Baptist Health in Jacksonville, Fla., scaling back construction plans

$200 million hospital expansion postponed


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Jan. 30--Pinning their troubles to the same economic forces plaguing the health-care industry nationwide, one Jacksonville hospital is delaying a skyline-altering construction project and two more are putting some equipment purchases on hold.

Baptist Health had planned to get an 11-story tower project off the ground this quarter on the shared campus of its 579-bed downtown medical center and Wolfson Children's Hospital. But a bone-dry lending market has postponed the $200 million expansion indefinitely, said Hugh Greene, Baptist Health's CEO and president.

He isn't alone. Hospital executives across the country are postponing projects big and small, blaming the credit crunch, investments gone bad and a squeeze on cash flow triggered by patients delaying nonessential treatments.

Nearly half of the facilities in an American Heart Association survey released last week said they had delayed planned capital projects. Meanwhile, 13 percent said they halted ongoing projects in their tracks.

In Baptist's case, the problem is that no bank will back the system's $100 million tax-exempt, variable-rate bond, Greene said. The balance of the cost would come from cash generated from hospital operations and reserves.

Without a bank willing to step in, the only other option is a fixed-rate bond, which carries a substantially higher interest rate, said Mike Lukaszewski, the health system's chief financial officer.

The difference in the interest payments between the two loans would be $7 million during the first year, assuming current rates hold steady. Baptist's administrators would rather wait out the credit crunch than pay so much interest.

"Our expectation is that that's a temporary delay," Greene said.

The children's hospital is to occupy the lower five or six floors of the new building, which will sit between the existing buildings and Interstate 95, just south of the St. Johns River. Additions inside will include pediatric cardiovascular intensive care, an expansion of the existing children's operating room and more beds.

The tower's 300,000 square feet of floor space will be evenly divided between children and adult services, but the two will remain separate, Greene has said.

The raised crosswalk that spans the interstate between Wolfson and Nemours Children's Clinic had been set last fall to temporarily close to make way for the construction. But it will remain open until work begins, Greene said.

A five-story medical office building under construction at the Baptist South campus off Old St. Augustine Road is expected to move forward as planned.

At Mayo Clinic Jacksonville, administrators are slashing this year's capital budget to $20 million, half its usual total. The impact is softened because of the hospital's move last April from St. Luke's Hospital, now part of St. Vincent's health system, to a newly built facility off San Pablo Road, said Bob Brigham, chief administrative officer.

Shands Jacksonville is in a "holding pattern," said Steven Blumberg, vice president for planning and business development.

"We, just like everyone else, are conserving cash as the market continues to fluctuate," he said. Only the most critically needed projects are likely to receive funding, he added.

It is too early to say how the recession will affect Shands' plans to build a new medical campus at the northeast corner of I-95 and Duval Road in North Jacksonville, he said. Unless the economy improves, Blumberg said, "You can see how that would be delayed for a little while."

Representatives of Brooks Rehabilitation and Memorial Hospital said that their projects remain mostly unaffected. A St. Vincent's spokeswoman didn't make a representative available to comment about the systems plans.