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Behind Greater Philadelphia's $4 billion hospital boom

Friday, November 22, 2019  
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Philadelphia Business Journal

by John George

Behind Greater Philadelphia's $4 billion hospital boom

The Philadelphia region is experiencing perhaps its biggest hospital building boom ever.

All of the projects come despite the ever-expanding array of health care procedures shifting to outpatient settings, and the push by payers to shorten the lengths of inpatient stays.

In November, two new hospitals — built as replacements for existing medical centers — will get their first public unveiling with the debuts of Inspira’s Mullica Hill hospital and St. Luke’s Upper Bucks Campus. Construction of a third new hospital in the region, Belmont Behavioral Hospital’s replacement facility, is expected to be completed by the end of 2020. Another new medical center — Children’s Hospital of Philadelphia’s King of Prussia hospital — is scheduled to open the following year and a fifth, Virtua’s Westampton health campus, is in the early planning stages.

That list doesn’t include the $1.5 billion Penn Medicine is spending to build a 17-story pavilion across from the Hospital of the University of Pennsylvania that will house 500 private patient rooms.

It adds up to more than $4 billion in investments that will create thousands of temporary construction and permanent health care jobs.

And it is all taking place in an eight-county region that has seen just two new full-service hospitals open in the past two decades: Virtua Voorhees in 2011 and Einstein Medical Center Montgomery a year later. Two smaller specialty hospitals opened in 2010, one in Bensalem and the other in Royersford.

So what’s driving the hospital building boom?

“It’s the wherewithal to do so,” said Dan Grauman, managing director and CEO of the Center City-based health care consulting firm Veralon.

Grauman said when hospitals are able to establish a strong market position and perform well financially, their health balance sheets are recognized by the bond rating agencies with favorable ratings. That, he said, provides access to additional debt capital to spend on new projects.

“History shows that hospitals and their communities have an insatiable appetite to invest in building, equipment and technology,” he said. “Hospital facilities do get outdated, and the standards keep rising . It can be very expensive to build new towers or retro-fit existing floors for single patient rooms.”

Grauman said health systems, particularly the profitable ones, are investing in a range of ambulatory care locations to reflect the growth in outpatient care, but they also want to make sure their core inpatient facilities are up to date.

“While more and more care is provided in outpatient settings, remember that the aging population will require inpatient care at an increasing clip,” he said. “Within the next few years, the nation will get hit with a steady tsunami of the elderly requiring all types of care – whether provided in the home, in ambulatory settings and yes, in acute inpatient care settings as well.”

Health care consumerism and comparison shopping is also a significant driver of the building boom, as patients are assuming more responsibility in deciding where they go to receive care.

“Those needing inpatient care, the relatively older population, want facilities and care to be stellar,” Grauman said. “Those needing basic physician and outpatient care, the relatively younger population, are demanding easier and quicker access, and a superb patient experience with digital tools. Hospitals and health systems that are striving to remain at the epicenter of the health care system find the need to invest on multiple fronts to cater to a range of consumer expectations.”

What follows is an inside look at the next three new hospitals set to open in this market: one in South Jersey, one in Bucks County and the third in Philadelphia.

Inspira Mullica Hill: ‘A chassis built to grow’
John DiAngelo, CEO of Inspira Health, needed just three words when asked what the “wow” factor is for the new $356 million medical center his health system will open next month in South Jersey. “It’s the technology.”

Inspira Medical Center Mullica Hill will open with 210 private rooms — all with “smart room” technology that includes:
• Interactive TVs that will share real-time details on the patients’ care throughout their stay and allow patients to send messages to hospital staff
• Digital displays that will share real-time information on both the patient and patient interaction with clinical staff in the room
• Tracking that will improve patient flow and help identify the precise location of mobile equipment and Vital sign integration that sends data from diagnostic and patient monitoring equipment used to patients’ electronic medical records so nurses no longer have to record information manually

 The hospital’s clinical equipment will also boast new technology, which DiAngelo said is already proving useful in attracting additional physicians interested in obtaining staff privileges.

“The number of things we put in this building that aren’t in any of our other hospitals is significant,” he said.

Patrick Nolan, chief operating officer for Inspira Medical Center Mullica Hill, agreed the technology placed throughout the 465,000-square-foot medical center is its distinguishing feature. “I challenge you to find another hospital in South Jersey that has more technology than we do,” Nolan said.

