Westward, hospital 

City growth driving hospital expansions.

click to enlarge AHEAD OF THE PACK: St. Vincent Health System broke ground on its new campus at Rahling Road and Chenal Boulevard last January.
  • AHEAD OF THE PACK: St. Vincent Health System broke ground on its new campus at Rahling Road and Chenal Boulevard last January.

Looking to capture out-patient business in the city's fastest-growing (and wealthiest) neighborhoods, hospitals are moving to build facilities in West Little Rock at ambulance pace. St. Vincent Infirmary will get there first, with a new medical office building that will house primary and urgent (but not emergency) care on a new $47 million campus at Chenal Parkway and Rahling Road. The University of Arkansas for Medical Sciences and Baptist Health are right behind; UAMS will build on 11.3 acres at Rodney Parham Road and state Hwy. 10, and Baptist has bought 21 acres at Hwy. 10 and Chenal.

That hospitals are investing millions of dollars at a time when nearly 20 percent of Arkansans can't afford health insurance and when insurance plans are moving patients out of the hospital with catheters trailing seems counter-intuitive. Are hospitals in position to expand because we are paying such high premiums to insurers, who in turn pay hospitals?

It's not that simple, hospital managers say. They say there's little correlation between reimbursements hospitals negotiate with insurance companies and the premiums insurance companies negotiate with buyers, and that because the cost of hospital expansion is paid for over long periods of time, the dollars don't come from today's patients.

Another question — for the distant future — is whether hospitals will follow their out-patient services west, to the detriment of mid-town hospitals. There is a trend nationwide for hospitals to invest in outpatient centers in affluent suburbs. The city of Cleveland has sued Cleveland Clinic over its decision to shut down Huron Hospital, one of the city's oldest hospitals, located in an area of declining population.

The University of Arkansas for Medical Sciences has too much real estate and investment in its campus and "centers of excellence" to contemplate in-patient relocation. Baptist Health — which already is west, by some lights, on Kanis Road — is in the midst of a $110 million capital campaign to renovate the hospital.

But St. Vincent Health, owned by Catholic Health Initiatives, whose West Little Rock campus is only two acres shy of St. Vincent Infirmary's, may one day build a hospital out west, though not any time soon. The campus has "capacity to expand to in-patient beds," said Tad Richard, vice president of business development for St. Vincent Infirmary, though he added that not all procedures would move to a new hospital.

UAMS says that by building near I-430, it will attract not just patients from West Little Rock but all parts of Central Arkansas. That patient population should leap in 2014 when the health care reform act rules on insurance go into effect. UAMS expects 250,000 Arkansans who were previously uninsured and unlikely to see a doctor will become insured.

UAMS paid $3.65 million from its surplus fund — which derives from clinic revenues (about 75 percent of UAMS income) — for the acreage on Hwy. 10. Developing a facility there will cost "tens of millions," director of managed care and business development R.T. Fendley said. "We have a lot more vision than we have capital," Fendley said; on the other hand, he said, "we need growth to be financially healthy." UAMS will hire consultants to look at debt capacity and what services should take priority at its new campus before building.

UAMS also sees an advantage to putting clinical offices off campus. Getting from point A to point B on UAMS' main campus is "complicated," Fendley said (though the hospital is working on ways to alleviate that). Taking "primary care, patient education, early diagnosis and treatment out to the community — that fits better outside of main campus than it does here," he said.

UAMS also plans to open a small primary care clinic in rented space on Chenal after the first of the year. But Fendley says "competition didn't play a role for us" in its plans to expand, and he expects the payer mix to be the same out west as it is now — 40 percent Medicare, 30 percent private pay, about 20 percent Medicaid and the rest uncompensated.

Fendley said UAMS has been planning a westward expansion since 2004. With population declining in the southern and eastern parts of the city but rising by double digits in the west, "it makes sense to us we ought to be placed where we can be attractive."

St. Vincent's Richard said the family practice clinic it operates on Rahling Road will move to its new medical campus, which is southwest of the Promenade at Chenal. An urgent care center to problems that don't rise to emergency room needs will be open after hours and on weekends. In spring, a satellite of the Longevity Center will open at the West Little Rock campus, and an ambulatory surgery center and radiology out-patient services will be added later in 2012. More services will be added over time; the hospital has been talking to cardiologists about "their future desires to more closely align," said Jonathan Timmis, chief strategy officer at St. Vincent Health System. Such hospital-doctor partnerships are expected to increase as reforms in Medicare reimbursement and other payments are enacted.

Because St. Vincent posted a loss of $26 million at the end of its fiscal year last year, its investment of $47 million in the western campus has raised some questions. Richard said last year's loss was due to an accounting entry that wrote off St. Vincent's investment in Doctor's Hospital building, which St. Vincent will exit in June of next year.

The hundreds of thousands of newly insured that the health care reform act would theoretically create didn't figure much into St. Vincent's plans, Richard said, and Baptist Health said the same.

Baptist has been eyeing the acreage it bought — the land is opposite the Walmart at Chenal and Hwy. 10 — for 10 years, CEO Russell Harrington said. Baptist paid $7.9 million for the land in June. Harrington said a study Baptist Health had showing that the land was "the best location on the west side of town" created "urgency" to purchase the land.

Though Baptist Health, the third largest private employer in Arkansas, could build a hospital out there, Harrington said, it's more likely to be the location of "an array of different types" of clinical services.


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