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New Prince George's hospital to cost $655M

Monday - 10/7/2013, 12:11pm  ET

The proposed Prince George's County Regional Medical Center in Largo will contain just 231 beds and cost approximately $655 million to build and equip, according to operator Dimensions Healthcare Systems and its expert consultants.

Dimensions disclosed the official cost and numerous other details of the plan to replace aging Prince George's Hospital Center in an application filed Friday at the Maryland Health Care Commission, which must approve the project.

In a prepared statement, Dimensions CEO Neil Moore predicted success in obtaining a certificate of need, the last major hurdle for the project, which is slated to open in January 2018.

"We’ve enhanced our partnerships, finances and operational efficiencies, which further strengthens our Certificate of Need application and we are confident that the Maryland Health Care Commission will agree that a new regional medical center meets the community’s needs," Moore said.

Until now, public projections for the hospital called for 259 beds at a cost of about $645 million. The reasons for the decline in capacity and cost escalation were not immediately clear. As technology and medicine advances, hospitals across the country often are much smaller but require more advanced equipment than the ones they are replacing.

Funding sources include $208 million each from the state and the county (already approved), $224 million in new bonds that will be financed through increased rates and $15 million in investment income.

Also, Dimensions will take out a $109 million line of credit to fund accounts receivable once the hospital opens, according to the documents. That debt will be assumed by Dimensions and is included in the application's total price — $764.5 million — but is not part of construction costs.

If built as now planned, the hospital will include: A 10-story, 603,444-square-foot main tower, a four-story, 68,255-square-foot outpatient center and a 40,000-square foot central utility plant on the ground floor.

In the filings, Dimensions was required to demonstrate its financial viability with detailed projections for the new facility, making clear the real rationale for the hospital's move from Cheverly to Largo and possible inclusion in a broader network with the University of Maryland Medical System.

When the hospital is at full capacity in 2021, for instance, planners anticipate nearly $16 million in net income on $293 million in revenue, up from $1 million income on $232.2 million in revenue in fiscal 2013.

One key reason is a change in patients: Planners say that Medicaid will cover just 26 percent of inpatient overnight stays in the new facility by fiscal 2021, down from nearly 35 percent last year. Meanwhile, patients covered by more desirable commercial insurance are projected to go from 12.9 percent in 2013 to 24.3 percent in 2021.

According to projections, the new hospital's primary service territory will shift to the east, covering more of eastern Prince George's County and less of the neighborhoods immediately adjacent to the District and inside the Beltway. In part for that reason, nearby competing hospital systems are widely expected to oppose the project, arguing the relocation will negatively affect their patient volumes and finances.

The county will act on necessary zoning changes for the site by November, and the county has entered into agreements with leaseholder Retail Properties of America Inc. that will give the county control of the land when its application is approved.

While the application still must be acted on by the 15-member commission, the filing of the plans nevertheless marks a major milestone in the effort to stabilize the struggling hospital and health network inPrince George's.

The certificate-of-need process is a quasi-judicial, independent bureaucratic exercise that's likely to take nearly a year. The application was filed along with 225 letters of support, including ones from Lt. Gov. Anthony Brown, Democratic leaders of both houses of the Maryland legislature, educational leaders throughout the state and local officials. Dimensions officials say more letters of support are coming.

© 2013 American City Business Journals, Inc.