Nolan expects the campus to evolve over time if new needs arise.

“This is a chassis that was built to grow,” Nolan said. “We can add a third wing, we can add more ER beds, we can add another cardiac catheterization lab.”

Inspira hired Skanska USA to build the five-story hospital. Array Architects designed the medical center.

Slated to open Dec. 8, Inspira Medical Center Mullica Hill was built as a replacement hospital for Inspira Medical Center Woodbury also in Gloucester County.

Nolan said the hospital will open with 1,400 employees, including about 300 people hired for new full-time jobs created as a result of the project. Another 50 jobs are being created at an adjacent cancer center, which will have a staff of 250, that is expected to open in January. Over time as many as five medical buildings are expected to join the hospital in occupying the campus.

Another 500 health system jobs will remain in Woodbury, where Inspira expects to maintain a satellite ER, behavioral health programs, radiology and lab services, and back-office operations. Inspira funded a needs assessment study for Woodbury, and is working with Gloucester County and the city on developing other uses for the site.

DiAngelo said it was always a matter of when, not if, a replacement hospital for its Woodbury hospital — formerly operated as Underwood-Memorial Hospital would be built. (Inspira was created in 2012 after South Jersey Healthcare merged with Underwood-Memorial.)

“Woodbury was obsolete,” DiAngelo said. “It was landlocked and we couldn’t expand there.”

Building a new hospital in Mullica Hill, on 100 acres of property Inspira purchased from neighboring Rowan University, carried its own challenges.

DiAngelo noted the land occupied parts of two townships, Harrison and Mantua, which meant securing approvals from two local governments as well as from Gloucester County. Also, the health system needed to go through the state’s certificate-of-need process that regulates new hospital construction.

The project faced stiff opposition from Kennedy Health System, now part of Philadelphia-based Jefferson Health, which operates a hospital in Washington Township about six miles away and, like Inspira, has an education partnership with Rowan.

Ultimately, the state ruled in support of Inspira’s application and the project was allowed to move forward.

“We know this is the best thing for the community,” DiAngelo said. “What we can do here is more than we could have done anywhere else.”

DiAngelo said Inspira isn’t only focused on new hospital construction. He noted over the past decade the health system has expanded its number of outpatient care and medical office sites from about 60 to 160 in South Jersey.

The construction of Inspira Medical Center Mullica Hill — being funded through a combination of health system reserve, tax-exempt bonds and philanthropy — marks the second time Vineland-based Inspira has built a new hospital this century.

In 2004, the health system consolidated three older hospitals into one: Inspira Medical Vineland.

“Most (hospital executives) don’t get to do one,” DiAngelo said. “I’ve been lucky. I get to do two.”

Belmont Behavioral Hospital: ‘Staple in the community’
The Philadelphia region has not experienced the opening of a new inpatient psychiatry hospital in more than a half-century.

That will change in early 2021 when the new Belmont Behavioral Hospital in the Wynnefield Heights section of the city opens for business.

Construction of the $114 million medical center, going up behind the existing hospital at Monument and Ford roads, is expected to be completed by the end of 2020. That old hospital will be torn down to create green space and parking areas.

The story of why the new hospital is being built dates back to 2015, shortly after Acadia Healthcare of Tennessee purchased Belmont from the Einstein Healthcare Network for $30 million.

Acadia bought the run-down hospital knowing renovations were in order. One of the new owner’s first tasks was sending a team to Philadelphia to examine the building and make recommendations.

The task of telling Acadia’s executive team the study’s outcome fell to Mark Schor, a Philadelphia native whom the company had recruited to serve as Belmont’s CEO.

“I told them renovations would cost $40 million, and they wouldn’t address all the infrastructure issues,” Schor recalled. “The CEO of Acadia at the time responded by saying that for $50 million he could build a new hospital. We all jumped at that idea.”

The scope, and cost, of the project changed over time. Belmont built stronger relationships with the city, Children’s Hospital of Philadelphia and Jefferson Health, creating a need for more space and to meet a growing demand for the hospital’s services.

“We started out planning to build a 200-bed hospital, but now we’re building a 250-bed hospital,” said Schor, now a division president for Acadia.

Despite the logistical challenges of building on Belmont’s cramped campus, which required tearing down several existing and underutilized buildings, erecting a new hospital somewhere else was never a consideration.

