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PROPOSED EL PASO CHILDREN’S HOSPITAL NEW CLIMATE NEW PROMISE JOBS • RESEARCH • INDUSTRY JAMES N. VALENTI, CEO 2+ YEARS IN THE BLACK PROMISE OF A CHILDREN’S HOSPITAL COMMITMENT TO FOUR YR MEDICAL SCHOOL MEDICAL CENTER OF THE AMERICAS KMD ARCHITECTS JIM DIAZ, AIA AN EL PASOAN LARGEST EXPANSION OF ANY HOSPITAL IN EL PASO IN 90 YRS BRAC INFLUX OF TROOPS FOUNDING DEAN ROBERT SUSKIND, MD TRUE REGIONAL MEDICAL CENTER JOBS ● RESEARCH ● INDUSTRY ● CLEAR ECONOMIC DRIVER ECONOMIC IMPACT OF ACADEMIC TEACHING HOSPITALS The economic “multiplier effect” averages 2.3 for teaching hospitals. For every dollar spent an additional $1.30 is generated. Texas Medical Association January 2007 ECONOMIC IMPACT OF EL PASO MEDICAL SCHOOL “$1.2 TO $1.3 billion...Over 4200 new jobs” Founding Dean Robert Suskind, MD, March, 2007 EL PASO MEDICAL SCHOOL FUNDING APPROVED BY LEGISLATURE Accreditation in 2008 ● Classes begin in 2009 UTEP Impact Study THERE HAVE BEEN FOUR PREVIOUS CHILDREN’S HOSPITAL STUDIES 1993 1995 2003 2004 Providence Hospital, Ernst & Young Columbia HCA, Ernst & Young EPICH Foundation, Katz Group Thomason, Deloitte None of the previous studies utilize the economic business model of the 2007 study. 2007 Thomason, Kurt Salmon Assoc ALL STUDIES AGREED: There is a need for a specialized Children’s Hospital; A Children’s Hospital could be financially viable if affiliated with an existing acute care general hospital; The Pediatric inpatient market would consolidate over a period of time as the Children’s Hospital achieved critical mass to provide a full range of specialty services; and, It is essential to increase the supply of Pediatric manpower in the community. TEAM OF EXPERTS • • • • • • • • • • • Kurt Salmon Associates, Lydia Hammer & George Westfall Gjerset & Lorenz, Lance Ramsey, DSH & UPL, governance John Wendling, Cost reimbursement Sellers Feinberg, Scott Reasonover, reimbursement of capitalized cost Bob Evans, state licensing and CMS Paul Braden, Delgado Acosta & Braden, governance and bonding KMD, Jim Diaz and team, design Bruce Crockford, Jones Lang Lasalle, construction costs Kaufman Hall, Charles Kim, review and validation of assumptions Thomason Administration: Valenti, Rivera, Cassidy, Zampini Eddie Sosa, Legal counsel VALIDATED. VERIFIED. WHAT DRIVES FEASIBILITY? VOLUME COST BASED REIMBURSEMENT GOVERNANCE MODEL PROVIDER BASED SEPARATELY LICENSED TAX EXEMPT ABILITY TO USE TAX BACKED DEBT SUBSIDIES CMS REQUIREMENTS FOR LICENSING PROTECT BONDING ABILITY GROWTH IN PEDIATRIC POPULATION The pediatric population in the El Paso area is projected to increase by: 3.60% between 2005 and 2010, and 2.67% between 2010 and 2015 PROJECTED POPULATION CHANGES BY SERVICE AREA SERVICE AREAS 2005 2006 2007 Primary Service Area 226,094 230,614 234,097 79,133 80,486 82,359 International Service Area 388,232 407,294 421,127 Total Pediatric Population 693,458 718,394 737,584 Secondary Service Area – Southern NM UNDERSERVED PEDIATRIC COMMUNITY Pediatrician to Child Population Ratio (PCPR) Area Ratio US Average 1 to 1769 Texas Average 1 to 2421 El Paso Average 1 to 3532 UNDERSERVED PEDIATRIC COMMUNITY Fragmented market Subspecialists on staff