The Plain Dealer  , January 04, 2009 -  Several major hospital expansions in Greater Cleveland are moving forward despite an economic crisis that has stalled medical projects nationwide.

Economic Forecast 2009 - - The new year brings more gloomy forecasts but also fresh hope. Through Jan. 4, The Plain Dealer will look at what might be in store for the economy in 2009.

Several major hospital expansions in Greater Cleveland are moving forward despite an economic crisis that has stalled medical projects nationwide.

University Hospitals and Hillcrest and Lake hospitals all have major renovations or new construction in the works, with several projects scheduled for completion in 2009.

Those plans are among a minority across the country. The American Hospital Association recently surveyed hospitals and found that 56 percent were reconsidering or postponing large construction projects.

Thirty-three percent reported increases in borrowing money, and 11 percent said they couldn't issue bonds at all.

In the past, institutional investors flocked to buy tax-exempt bonds that hospitals, cities, counties and other nonprofit groups use to finance large projects. But the nationwide credit crisis has pushed investors toward safer places for their money, such as U.S. Treasury bills.

Hospitals also face other financial pressures, including a drop in the value of investments and, as unemployment increases, more uninsured patients.

"Hospitals overall, the financial markets aside, are seeing pretty weak [patient] volumes," said David Bachman, a senior equity analyst covering health care at Longbow Research in Cleveland. "Patients are putting off -- for as long as they can -- elective surgeries and other things because of the squeeze on their household finances."

Fitch Ratings recently revised its outlook on the entire U.S. not-for-profit hospital sector to "negative" from "stable."

For projects now well under way, the hospitals probably had issued bonds, refinanced or borrowed well before the financial crisis hit.

THE STORY FOR HEALTH

Highlights of 2008

• The Cleveland Clinic opened a $506 million heart center and a $128 million kidney and urology facility.

• Hospitals began seeing less traffic as financially strapped patients put off elective surgeries and other procedures for as long as they can.

• Because of the economic downturn, Fitch Ratings revised its outlook on nonprofit hospitals nationwide to "negative" from "stable."

Outlook for 2009

• With the help of grants and investors, the region's stem cell companies will continue working to perfect therapies for heart disorders and other ailments.

• Higher borrowing costs are causing hospitals around the country, including Summa Health System in Akron, to put some construction plans on the back burner.

• Nevertheless, some big projects in the area -- at University Hospitals, Hillcrest Hospital and Lake Hospital System -- are scheduled for completion in 2009.
"Those funds are committed and they are OK," Bachman said. "The hospitals that were hoping to get the ball rolling in 2009 or late 2008 are really feeling the credit squeeze."

Greater Cleveland has hospitals on both sides of the issue.

In late 2006, University Hospitals got approval for a bond issuance through the Ohio Higher Education Facility Commission for about $430 million, with $319 million for new projects and the rest to refinance old debt. And UH refinanced more than a third of its debt last spring to get more-favorable rates.

In the fall, the Cleveland Clinic also used the education facility commission to issue more than $1 billion in bonds.

The Clinic planned to refinance old debt and pay for new health centers planned for Twinsburg and Avon. A Clinic spokeswoman said, though, that the focus is on planning and design for the centers and that no time frame has been set for construction to begin.

The money also is going to pay for the $163 million renovation and expansion of Hillcrest Hospital, including a larger emergency department and a new patient bed tower. Parts are expected to be done by fall 2010.

UH, with its $1.2 billion Vision 2010 strategic plan, has the most projects under construction or planned. The Clinic finished its major projects at its main hospital last year.

UH and Lake Hospital System will open facilities close to each other in Concord Township this year.

UH's $27 million health center in Concord Township is expected to be complete in late July.

Meanwhile, Lake's 119-bed hospital is slated to open in the fall. Called the TriPoint Medical Center, the Concord Township facility will replace LakeEast Hospital in Painesville.

Elsewhere, the $235 million UH Ahuja Medical Center off Interstate 271 is well under way and expected to be completed in 2010.

UH's new $229 million Cancer Hospital also is under construction at its main campus, with completion set for late 2010. A nearly $41 million emergency center is scheduled to open nearby in March 2010.

The new neonatal intensive care unit is nearly complete and is expected to open in February.

But not all hospital systems in the region are as far along.

In November, Summa Health System said it was suspending construction of an orthopedic hospital, as well as an emergency department expansion at the Akron City Hospital campus.

"Not unlike other organizations throughout the country, we made this decision because it is financially responsible due to current markets making it virtually impossible to obtain permanent financing at favorable rates," wrote Summa Chief Executive Officer Thomas Strauss and board Chairman Thomas Knoll.

by Joan Mazzolini, Plain Dealer Reporter

Source: http://www.cleveland.com/medical/index.ssf/2009/01/clevelandarea_hospitals_procee.html

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