“That never really even came up,” said Laura Longstreet, Belmont’s CEO since the start of 2018. “This hospital is a staple in the community, and it’s close to the other suburban counties so it’s very accessible.”

The original target date for opening the new Belmont Behavioral Hospital was this year.

“I’d like to say everything has gone smoothly, but I’d be lying,” Schor said.

Longstreet said the most significant setback was the discovery of an underground water table that required extra engineering work. The new hospital was designed by Johnson Johnson Crabtree Architects. Alpa Construction is the builder for the project.

In addition to the hundreds of temporary jobs being created during the construction projects, the new six-story hospital will allow Belmont to expand the size of its work force, currently at 650, by up to another 300 jobs within the first year of its opening.

The project gives Belmont’s leadership the opportunity to create a new psychiatric care hospital from the ground up, one that will be home-like and not reflect the institutional-setting common in older behavioral health facilities.

“One of the features we are creating is a ‘treatment mall’ where patients will be able to go off their unit for special programs like computer labs, yoga and life skills such as a culinary cooking class,” Longstreet said.

Longstreet said their goal is to have the new hospital not only be a place to care for children and adults, but also serve as a community resource.

“We want to provide the community with access to the new gymnasium, where we hope to host community events and basketball leagues,” she said. “The hospital was once a polling place where people came to vote. We will be bringing that back.”

St. Luke’s University health network: Longtime coming
St. Luke’s University Health Network can’t be accused of acting rashly when it decided to invest $100 million on a replacement hospital for its Quakertown medical center in Upper Bucks County.

“This project has been in the works for 12 years,” said Dennis Pfleiger, president of St. Luke’s Quakertown and what will be known as St. Luke’s Upper Bucks Campus a few miles away in neighboring Milford Township.

“We were landlocked in Quakertown. When we looked to the future we needed to be able to provide what patients are looking for in a hospital, things like private rooms, and we needed to have the ability to expand.”

The project, however, was stuck on the drawing board while Bethlehem-based St. Luke’s prioritized other growth opportunities elsewhere in the state that included building its new Anderson Campus in Easton, which opened in 2011, and its Monroe Campus in Stroudsburg, which opened in 2016.

“The Monroe campus was a situation where the community came to us and asked us to bring our services there,” Pfleiger said. “The success of those two hospitals provides us with resources for Upper Bucks.”

St. Luke’s spent about $35 million to acquire the 40-acre property on Route 663 near Porter Road, where the new campus is being built, and another $65 million on construction of the hospital. IMC Construction, which has offices in Malvern and Philadelphia, is the project’s construction manager and MKSD Architects of Allentown designed the building.

Pfleiger said the costs are being funded through a combination of bond proceeds, existing reserves, a $5 million fund-raising campaign and a small state grant.

The property, previously farmland, was purchased from the nonprofit LifeQuest organization, Quakertown Hospital’s previous owner. The site, near a Pennsylvania Turnpike interchange, was once targeted by developers for a casino.

In December, pending Pennsylvania Department of Health approval, the St. Luke’s Upper Bucks Campus will open with a 40-bed medical/surgical unit and 16-bed emergency department along with four operating rooms, an intensive care unit and interventional radiology services.

Pfleiger said their plan is to open an additional 20 beds in March, while preserved space for another 20 beds for future growth based on patient demand.

“You don’t want to build a facility that’s so large you can’t support it,” he said. “We build hospitals to fit the needs of the communities they serve.”

Pfleiger said one feature of the Upper Bucks Campus he likes is the accessibility of all the service areas from the main lobby. “Nobody will have to wander around looking for where they need to go,” he said.

The campus won’t be limited to the hospital building. Pfleiger said the expectation is one medical office building, or possibly two, will occupy open space next to the medical center in the years ahead.

St. Luke’s isn’t vacating Quakertown.

Earlier next year, design work will begin on reconfiguring that hospital building to expand its behavioral health unit to 32 from 19 beds. Other programs such as its wound care, infusion therapy, dialysis, a sleep center, and radiology and lab services will be maintained as will the family and internal medicine physician practices at the Quakertown medical office building.

“A lot of people like being able to walk to that campus,” Pfleiger said.

The Upper Bucks Campus will open with a staff of about 300.

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