at multiple hospitals Lack of comprehensive service CHILDREN’S HOSPITALS TRAIN NEARLY 30% OF ALL PEDIATRICIANS AND NEARLY HALF OF ALL PEDIATRIC SUBSPECIALISTS TOTAL PEDIATRIC DISCHARGES 2004 HOSPITAL TOTAL PEDIATRIC DISCHARGES MARKET SHARE Providence Memorial Hospital 4,646 41.12% Thomason Hospital 2,675 23.67% Del Sol Medical Center 2,149 19.02% Las Palmas Medical Center 1,337 11.83% 473 4.19% 15 1.30% 4 4.00% 11,299 100.00% Sierra Medical Center Physicians Hospital El Paso Specialty Hospital GRAND TOTAL PEDIATRIC DISCHARGES TOTAL NEONATAL INTENSIVE CARE NICU DISCHARGES 2004 HOSPITAL Thomason Hospital TOTAL NICU DISCHARGES MARKET SHARE 1,220 34.08% Providence Memorial Hospital 796 22.23% Del Sol Medical Center 759 21.20% Sierra Medical Center 405 11.31% Las Palmas Medical Center 400 11.17% 3,580 100.00% GRAND TOTAL NICU DISCHARGES PROJECTED ADMISSIONS FOR NEW CHILDREN’S HOSPITAL SOURCE 2004 2010 2011 2012 2013 2,675 2,753 2,763 2,773 2,781 2,791 2,799 Ft. Bliss Growth 118 235 353 471 589 589 Curb Outmigration by 20% 82 96 109 123 137 151 Market Share Growth at .5% per year 347 413 481 549 615 755 3,300 3,507 3,716 3,924 4,132 4,294 Base Adjusted for Population Growth TOTAL PROJECTED ADMISSIONS 2014 2015 PROJECTED ADMISSIONS FOR NEW CHILDREN’S HOSPITAL SOURCE 2004 2010 2011 2012 2013 2,675 2,753 2,763 2,773 2,781 2,791 2,799 Ft. Bliss Growth 118 235 353 471 589 589 Curb Outmigration by 20% 82 96 109 123 137 151 Market Share Growth at .5% per year 347 413 481 549 615 755 3,300 3,507 3,716 3,924 4,132 4,294 Base Adjusted for Population Growth TOTAL PROJECTED ADMISSIONS 2014 2015 CRITICAL SUCCESS FACTORS • Public support, positive vote of the electorate • Children’s Hospital is the provider of choice • Community Pediatricians refer to the Children’s Hospital for ambulatory diagnostic testing and treatment • Thomason/Texas Tech Partnership • Academic Teaching Hospital & Open Medical Model • Pediatric Center of Excellence • Continued growth of obstetrics & NICU • Aggressive Recruitment of Pediatric Subspecialists TIMELINE FOR CHILDREN’S HOSPITAL Nov. 6, 2007 2008 2009 2010 2011 Public vote of the community Make ready RECRUITMENT PEDIATRIC Construction PROGRAM DEV. Construction Open 2nd Quarter of 2011 PEDIATRIC SERVICE LINE PLANNING HAS ALREADY BEGUN COLLABORATIVE COMMITTEE Thomason/TTUHSC/Community Peds & Subspecialists Business plan for pediatric program development Determine Centers of Excellence Set priorities for recruitment Specific timelines for service line development RECRUITMENT OF SUBSPECIALISTS & PEDIATRIC PROGRAM DEVELOPMENT Beginning in 2008, Thomason has committed between $5.0M and $6.4M each year, almost $18 million of support for pediatric physician recruitment and program development. These dollars will be repaid to Thomason by the Children’s Hospital in the first five years. Oncology Intensivist/Critical Care General Surgery Emergency Medicine Endocrinology Pulmonary Medicine Anesthesiology Gastroenterology Urology Radiology Psychiatry Rheumatology Nephrology Cardiology Otolaryngology Developmental Specialist KEY OPERATING ASSUMPTIONS FOR FINANCIAL FEASIBILITY Low cost financing for construction. Qualify for non-traditional revenue to support unfunded