Texas County Memorial Hospital board of trustees agreed at the hospital’s monthly board meeting Tuesday to postpone the proposed hospital expansion project until “the time is right.”
Wes Murray, chief executive officer at TCMH, recommended to board members that the project be postponed.
“I fully support this project, and we definitely need to do this project to continue to meet the healthcare needs of the county,” Murray said. “However, we need to do this project at a time that’s right for the community.”
Omanez Fockler, chairperson of the TCMH board, echoed Murray’s concerns.
“We want to do the project, if at all possible, but we need to be wise,” Fockler said.
In September, board members voted unanimously to approve the $18 million, 52,000 square foot expansion and related remodeling contingent upon appropriate financing. Although the contractor’s bids for the project fell within the original construction cost estimates, bond interest rates rose in late September, which raised questions about the feasibility of the project.
Hospital officials continued to prepare bond documents with the intention of seeking financing through tax-exempt bonds should interest rates get down in the 4 percent range originally projected for the project. In the summer, a debt capacity analysis for the project was completed by UMB Bank, NA, the company handling the bonds and BKD, LLC, the hospital’s auditing firm. Both firms came up with plans showing the hospital on strong financial footing for an $18 million project with an interest rate at 4.5 percent or less.
As bond interest rates rose in October, most of the subcontractors that provided bids for the project agreed to 60-day extensions while TCMH worked with UMB Bank to prepare to take the hospital expansion project to the bond market with hopes that bond interest rates would fall.
Murray reported to board members that the bonds were ready for the market Nov. 17, but interest rates for the bonds were at 5.2 percent rather than the originally projected 4.5 percent or less.
“The increase in the interest rate created an additional $2 million in interest expense for the project,” Murray said.
Murray explained that he worked to no avail with HMN Architects, the architectural firm for the project and JE Dunn Company, the construction management firm handling the project, to see if an additional $2 million in construction costs could be shaved off the project.
“At this point we feel like it’s in our best interest to roll up the blueprints and set this project aside for now,” Murray said.
Murray complimented members of the community that attended the public forums held throughout the county in October and November.
“We have received nothing but positive support for this project,” he said, “We will pick it back up when the timing is appropriate.”
Murray explained that prior to committing the hospital to the $18 million project, he wants to see an upturn in hospital revenues as well as a more stable economy. He noted that in the past few months, TCMH financials have been below budgeted expectations.
Murray noted that healthcare facilities across the nation are seeing a downturn in business due to people choosing not to have elective procedures done due to cost as well as an overall increase in uncompensated care.
“Unfortunately, we are not immune to the current economic conditions,” he said, explaining that uncompensated care at TCMH is already up 31 percent over last year’s uncompensated care numbers.
TCMH is also searching for two primary care physicians for the TCMH Medical Complex in Houston. The drop in referring physicians has affected the overall financial numbers at the hospital.
“If we set this project aside for a time, we can stabilize our provider base,” Murray said.
TCMH also plans to work with the TCMH Healthcare Foundation to take a capital campaign for the project to the community.
“This is a reasonable approach,” said Mark Forbes, board member. “All of the pieces need to be in place, and right now, there are too many things that could go either way.”
Dr. Charles Mueller, chief of the TCMH medical staff, expressed disappointment.
“The medical staff is disappointed that we can’t move forward right now, but we understand and are supportive,” he said.
The time frame for picking up the project could be in the first quarter of the new year, this time next year, or later, according to Murray.
“It’s important not to lose sight of the big picture and how the community views our project,” Murray cautioned. “We will know when the time is right to pick this back up.”