With plans quickly coming together to expand and renovate the Cook County North Shore Hospital and Care Center, the hospital board has been holding long board meetings, and the one it held from 9 a.m. until 2:30 p.m. on Thursday, February 19 was no exception.
One of the things the board learned was that the cost is going to be higher than they first thought. For the past year the board has been working with a $20.5 million estimate, but the new projection is that when everything is completed it will cost more in the range of $22.5 million
There are several reasons for the increase, but the biggest expense will be buying a new generator that can supply all of the power to the hospital and care center in case the power goes out, said Mark Walch of Boldt Construction, who was on hand to explain the build out process and costs to the board.
Rebecca Lewis of DSGW architects was also there, and she reminded the board that they had recently added several new items to the list that exceeded the estimated $20,890,367 price tag.
Those items include spending $75,000 for lift supports in the care center remodel; $60,000 for a drive up canopy; $30,000 to increase hospital room sizes; $248,724 to build a two-stall ambulance garage; and $450,000 for new boilers.
There were other reasons the estimate has risen, said Walch. Higher costs than first projected are expected in demolition work, concrete and masonry, interior finishes, millwork and earthwork.
Financing the project
Earlier in the meeting the board met with Jim Spreitzer of McGladery & Pullen to discuss the examined financial forecast. Spreitzer said based on the forecast he felt the hospital board could proceed with the $22.5 million renovation.
Long-term construction bonds will be purchased through the USDA Community Facility Guarantee program with AgStar purchasing the bonds. It is anticipated that a USDA direct loan in the amount of $12.275 million will be received. The board consensus was to accept the forecasted financial report and allow management to share the report with AgStar and the USDA so the process to obtain financing can stay on schedule for the construction timetable of breaking ground in May or early June of this year.
The first year of construction will be rougher than you expect, said Aaron Knewston of AgStar. “If you have problems, we will come and assist you to make a [financial] plan with management. You will ask for a waiver and we will give it you,” he said, adding, “Typically we will see something [financially] happening before it happens.”
Board Chair Kay Olson asked Spreitzer if he thought there would be problems for the hospital/care center to meet its financial obligations. He said he didn’t think so, and he felt good about the examination of the forecast.
“We can’t audit the future. We can examine the future. We don’t take our work lightly. We have our names on this,” he said.
“Taken year to year, a financial forecast can be bumpy—it’s not a straight line,” said Spreitzer, but by 2019, it should be on line, he added.
Olson also asked him about other concerns he might have with the board’s plans. He said it was important to keep the relationships with Sawtooth Mountain Clinic strong. “Make sure they are on board, that they are a strategic partner with you, and work with St. Luke’s. They will work with you. This is a plan of action. This isn’t a ‘build it and they will come’ plan. We’ve estimated what is going to happen with your seasonal and local populations to come up with our forecast.”
St. Luke’s CEO John Strange was at the meeting and he asked, “What is AgStar’s feeling in critical care access hospital funding?”
Knewston responded by saying AgStar didn’t anticipate any changes in rural health care access funding. Or if there would be any changes, he said, they would be small. “I’m not saying they won’t happen. But I don’t see how they [Congress] could make that big of policy changes that serve rural communities.”
Olson asked Spreitzer, “If you were a CEO would this be a project that you would do?
“Yes, absolutely. It has valid and reasonable expectations,” Spreitzer said.
Olson then asked CEO Strange what his thoughts were. Strange said there was a “narrow corridor in volume” and he worried that the Sawtooth Mountain Clinic was encroaching on some of the hospital’s services. “You need to present this to the clinic board and explain this project to them. They are in this with you and they need to play ball. In a way this is partnership.”
Strange also said there needed to be breaks in the project so the board could stop and examine and assess current needs and then decide to keep going forward or stop the project at that time.
Hospital Administrator Kimber Wraalstad said she would send in the financial reports to AgStar and the USDA. They will determine what blend of funding the project will receive and send it to Washington for approval. AgStar will draft the legal documents, covenants, and draft a commitment letter. The USDA will outline the conditions and obligations for Cook County. Meanwhile Boldt hopes to begin project bidding in May with ground expected to be broken in late May or early June for the two-year project.
Biomass
In other matters Wraalstad said she and Maintenance Director Rory Smith met with George Wilkes, Paul Nelson and Mark Spurr earlier to discuss the proposed biomass district-heating program. It was a second meeting between the hospital and biomass district heating group in the past month.
Wraalstad said she still had some questions that need answering before the hospital/care center could make a 25-year commitment to purchasing steam heat from the proposed biomass facility. The group would like the plant to begin operating in 2017 if enough money and contracts between clients and the city can be found to ensure its success.
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