care. Separately licensed Children’s Hospital eligible for full Medicaid reimbursement. Availability of pediatric program support and working capital. IMPACT OF ENHANCED MEDICAID PAYMENT AS SEPARATELY LICENSED CHILDREN’S HOSPITAL 2005 Projected Future Reimbursement Reimbursement Difference Medicaid Reimbursement New Capital Cost Reimbursement $11,300,000 $12,300,000 $1,000,000 $0 $6,500,000 $6,500,000 TOTAL DIFFERENCE IN REIMBURSEMENT $7,500,000 $ in millions CONCLUSION – FINANCIAL FEASIBILITY $7.0 $6.0 $5.0 $4.0 $3.0 $2.0 $1.0 $0.0 ($1.0) $6.58M $6.62M $6.03M $2.3 $5.45M $5.46M $2.0 $6.04M $1.8 $1.7 $4.89M $4.92M $4.26M $(1.5) $(0.6) $(1.0) ($0.1) $(1.5) $(2.2) $-.82M Year 1 Cash Generated Year 2 Year 3 Year 4 Year 5 Revenues in excess of (less than) expenses The Children’s Hospital is expected to generate operating profit in each of the first five years of operation. The Children’s Hospital will generate positive cash flows in each of the first five years of operations, except for the initial year. 24 FIVE SITES WERE CONSIDERED Parking on Alberta Boll St Central Plant #2 Anywhere Free standing Texas Tech Clinics Raynolds St Staff Parking #4 #3 #1 Texas Tech Bldg El Paso Psych Ctr Hospital Annex #5 New Tower Parking WOMEN/INFANT’S HEALTH CENTER EL PASO CHILDREN’S HOSPITAL CURRENT EXPANSION Existing Parking Main Hospital Entrance Children’s Hospital Entrance 3D Thomason Campus Model SW Aerial View - Campus Ambulatory Surgery Women’s/ Children’s Emergency COMPARISON OF FIVE OPTIONS I. Building/Land Acquisition II. Construction Cost Demolition Site Improvements Off-Site Improvements Landscaping and Irrigation Building Cost Payment and Performance Bonds Contractor's Fees Administrative Costs Professional Fees Owner's Contingency Sub Total Construction Cost Option1 Texas Tech Building Option 2 Option 3 Psychiatric Center Parking Lot, Alberta Option 4 Freestanding Option 5 Expand New Tower $ $ $ $ 750,000 2,650,000 80,000 90,000 79,926,000 1,598,520 4,334,652 1,870,800 13,011,253 9,602,417 $ III. Major Movable Equipment Total Project Cost--See Schedules 19,200,000 113,913,642 164,358,642 $ 250,000 850,000 80,000 11,000 55,726,000 1,114,520 2,957,302 1,695,000 10,419,840 6,758,382 $ 31,245,000 $ 21,350,000 79,862,044 70,000 2,650,000 80,000 90,000 79,926,000 1,598,520 4,300,652 1,870,800 12,709,248 9,539,017 $ 30,145,000 $ 131,357,044 - 112,834,237 2,650,000 80,000 90,000 84,599,770 1,691,995 4,540,188 1,870,800 13,146,372 10,024,695 $ 31,095,000 $ 143,929,237 6,720,000 118,693,820 1,000,000 2,000,000 71,439,620 2,199,662 10,892,804 10,306,000 $ 36,145,000 $ 161,558,820 - 97,838,086 19,878,534 $ 117,716,620 IV. Add to Construction Cost for Total Capital Expenditures Loan Acquisition Costs @ .02059 - - - - Total Financing $ 164,358,642 $ 131,357,044 $ 143,929,237 $ 161,558,820 BENEFIT OF OPTION 5 $ 44,218,642 $ 11,217,044 $ 23,789,237 $ 41,418,820 2,423,380 $ 120,140,000 Option 5 – New Tower $120,140 million CONSTRUCTION COMPARABLES Children's Hospital Construction Cost Comparisons Recent Projects in Area Year Total Square Hospital Complete Cost (mill) #Beds footage Dell Children's in Austin 2007 $200.00 169 500,000 University of New Mexico 2007 $233.80 267 476,555 El Paso