Bond question: Samaritan commissioners weighing construction bond for new hospital

MOSES LAKE — Samaritan Healthcare commissioners will sponsor a public forum Jan. 18 to get input from district patrons on a possible proposal for a construction bond to pay some of the costs of building a new Samaritan Hospital.

“We are committed to moving forward in some way,” Christian said. “We are (discussing) what the best way is. We’re still gathering data, evaluating our community. We’re not ready to make a decision yet, because we want to make sure the decision is the correct one.”

Construction of the new hospital was put on hold in March 2020, just before it was scheduled to be advertised for bid, the result of the Covid-19 pandemic. Commissioners rejected a “guaranteed maximum price” in August, after hospital officials expressed concern about the ability to pay for the construction in the current economic environment for healthcare.

Commission chair Katherine Christian said Tuesday that commissioners haven’t decided yet how to proceed, and want community reaction to help them decide.

“We are receiving public input,” said Commissioner Dale Paris Tuesday. “There are going to be opportunities for that.”

Officials said they want to ensure they make a decision based on the community’s needs and desires.

“We want to make sure (our) decision is the right one, and that it’s an informed decision,” Christian said.

Samaritan Chief Executive Officer Theresa Sullivan said in a special commission meeting Dec. 6 that the amount of a possible bond hasn’t been determined.

“Not the news we necessarily wanted to be sharing,” Sullivan added. “But I really think that’s where we’re at. If we are to go forward with this replacement hospital, we will need to have additional support from the community.”

District officials have purchased land for a new hospital on Clover Drive, and commissioners approved the construction of a new 50-bed hospital in 2018.

Chief Administrative Officer Alex Town said on Jan. 6 that in the wake of the pandemic, construction costs have risen steeply at the same time the hospital is experiencing a substantial increase in expenses.

Hospital officials secured $100 million in low-interest loans from the U.S. Department of Agriculture in 2021 for the project. The original financing proposal also included $36 million that was going to be obtained from other lenders.

Sullivan said the hospital district will contribute about $28 million, which included about $10 million for the land.

The original loan was scheduled to be paid back through hospital revenues, Town said.

The guaranteed maximum price that commissioners rejected in August was about $188.3 million. Joe Kunkel, the consultant working on the project, gave an estimate Dec. 6 of a current cost of about $224.2 million, with about another $6 million to finance the construction and equipment. That was the conclusion of an updated evaluation done by the consultants, architects and ageneral contractor, he said.

“Normally when you do construction estimates you kind of look to the midpoint of construction as your target date for when you’re evaluating those costs,” Kunkel said.

In this case, the evaluation was based on the assumption the project would resume in spring 2023, with construction starting sometime in the summer. The estimate also includes a 5% contingency for any continuing increases in construction and equipment costs.

Sullivan said in a Dec. 7 interview that hospital officials weren’t thinking about asking for a bond last spring or summer.

“At that point, we were still thinking we could do it without a bond, and then when the guaranteed maximum price came in, and at the same time we were reevaluating our finances, we (said), ‘You can’t make it happen,’” Sullivan said.

Town said the hospital no longer is in a position to pay back the loan through its revenues. To complete the project, the district must be able to pay back the original loan, plus the increased costs of construction. That could require up to $130 million in a construction bond.

“The hospital has to come up with $130 million,” Town said Wednesday. “So we’re investigating the possibility of a construction bond.”

Town said the cost of operating the hospital and clinics has risen sharply. He said Dec. 13 that the hospital has more patients and more revenue, but not necessarily enough to make up for increases in expenses. The hospital's reimbursement depends on the patient’s insurance or public program, and some don’t pay what it costs to treat the patient.

The surge in inflation has prompted a steep increase in expenses, especially in labor costs, Town said.

“With the staff shortages that all organizations are facing, we’re having to pay that much more, because staff are recognizing that it’s much more lucrative being a (temporary) agency employee, versus actually being employed by the organization,” Town said.

“That is across the state and the country. That’s not just Samaritan,” Sullivan said.

Inflation has also caused steep increases in supply and other operating costs, he said.

“It’s a perfect storm of expenses, increasing significantly to the point that it’s outpacing what we would normally get reimbursed to supply services,”

Paris said he hopes that community members make their opinions heard, at community meetings and through other avenues.

“We’re going to have community forums, and hope that we have a good turnout and lots of questions. Because we want to represent the people that elected us, and respond to what it is they want,” he said.

Cheryl Schweizer can be reached at education@columbiabasinherald.com.