New hospital finances in good order

February 25, 2006|By Raymond Grahe

A recent letter to the editor incorrectly presented information regarding the funding of a new hospital at Robinwood Medical Center.

The new regional medical center will not cost $300 million, but closer to $250 million. The annual interest costs will not be $21 million, but rather about $14 million.

The real facts on the financing of the new hospital are these.

The interest cost, as calculated by experts in financing health-care projects like ours, is estimated to be close to $14 million a year. The current interest rate environment is very favorable to the project.

The Maryland Health Services Cost Review Commission granted the hospital an increase in rates - to begin when the hospital opens - of $7.2 million or approximately 50 percent of our interest cost.


The hospital has a sufficient bottom line to close the gap between the HSCRC rates and the total interest cost. Currently, as a nonprofit organization, our excess revenue is plowed back into equipment and programs to expand access to health care for our community. When the new facility is built, it will be used, in the early years, to pay the debt service on the facility.

The hospital's excess revenue is generated by efficient operations, investment gains, and other sources of nonpatient revenue.

There will not be a need for additional funding of start-up and operating costs. The costs have already been included in the project cost, as well as funding for roads, and sewer and water. In fact, Washington County Health System has included $7.5 million toward infrastructure costs in the new project.

About $1.7 million will go to road improvements - that's in addition to the $1.5 million we contributed when Robinwood was built. The bulk of the balance of the $7.5 million will go to costs associated with water and sewer fees and infrastructure. The project also includes $2.5 million for transition costs.

Before the site selection committee chose the Robinwood location, the health system management and a group of experts considered several alternative renovations for the existing site; one of which was described at "Plan B."

It would have built additional floors above the newest part of the hospital, which houses the critical care areas, the operating suite, and the emergency department.

Such a renovation would have disrupted the operation of critical services. Additionally, engineers have verified that the current structure would not support additional floors and it would restrict the use of the helipad, which is crucial to getting patients to our trauma services.

The new regional medical center at Robinwood is about providing optimal health-care services for every resident of our community at an affordable cost.

Washington County Health System is doing everything it can to keep those costs low. The hospital is currently one of the lowest cost providers in the State of Maryland. When the new one is complete, we will still be in the lowest 10 percent of costs of all hospitals in the state.

Raymond Grahe is Chief Financial Officer of the Washington County Health System.

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