Children's Hospital 2011 $117.70 135 217,036 $ per sq ft Cost per bed $400 $ 1,183,000 $501 $875,655 $542 $871,852 BUILT FOR FUTURE GROWTH NICU PICU Gen Peds TOTAL #Beds Neonatal Intensive Care 50 Pediatric Intensive Care 12 General Pediatric Beds 78 TOTAL 140 50 12 78 140 ROOF 30 FLOOR 9 PEDIATRIC NURSING 30 FLOOR 8 PEDIATRIC NURSING (18) PICU (12) 30 FLOOR 7 PEDIATRIC NURSING 55 FLOOR 6 NICU FLOOR 5 MECHANICAL 30 FLOOR 4 MOTHER/BABY & NURSERY POSTPARTUM 30 FLOOR 3 MOTHER/BABY (POSTPARTUM) & NURSERY 26 FLOOR 2 L&D (18 LDRs) + ANTEPARTUM (8) PEDIATRIC SURGERY FLOOR 1 OP SERVICES/ANCILLARY SUPPORT PEDIATRIC IMAGING BASEMENT OP SERVICES/ANCILLARY SUPPORT Roof MECHANICAL Not asking for additional dollars for operations. $120.1 MILLION BOND to finance construction only Per $100,000 Home Value 2009 2015 $ 2.38 mo. $ 1.99 mo. $28.56 yr. $23.88 yr. SEPARATELY LICENSED EXEMPT CHILDREN’S HOSPITAL To qualify for reimbursement and licensing as a separately licensed exempt children’s hospital, Center for Medicaid (CMS) requires separate books, separate control, separate staff, separate services. The Children’s Hospital would be controlled by a separate, independent 501(c)(3) corporation. EL PASO CHILDREN’S HOSPITAL WOULD BE ORGANIZED AND OPERATED AS AN INDEPENDENT 501(c)3 AS DICTATED BY FEDERAL TAX LAW •Board of Directors must be independent, no entity can have veto power over Children’s Hospital operations •Requires board, management and staff to act solely in the interest of the charity IRS •Good Governance Practices include adoption of code of ethics for the Board and conflict of interest policy CHILDREN’S HOSPITAL BOARD COMPOSITION • THOMASON - 2 members • COMMISSIONERS COURT – 2 members 11 MEMBERS • TECH – 1 member • PEDIATRIC SPECIALISTS – 1 member • PEDIATRIC PHYSICIAN – 1 member • WILLIAM BEAUMONT – 1 member • EPICH FOUNDATION – 1 member • AT LARGE – 2 members • THOMASON CEO & CFO – Ex-officio non-voting 4 One year terms ● 4 Two year terms ● 3 Three year terms ● Can serve maximum of six years ● Self-perpetuating ● 3 nominees for each vacancy CONTROL AND ACCOUNTABILITY EL PASO CHILDREN’S HOSPITAL EL PASO COUNTY HOSPITAL DISTRICT OWNS PHYSICAL STRUCTURE SETS TERMS OF SERVICE AGREEMENT CHILDREN’S HOSPITAL CHILDREN’S HOSPITAL INDEPENDENT 501(c)3 LEASES BLDG FROM DISTRICT PAYS FOR INDIGENT CARE PROVIDES INDIGENT CARE GOVERNS CHILDREN’S HOSPITAL AGREEMENTS BETWEEN HOSPITAL DISTRICT District would build and own the physical structure and all improvements. Multi-year management agreement for turn-key services co-terminus with lease includes performance standards and milestones. District would compensate Children’s Hospital for indigent care of certain pediatric patients of the District. CHILDREN’S HOSPITAL Exclusive lease on newly constructed facility Children’s Hospital would hold all licenses, permits, hire or contract for all employees Agree to repay the District for start-up costs (recruitment dollars and working capital) Minor agreements for dietary, housekeeping, maintenance as permitted by regulations. USE OF FACILITIES • DAILY OPERATIONS • INDIGENT CARE SO IF THOMASON CAN DO IT WHY HASN’T ANOTHER HOSPITAL DONE IT? $3.9 million in property taxes for indigent pediatric