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Tuesday, 31 January 2012 11:35

Hospitals plan $62M in construction projects

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Hospitals plan $62M in construction projects Courtesy photo
WEST MICHIGAN — A trio of projects planned at West Michigan hospitals come after a relatively quiet period for health care construction.

Holland Hospital, Saint Mary’s Health Care in Grand Rapids and Mercy Health Partners in Muskegon are each planning renovations or expansions for 2012.

While each of the projects pales in comparison to the massive developments of the past decade in Grand Rapids, they still represent movement from what the market experienced during the recent economic turbulence.

“Everybody has been very conservative for quite a while,” said Alliance for Health President Lody Zwarensteyn.

The Grand Rapids health care planning organization reviews local projects that fall under state certificate-of-need regulations.

Among the health care projects planned in the region:

  • Holland Hospital will propose a $10.5 million patient floor to house a 24-bed orthopedics and neurology floor, according to a letter of intent recently filed with the Michigan Department of Community Health.
  • Saint Mary’s Health Care filed an LOI as well in December signaling plans for a $4.6 million renovation to expand its adult psychiatric medical unit from 20 to 28 beds. The current unit has operated at nearly 100-percent capacity in recent years, and Saint Mary’s Health care received state approval in November to increase its licensed adult psych beds to 28. The new filing to the state will seek approval to proceed with construction. After opening the Hauenstein Center in 2009 and the $47 million Lacks Cancer Center in 2005, Saint Mary’s Health Care is now focusing on small renovation projects to upgrade its main hospital campus, Chief Operating Officer Randy Wagner said.“We’re getting back to the other parts of the hospital to update some of our older units and bring them up to current standards,” Wagner said.
  • Mercy Health Partners in Muskegon plans a $15.4 million renovation that’s part of the final phase of consolidation of services at the former Muskegon General Hospital into the Mercy Hospital campus. The project will save the health system an estimated $1.2 million in annual utility and maintenance costs, plus alleviate the need for $10 million in capital improvements at the Muskegon General site.

Zwarensteyn believes more expansion or renovation projects are on the way in West Michigan. One driver behind the projects is a need to modernize facilities to generate efficiencies. Pending federal reforms on how health systems are paid also could affect hospitals’ future ability to finance and afford projects and may drive some activity, he said.

“They realize there are changes coming and they have to position themselves for the future,” he said.

At the same time, the ability to finance a project has eased since the height of the recession in 2008 and 2009.

Mitch Stapley, chief fixed income officer for Fifth Third Asset Management in Grand Rapids, said capital markets had “such an aversion to risk” just a few years ago, and that affected the ability of health systems to access capital.

“It has taken a while for that to come out of the system,” Stapley said.

Investors now see health care as a “much better environment” to put their money, he said.

“Money is flowing back into that sector,” Stapley said. “Whether it’s in construction, whether it’s investor dollars going into the equipment manufacturers or going into health care companies, money’s going in because people are seeing the opportunity to get a better return.”

Municipal bonds that are often used to finance hospital projects are selling “much better,” Stapley said.

“There’s a tremendous demand like we haven’t seen before,” he said.

Read 2171 times Last modified on Sunday, 12 August 2012 21:56

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