MaineGeneral bets big on new, $312 million Augusta hospital

Posted Nov. 08, 2013, at 6:01 p.m.
Last modified Nov. 09, 2013, at 6:56 a.m.

AUGUSTA, Maine — At 6 a.m. Saturday, a pristine emergency department will open at the brand new MaineGeneral hospital located just off Exit 113 in Augusta. At $312 million, the facility has been described as the single-largest hospital financing project in the state’s history.

Across town, at the very same moment, the emergency department at MaineGeneral’s more than century-old medical center on Chestnut Street will close its doors forever.

The new hospital, the Alfond Center for Health, will shape how much patients pay for treatment and the quality of that care in the Kennebec Valley, with potential ripple effects throughout the state for years to come.

The new facility is more efficient and designed to make patients’ stays safer and more pleasant, according to MaineGeneral administrators. While the project has garnered significant support locally, some question whether the new hospital will attract enough patients to support MaineGeneral’s investment.

MaineGeneral’s undertaking is massive in terms of both size and cost, but the health care system says the project was necessary to attract physicians, centralize services, and continue providing high-quality care over the long haul.

The 640,000-square-foot hospital will replace three smaller, aging MaineGeneral facilities, including the existing Augusta hospital and its Seton and Thayer campuses in Waterville. The Thayer campus will remain open, but be converted to an outpatient facility with a $10 million upgrade and a standalone emergency department.

MaineGeneral’s decision to commit tremendous resources to building a new hospital from the ground up comes as the health care industry struggles to adjust to seismic changes. Hospitals face pressure to clamp down on ever-rising costs, falling government reimbursements, the disruptive implementation of Obamacare, and a national push to get paid for keeping patients healthy rather than funneling them through more tests and procedures.

Without the project, MaineGeneral faced spending $100 million to maintain its older buildings, Chuck Hays, the system’s president and CEO, told the Bangor Daily News during a tour of the new facility.

“We said, ‘What’s the future?’ Is the future to continue to try to do this spread out all over the place, or should we consolidate in a regional approach?” he said. “It’s a big number, but in the long run it’s going to be more efficient for us.”

Healthy by design

Along with the emergency department switchover, MaineGeneral on Saturday will begin to transport existing patients to the new hospital in a fleet of ambulances, buses and vans.

The Alfond Center has 192 beds, each in its own private room. That’s a drop of about a third from the existing capacity at Augusta and Thayer. Administrators expect to serve just as many patients, however, by using those beds more efficiently. Now, beds in shared rooms sometimes go unused because men can’t be paired with women, and some contagious patients must be isolated, Hays said.

Hospital officials predict the new rooms will lead to a drop in infections, aiding a battle against germs, which represent one of the toughest foes faced by hospitals across the country.

While private rooms can be safer, patients are still at risk if doctors and nurses skip basic safety protocols, said Leah Binder, CEO of the Leapfrog Group, a national patient safety organization funded by employers.

“There’s no room that can force you to wash your hands when you walk in it,” said Binder, who formerly worked for a health network in Franklin County.

The Alfond Center also features high-tech improvements designed to free medical staff from time-consuming tasks that don’t benefit patients.

“The biggest thing nurses wasted time on was finding equipment, finding each other and answering phone calls,” Hays said.

The clinical staff will connect to a wearable communication system that allows them to rapidly contact each other, while another GPS gadget tracks equipment and automatically shuts off call lights when a nurse enters the room. Even patients themselves can be tracked in the operating room, their progress updated in real time to a screen in the waiting area, allowing families to monitor their loved one in the form of a digital set of initials.

Binder praised MaineGeneral for incorporating design elements geared toward making patients safer, but said Leapfrog’s hospital grading system shows MaineGeneral has work to do.

“They received a C in our last round of Hospital Safety Scores, which suggests to me that they are not as safe as they should be,” Binder said. “They shouldn’t be waiting for their sparkling new building before they address that issue.”

Attracting patients

When the state reviewed the project in 2010, regulators voiced concern that MaineGeneral’s predictions for patient volume were overly optimistic. Hospitals rely on those volumes to spread out the significant costs of construction, buying new equipment and paying staff.

Hays expects Maine’s aging population will translate to a higher volume of patients in coming years. State regulators questioned that assumption, as inpatient volume at hospitals has dropped in recent years as more surgeries shift to outpatient facilities.

When hospitals make big investments but patient volume projections fail to materialize, patients and employers may end up footing the bill.

As a hospital, “You’ve got to figure out how you’re going to pay those monthly bills and there are only two choices: Either you stop offering the service or you increase the price to the next person walking through the door,” said Joe Ditre, executive director of the Augusta advocacy group Consumers for Affordable Health Care.

The Maine Bureau of Insurance projected costs in the region would increase by nearly 4 percent, according to documents filed as part of MaineGeneral’s certificate of need application.

Hays, however, said MaineGeneral doesn’t “expect any price increases directly relevant to this [project].”

Pushing ‘the financial envelope’

Undertaking such a large project, especially one based on assumptions within the complex world of health care, is a big risk, according to Robert Lenna, who for 24 years was executive director of the Maine Health and Higher Educational Facilities Authority, which sells bonds on behalf of health care facilities raising large amounts of money for capital projects. He was in charge of the authority when MaineGeneral sold nearly $281 million in bonds in 2011, and retired in 2012.

“They pushed the financial envelope with this one,” he told the BDN on Thursday.

The project depended on the support of the Harold Alfond Foundation, which donated $35 million, Lenna said. Another $10 million was raised through a capital campaign and MaineGeneral kicked in $35 million in equity.

The project was so risky, in fact, the bonding authority told the hospital it would not take the typical step of providing additional support through a reserve fund to strengthen the hospital’s credit, Lenna said.

Moody’s Investors Service in September downgraded MaineGeneral’s credit rating, citing a downturn in its financial performance and worries that the challenges it faces will persist after it opens its new hospital.

The hospital is expected to lose $17 million this fiscal year, which began in July, as it absorbs costs related to the transition to the new hospital, according to Michael Koziol, the hospital system’s chief financial officer. He expects the hospital’s balance sheet will improve next year, helped by the roughly $7 million the hospital projects it will save each year from operational efficiencies, including a switch to natural gas that alone will save $1 million annually.

“I can’t say we’ll break even, but we’ll be working hard to get to that,” he said.

“The jury is still out” on whether MaineGeneral’s bet will pay off, Lenna said.

The health care world has shifted focus from treating patients only when they’re very sick to keeping them healthy, Hays said. It’s the right thing to do, but affects a hospital’s bottom line, he said.

“The switch from keeping people healthy versus sitting there and waiting for them to have an acute need and come to you is a big switch,” Hays said.