care $7.5 million in increased reimbursement as licensed Children’s Hospital $120.1 million bond for construction through community support Ability to meet stringent CMS requirements for separately licensed Children’s Hospital THOMASON HOSPITAL IS EL PASO’S ONLY REMAINING NOT-FOR-PROFIT HOSPITAL WITH A CHARITABLE MISSION THOMASON’S MISSION SINCE 1915 To enhance the health and wellness of the El Paso community by making high quality, affordable health care services available to all. THOMASON IS A SAFETY NET HOSPITAL Not for profit hospitals are mandated to provide a specified amount of charity care and community benefits as a safety net to the medically vulnerable, the poor, the uninsured and underinsured, at least as great as the local and state tax exemptions they receive. This does not apply to for-profit hospitals. 2006 Thomason received $45.8 million from El Paso taxpayers. Thomason delivered $196.1M+ to El Paso in uncompensated care. THOMASON HAS 2+ YEARS IN THE BLACK FINANCIAL STABILITY CHARITABLE MISSION DELICATE BALANCE AT THOMASON EVERY PENNY OF PROFIT STAYS IN EL PASO PROFITS ARE REINVESTED IN CLINICAL PROGRAMS & INFRASTRUCTURE PROFITS ARE REINVESTED IN TECH RECRUITMENT; IN 2006 THOMASON PAID TECH $35 MILLION DOLLARS FOR FACULTY FUNDED PATIENTS PAY FOR UNFUNDED PATIENTS, PROFITS REDUCE THE NEED TO GO BACK TO TAXPAYERS $$$ AVERAGE CHARGES P/DAY FOR CARDIAC CARE Average Charges in El Paso Hospitals for Cardiac Care Source: The Texas Hospital Checkup Texas Business Group on Health and the Dallas-Fort Worth Business Group on Health, http://www.tbgh.org/checkup/index.htm AVERAGE CHARGES FOR DELIVERY Average Charges in El Paso Hospitals for Delivery Source: The Texas Hospital Checkup Texas Business Group on Health and the Dallas-Fort Worth Business Group on Health, http://www.tbgh.org/checkup/index.htm 100 MOST EXPENSIVE HOSPITALS NATION’S HOSPITALS WITH THE HIGHEST CHARGES COMPARED TO COSTS Total Rank Charges to in the Hospital Cost Ratio- Net Income Nation Name City State System Total (or loss) 37th Sierra El Paso TX Tenet 697.73% $40,540,673 46th Providence El Paso TX Tenet 675.49% $70,841,238 IHSP Hospital 200, 2005 Ver 1.2 COMPARISON OF UNFUNDED CARE BY EL PASO HOSPITALS CORP Tenet Tenet HCA HCA EPCHD Total Gross Patient Revenue Unfunded Care as % of Gross Net Patient Patient Revenue Revenue Total Unfunded Care TYPE HDQTRS HOSPITAL For-profit Dallas, TX Sierra $45,623,530 $1,095,488,713 $215,861,759 For-profit Dallas, TX Providence $45,619,963 $1,241,435,264 $294,834,585 For-profit Nashville, TN Del Sol $62,977,700 $859,853,506 $216,642,826 For-profit Nashville, TN Las Palmas $24,263,258 $575,872,965 $151,982,356 Not-for-profit El Paso, TX Thomason $177,281,952 $473,241,982 $178,507,250 http://www.dshs.state.tx.us/chs/hosp/char2005.pdf 4.20% 3.70% 7.30% 4.20% 37.50% A DIFFERENCE IN MISSION A FOR PROFIT HOSPITAL PROVIDES A SERVICE TO MAKE A PROFIT A NOT-FOR-PROFIT HOSPITAL MAKES A PROFIT TO PROVIDE A SERVICE YESTERDAY’S INDIGENT IS TODAY’S UNFUNDED. El Paso 4th poorest county in the nation Poorest American cities with a population of 250,000 or greater Rank City Median household income, 2004 1 Miami, FL $24,031 2 Newark, NJ $26,309 3 Cleveland, OH $27,871 4 