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Hospital, city still at odds

April 03, 2004|by GREGORY T. SIMMONS

gregs@herald-mail.com

City officials and consultants have engaged in "economic guerilla warfare" to prevent Washington County Hospital from moving to a site on Robinwood Drive, and the delaying tactics are adding roughly $14,000 per day to the project costs, hospital officials said Friday.

In a meeting with Herald-Mail editors and reporters, James P. Hamill, Washington County Health System's president and CEO, said consultants for the city have been "intentionally deceptive" to state officials.

He also said city officials and the city's consultants are practicing "economic disinformation" to undermine the hospital's plans.

Washington County Health System is the parent organization of Washington County Hospital.

Hagerstown Mayor William M. Breichner and City Council members dismissed the claims Friday when reached by phone.

"I believe the hospital (group) is engaging in a game of 'we know better than anyone else,'" Breichner said.

The city has hired a lawyer and a consultant to aid in drafting opinions for state boards about the hospital's requests.

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Hamill and the health system's vice president of financial services, Raymond Grahe, said the city's opposition to the $165 million project - work on which could have begun last month if the hospital's plan had been approved - is costing the project in two ways.

The first is related to inflation costs from construction-related items such as fuel and steel. Hospital officials have calculated that with 3 percent annual inflation, daily inflation on $165 million is about $14,000.

Hamill said that if the project is delayed for a year, the associated inflation costs could be as much as $5 million. Hospital officials said that under their original timeline, they had expected to break ground on the project last month. Now it could be late fall or early winter before construction begins, Hamill said.

Despite the added inflation costs, hospital officials will keep the project cost at $165 million, Hamill said. What might be lost because of the added expense is medical equipment for the new building or a reduction in construction costs.

Hamill said he could not say what might be eliminated because that would be determined by an engineering review.

The second cost to the project is a result of the city's opposition to the payment plan the hospital has proposed. The difference, Hamill said, is when the hospital would begin paying its debt for the project: at the time the project begins or at the time the construction is complete.

Hospital officials want approval for a plan that would charge a 3 percent rate increase to current patients at the existing hospital. When the new hospital opens, it wants another 2 percent increase.

Being able to increase rates sooner would allow the hospital to begin paying off the construction debt sooner, saving the hospital millions of dollars in interest payments, Hamill said.

Consultants for the city have opposed the rate increase proposal, which is before the Maryland Health Services Cost Review Commission.

If the rate plan isn't approved, Hamill said, the hospital could request a 6 percent rate increase to go into effect when the new hospital opens.

If the hospital does not begin paying its construction bill until the estimated 30-month project is complete, it will have to pay another $62 million in interest payments over the course of what would be a 30-year loan, Hamill and Grahe said.

City officials balked at the hospital officials' claims.

Breichner and council members N. Linn Hendershot, Lewis C. Metzner and Carol N. Moller all said the city isn't responsible for the hospital's problems.

The officials said while they have questioned the hospital's certificate of need to relocate as well as its financing proposals, it is up to the hospital to prepare proposals that state officials are willing to approve.

Additionally, city officials said, the rate proposals have decreased since the hospital group first made its proposal. They said the hospital initially had proposed a 13 percent cost increase, versus the 5 percent to 6 percent increases currently under consideration.

On the original 13 percent fee increase, Moller said "we succeeded in dropping that and saving the taxpayers' money."

City officials said health-care costs paid by the city would be directly increased by a hospital fee increase.

Hamill said city officials have been "unwilling to meet with us."

Metzner said the most recent meetings were unproductive.

City and hospital officials met in October and the following day, lawyers for the hospital filed a brief with the Maryland Health Care Commission to try to block the city from being considered an interested party in the matter. Had the Health Care Commission granted the hospital's motion, it would not have had to consider the city's comments about the move.

And at this point - with one side claiming the other side is using "guerilla" tactics - it may be better to have lawyers from each side discuss problems, Metzner said.

Hendershot said he would be willing to sit down with hospital officials. But Breichner said, "What is to be gained with meeting with them?"

The mayor said he sees no value to personally meeting with hospital officials "on an issue which they're not willing to compromise in any way, shape or form."

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