH relies on federal programs to meet this recruiting need at the county hospital, but they will begin to look at other options during in their ongoing physician recruiting efforts.
Murray added the Missouri Area Health Education Center is providing grants for certified healthcare professionals – such as radiologic technologists or nurses – that will allow students to get some loan repayment in exchange for participating in the program and working at a hospital like TCMH.
“As the need for healthcare providers of all types grows, it’s important that we help our employees take advantage of opportunities like this,” Murray said. “This can be a great recruiting and retention tool for us.”
TCMH is also working with the University of Missouri School of Medicine to host a second year medical student through the MU-AHEC Rural Summer Community Program. The program allows a student the opportunity to work under a physician preceptor at a hosting hospital.
Carter Casmaer of Hazelwood has been working under several physicians at TCMH in the clinics, surgery and emergency departments as part of the MU-AHEC program. Casmaer will be at TCMH through mid-July.
“This is just another opportunity for us to expose our hospital and community to someone in the medical community,” Murray said.
In exchange for participating in the program, TCMH provides a small scholarship to the student for the upcoming year’s medical expenses.
Also related to employment, TCMH has been working with the Penmac office in Houston to staff employees in some of the departments with higher turnover.
“This has been a really nice program for us,” Murray stated, explaining that the Penmac employees working in departments like dietary, housekeeping and floor maintenance have been pre-screened and trained in TCMH policies before coming on site.
“By working through Penmac, the employee is able to try the type of job they will be doing and learn the expectations of the department and the hospital prior to actually going through our entire hiring process,” Murray said.
The hospital has already employed one employee that came from Penmac, and several more employees are also likely to be hired after their 90 days with Penmac are complete.
Linda Pamperien, chief financial officer, presented the financials for May. The hospital ended May with a positive bottom line of $7,455 and a year-to-date balance of $290,861. The average daily census for the month was 18.
Present at the meeting were Murray; Durham; Pamperien; Casmaer; Doretta Todd-Willis, chief nursing officer; Dr. Charles Mueller, chief of staff; Dr. John Duff, Cox Health representative; David Phipps, pharmacy director; and board members Omanez Fockler, Jane Kirkwood and Janet Wiseman.
Board members Mark Forbes and Larry Southern were not present.
The next meeting of the TCMH board of trustees is noon Tuesday, July 22, in the downstairs meeting room of the hospital.