Detroit, MI $27,871 5 Buffalo, NY $28,544 6 St. Louis, MO $30,389 7 Philadelphia, PA $30,631 Rank 8 Milwaukee, WI $31,231 9 New Orleans, LA 10 Poorest American counties with a population of 250,000 or more City Median household income, 2004 1 Hidalgo County, TX $24,778.00 $31,369 2 Cameron County, TX $26,290.00 El Paso, TX $31,764 3 Bronx County, NY $28,705.00 11 Tucson, AZ $31,901 4 El Paso County, TX $28,925.00 12 Pittsburgh, PA $31,910 5 St. Louis city, MO $30,389.00 6 Philadelphia County, PA $30,631.00 7 Caddo Parish, LA $31,317.00 8 Orleans Parish, LA $31,369.00 9 Baltimore city, MD $34,055.00 10 Mahoning County, OH $34,132.00 11 Polk County, FL $34,206.00 13 Cincinnati, OH $31,960 14 Memphis, TN $32,399 15 Baltimore, MD $34,055 16 Toledo, OH $35,239 17 Tulsa, OK $36,255 18 Oklahoma City, OK $36,347 12 Luzerne County, PA $34,341.00 19 San Antonio, TX $36,598 13 Oklahoma County, OK $35,182.00 20 Stockton, CA $37,322 14 Mobile County, AL $35,512.00 15 Lake County, FL $35,856.00 16 E. Baton Rouge Parish, LA $35,954.00 17 Pasco County, FL $35,997.00 18 Kings County, NY $36,030.00 19 Nueces County, TX $36,050.00 20 Marion County, OR $36,591.00 El Paso 10th poorest city in the nation UNINSURED CONTINUES TO GROW US TX EP 1 out of every 9 1 out of every 4 1 out of every 3 U.S. Census Bureau, Texas State Comptroller’s Office THE WORKING POOR 79% OF UNINSURED ADULTS IN TEXAS WORKED ALL OR PART OF LAST YEAR OR HAVE A FAMILY MEMBER WHO WORKED BETWEEN 2000 AND 2006 HEALTH CARE INSURANCE ROSE 7 ½ TIMES FASTER THAN FAMILY INCOMES For a family of four at the Federal Poverty Level $20,000 private health insurance in 2005 was $9,100 a year. Close to half their income. Families USA October 2006 Task Force on Access to Health Care in Texas: Challenges of the Uninsured and Insured April 2006 IN EL PASO THE UNFUNDED ARE: People employed at small firms that don’t offer employer sponsored coverage Part time workers, 38 hr workers cut short of benefits Those employed less than a yr Unemployed TEXAS HAS STRICT MEDICAID QUALIFICATIONS Work full time minimum wage at $5.15 hr. $10,712 a yr Single Family of three Non pregnant Non-disabled Under 65 FEDERAL POVERTY LEVEL (FPL) For a family of 3 is $17,170 In TX in 2006, a working parent of two has to make less than … $3,696 p/ yr or 24% of the FPL to qualify for Medicaid. “Code Red: Critical Condition of Health in Texas” Task Force on Access to Healthcare Today, El Paso has the distinction of being the most uninsured city in the nation at 34% Health Leaders-InterStudy November 2006 That’s every third home… WHAT HAPPENS WHEN PARENTS ARE UNINSURED? THE KIDS ARE UNINSURED. MORE UNINSURED KIDS IN TEXAS THAN ANY OTHER STATE. VERMONT #1 8% USA #39 12% TEXAS #52 23% % UNINSURED CHILDREN BY STATE “People who are uninsured receive less care and experience worse outcomes.” Study by Kaiser Family Foundation, March, 2007 Journal of the American Medical Association INDIGENT & WORKING POOR INCREASED COST OF CARE NEGATIVE HEALTH INDICATORS THOMASON IS A SAFETY NET HOSPITAL NO INSURANCE UNDERINSURED NO CARE OR DELAYED CARE TODAY, EL PASO IS STILL THE LARGEST METROPOLITAN AREA IN THE UNITED STATES WITHOUT A SEPARATELY LICENSED CHILDREN’S HOSPITAL YOU DECIDE.