Hospital proceeds with $6.78 million project

This article submitted by Michael Jacobson on 12/20/00.

A major remodeling project at the Paynesville Area Health Care System will be bid in January and construction should start this spring.

After hearing an update of the plan, its costs, and the ability of the hospital system to finance the project, the Paynesville Area Hospital District Board of Directors. voted unanimously to move forward with the bidding process.

At the start of the noon meeting, hospital administrator Willie LaCroix asked the board to let the bids only if they planned to go forward with the project as presented. He stressed that altering the project parameters after opening the bids would expose the bidders' proposals.

Bids should be let in early January and be opened in early February. A couple of weeks will be needed to examine the bids to insure that the construction provisions will be met, so the board would not be expected to approve them until the end of February.

Project description
The project is complicated, involving four additions and around 50 phases, said architect Richard Engan.

The additions will be built first and then interior remodeling can be done as existing space is vacated.

The four additions are a new emergency wing to the west of the hospital; a new meeting area and supply room on the north side; an addition to the north side of the clinic; and a small addition to the dining area at the Koronis Manor.

The new emergency room wing will have an ambulance entrance, trauma room, and new nurses station. The new parking lot on the west side of the hospital - put in last fall - will lead to this wing.

By vacating the current emergency room, that space can be used for two larger surgical suites. This will allow surgeons more space to perform procedures not presently offered in Paynesville. It also will allow surgeries to be done concurrently by separate operating teams or to be done with less down time for one surgical team by using both rooms.

Three birthing rooms will constructed. These will have ample storage to hide the equipment. "Normally, they'll look more like motel rooms than hospital rooms," said Engan.

The meeting room and supply room addition is needed to create more space for outreach in the middle of the hospital. These rooms, as well as the laundry (which will be outsourced), will be used to double the exam rooms to allow for four outreach physicians at once. Three procedure rooms are planned for outreach, where now there is only one.

The clinic addition will provide seven extra exam rooms as well as a room for medical students. The extra rooms will allow psychiatry to move to the clinic, provide rooms for pharm.D. consultations, and accommodate future clinic growth due to the new physicians.

Part of the plan at the Koronis Manor, Engan said, was to make the facility more like home and less like an institution. The existing dining room will be divided in two and another room will be added on for eating. The idea is to make the meal setting more like a restaurant and less like a cafeteria, said Engan.

In addition, necessity requires bathroom and tub room remodeling, a new ventilation system, a new nurse's call system, and a new fire sprinkling system. "That has been mandated for 20 years," said Engan. "We're going to comply with that now."

The project was scaled back from a year ago, when it was estimated at nearly $8 million. Another addition to the Manor and several remodeling phases were postponed due to finances.

The current estimate for the project is $6.78 million, according to Kevin Becker, the construction manager for the project.

This has grown from an estimated $4.9 million that the board approved pursuing last winter.

"Right now, the bidding climate is very favorable," said Becker. "(Contractors are) looking for work, so I think it's important for us to get on the street and get the work out."

Because the construction manager will be taking on the role of a general contractor, the project will be bid in smaller segments and not as one unit. Becker said $20,000 is budgeted just in copying expense to provide all the documents to prospective contractors.

Becker will be hosting two prebid meetings for contractors on Jan. 18 and Jan. 30.

In order to coordinate the project, builders will be giving milestone dates by which their work must be done.

Becker hoped that his cost estimates were conservative, telling the board, "If they are, I'll be the first to admit it, after the project is bid out."

The clinic addition, remodeling in the administration wing, new carpet for 700 Stearns Place, and an isolation room will be bid as alternates. If the bids do come in high, omitting these areas could save up to $600,000 and keep the project on budget.

Cash flow
Of the estimated $6.78 million project cost, the hospital system has already paid over $400,000 in architect and engineering fees and other expenses. By the time the project starts, they expect to have paid over $500,000 towards the project, which leaves $6.2 million to finance.

Jeff Gendreau, a financial advisor, said the rest of the project will be financed at 6.15 percent over 22 years.

After reviewing projections of PAHCS's earnings and cash flow, Gendreau concluded that while finances would be tight the hospital system could afford the project. "The bottom line is the projections are positive," he told the board.

PAHCS has made record profits in 1999 and 2000. Over the past two years, the system has netted $1.2 million. Continued profits will be needed to pay for the project.

"If you do this project, it's not going to leave you a lot of room to do a whole lot more in the next few years," he warned. He did add that being proactive could be better than reacting.

Needed improvements
Board member Mike Hansen asked whether the doctors had any qualms about the project and if everything was needed.

LaCroix and Bob Gardner, who as chief of staff sits on the hospital board, assured Hansen that the doctors support the project.

"I think what's being presented today is a necessity," said LaCroix. "It's not 'What if?' or 'Why not?' "

"I don't think there's a lot of niceness left," agreed Gardner. "I think it's all need."

Later, just before the board voted, Hansen expressed concern over the amount of spending in the Koronis Manor, where reimbursement is difficult.

LaCroix said he tried to keep the improvements in the Manor to $820,000, which is the amount that the state allows nursing homes to be reimbursed for capital improvements in a year. But more than $1 million will be spent there, and the groundwork for future improvements laid, he said.

"The cost of not doing the Manor is too great. It's impossible not to do it," said LaCroix.

In the board discussion, prior to voting, Doug Ruhland said, "There are two things that jump off the page. First, we're spending a lot of money in revenue-generating areas, which is a must. Second, if we do it, we should do the whole project." He pointed out that the alternates could be omitted or less could be spent on furnishings or equipment if money really got tight.

"In my mind, there's no question to bid everything," agreed board chairman Don Thomes.

The unanimous vote followed.

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