Health Care

Low interest rates aid some rural Kansas hospitals

Look at construction projects under way or recently completed, and you'd think smaller hospitals in Kansas are a bright spot in the economy.

You'd be partly right — but partly wrong.

Low interest rates and construction costs make this a good time to build, says a Wichita architecture firm that's working on two projects recently approved by voters and hoping for a third to be approved Tuesday.

Much of the work replaces aging facilities that don't meet today's technology or patient needs, say hospital representatives.

And some hospitals have been able to move ahead because they have access to alternate sources of funding in a tight credit market.

But the bottom line?

The bottom line at many hospitals isn't as robust as it might first appear, with many feeling the effects of the recession.

"We saw this coming," said Clayton Pappan, director of marketing at South Central Kansas Regional Medical Center in Arkansas City.

"We're just weathering the storm and moving forward at this point."

Construction is on schedule at the hospital's new site, about 2 miles north of the city limits, he said. The hospital, with a targeted completion date of February, is being funded with a $23 million voter-approved bond project and replaces a facility built in the 1950s.

Chad Austin, vice president of government relations for the Kansas Hospital Association, said, "A number of hospitals are attempting to update their facilities" to meet needs not imagined 50 or 60 years ago, when inpatient stays were longer and more common and when technology was less sophisticated.

Harper Hospital opened a 12,500-square-foot addition in January.

"Our hospital was built back in the early '60s, and it was really set up to deliver more inpatient care," said CEO Kim Cinelli.

"We're delivering far more outpatient care, so we needed to reorganize things."

Last month, voters in Liberal approved a $17 million bond project to pay for improvements to Southwest Medical Center, and Stanton County voters approved a $12.7 million bond project for improvements at Stanton County Hospital in Johnson City.

Tuesday, voters in Pratt County will consider a 1-cent sales tax to pay for a $34 million addition to Pratt Regional Medical Center.

Health Facilities Group, a Wichita architecture firm, helped with all three votes, said vice president David Wright.

"Many more of these (construction projects) recently have been general obligation bond votes, and part of that really has been related to the credit crisis," he said.

Some of the hospitals his firm has worked with "don't have the financial strength at this time to move forward" without alternate financing.

Using multiple funding sources, including grants, tax credits and USDA rural development programs, allowed the Harper project to move ahead, Cinelli said.

In the meantime, capital needs not related to the expansion, decreased volume and an increase in charity care have challenged the hospital's cash flow, she said. It's a problem shared by colleagues.

"Many are struggling with their cash flows," she said. "Many have had to use their reserves because of the decreased volumes."

Austin, at the Kansas Hospital Association, said small rural hospitals across the state "are still experiencing struggles financially as well as in volumes."

He said he would categorize a few — probably fewer than five —"as being on the edge of closure." He didn't identify any of them. The association has 125 community hospital members.

Pappan, in Arkansas City, said, "We overall are still making money. We're doing good."

Wright expects to see more hospital expansion or remodeling projects. "People took a pause and kind of waited to see" how the recession would play out, he said. But with lower construction and interest costs, "It's been a great time to do projects."

Harper Hospital recently went through its first downsizing in years, Cinelli said, cutting a dozen positions.

The action "will allow the hospital to be stronger... (but) that was a hard decision. It was not made lightly," she said.

The downsizing, coupled with the expansion project that will allow better access to the hospital and more outpatient care, should allow the hospital to move forward, she said.

"You have to manage the times, or they're going to manage you."