hospital feasibility analysis orange, texas · 2019. 10. 8. · hospital feasibility analysis...
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Hospital Feasibility AnalysisOrange County, TexasOCTOBER, 2015
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Table of Contents
➢Opening Comments – Healthcare Financial Trends
➢Demographics
➢Baptist Orange Hospital – Closure Announcement
➢Project cost
➢Financial Projections – New Acute Care Hospital
➢Physician Investment Opportunities
➢Conclusion
Demographics
Source: GEOMarket Solutions 2014
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Baptist Orange Hospital – Closure Announcement
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Baptist Orange Hospital - discontinues inpatient services –
Why?
1. Continued decline in patient demand over the past decade.
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2. Continued reductions in Medicare and Medicaid reimbursements. .
3. The loss of Orange Disproportionate Share funding (DSH)
4. Lack of medical specialists
5. Unable to qualify as a Rural Health Hospital or a Critical Access
Hospital
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Financial Projections – New Acute Care Hospital
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Project Cost
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New Hospital AssumptionsTotal Work Site- 20 acres
Hospital Facility: 62,500 SF
Services: 25 beds, 2 OR's, 1 Radiology Rm, 1 CT, 1 Fluoro, 1 Mobile MRI, ER, Ancillaries
Integrated Clinic Facility - 5-6 Physicians, 8500 SF
Location: Recommend consideration for the facility to be in a more centralized location such as 1442 and I10 or Highway 62 and I10 due to the necessity of building referral synergies for a new hospital provider. A more comprehensive study for the project location could be done at a later date, however, a healthcare provider prospers through quality, location and convenience.
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New Hospital Project CostConstruction $25,000,000
◦ Bed size – 25
◦ OR - 2
Furniture, Fixtures and Equipment 3,500,000
Technology 500,000
Professional Fees 2,000,000
Administration 500,000
Land 5,000,000
Working capital
◦ Start-up $10,000,000
◦ Fund Losses $5,000,000 15,000,000
Medical Staff Development 5,000,000
◦ Two General Surgeons
◦ Four Internists
◦ Two Pulmonologists
◦ Two Ortho pods
Contingency $2,500,000
Total Project Cost $59,000,000
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Financial Projections - Summary
New Hospital Orange Texas
Projected Income Statement -
2017
Total Net Revenue $ 20,380,232
Operating Expenses
Patient Clinical Services $ 10,529,683
Administrative & Other Costs 7,880,572
Capital related Costs 1,833,333
Total $ 20,243,588
Net Income $ 136,644
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Financial Projections A S S UMP T I ONS :
1. Revenues
A. Rates are per discharge based on M/Care expected rates for 2017
B. Other rates and volumes are estimated at % of Medicare
C. Rates for OP ae per procedures at Medicare rates appropriately adjusted.
2. Expenses
A. Departmental expenses are estimated to be generally the same
as 2014 Orange Hosp. Income statement with the following adjustments
B. Admin and General costs reduced $1M for estimated Home Office costs
C. Employee Benefits costs educed 10% for start up hospital.
C. Capital based on new $25M Building depreciated at 30 years
and $7M for MME depreciated at 7 years
3. Volumes
A. IP volume estimated to be ADC of 18.7
B. OP Volume estimated to be 2000 procedures per year or 5.5 per day
4. Ratio's
A. Payer Mix estimated on general averages as follows:
Payer percentages %
Medicare 40%
Medicaid 25%
Managed Care 20%
Self Pay 10%
other 5%
Total 100%
B. Rates based on % of Medicare reimbursements as follows:
Revenues per admit--2017 est
Medicare $ 8,922.25 100%
Medicaid $ 8,386.91 94%
Managed Care $ 10,706.70 120%
Self Pay $ 892.22 10%
other $ 9,456.69 106%
Total $ 7,672.95
Notes ;
1. Average Daily Census same as 2013 Actual. this is thought to be before business was shifted to Beaumont
2. IP vs. OP Revenue percentage slightly low, but for start up hospital details for diagnostic usage is thought to be conservative.
3. Other cost savings may be possible in a new facility with modern design applications.
4. All items are for full year of normal operations. Ramp up for new facility will need to be presented separately, with additional details, when available
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Financial Projections – Prior Years IP Volume History
BAPTIST ORANGE HOSPITAL
Departmental Costs
Provider Number 450005 450005
8/31/2014 8/31/2013 8/31/2012
Total Days 4,143 6,838 7,755
ADC 11.4 18.7 21.2
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Market Share Projection – 3rd Year3rd Year
Expected Need by Specialty
Expected Market Share Salary each' Quantity
Circulatory 945 378 40% Internal Med 300k 4
Respiratory 766 460 60% Pulmonology 350k 2
Labor and Delivery 635 - 0%
NICU 630 - 0%
GI 583 292 50% GI 350k 2
Ortho 530 212 40% Ortho 450k 2
Nuro 390 78 20% Nuro Contract - Telemedicine
Uro 322 129 40% Uro 300k 2
Nutritional 290 145 50% IM 300k 4
All Other 1314 329 25% Surgical 450k 2
6405 2,021 32%
Days 9,905 OB 450k 2
ADC 27.14
50 Percent Market Share
318 Annual Births
0.87 Average births per day
$ 1,111,250 Payments at Mcaid Rate (including anesthesia)
$ (742,520) 3 staff members 24/7 plus manager
$ (900,000) CRNA - 1 24/7
$ (531,270) Annual Subsidy Needed
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Physician Investment Opportunities
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Physician Investment Opportunities
( I) REAL ESTATE – TBD
( I I) DIAGNOSTIC EQUIPMENT - CT SCAN(1) Investment – Five physicians invest $5K apiece and finance cost of CT Scan ($250K) over 4 years
(2) Structure – physician group forms a LLC (NewCo) for the purpose of leasing medical equipment
(3) Hospital – executes lease agreement with NewCo to lease CT Scanner for 4 years. Hospital agrees to pay Newco $150 per Outpatient CT scan.
(4) NewCo break even – to cover the $4K per month note – approximately 27 scans per month
(5) Monthly distributions per investor27 scans – none – break even
50 scans - $3,500 or $700 per physician
100 scans - $15,000 or $3,000 per physician
150 scans - $22,500 or $4,500 per physician
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Conclusion
➢ Market Demographics - indicate that the previous Orange County inpatient facility captured only a 28% market share and an ADC of 11. There is significant patient outmigration that could be served by a new local quality provider. The financial projections indicate a breakeven ADC of 18. By year 3, the market share capture is projected to be 35% and an ADC of 27.
➢ Medical Staff Development – new hospital management would emphasize medical staff recruitment for specialties such as General Surgery, Internal Medicine, Pulmonology, Orthopedics and GI.
➢ Local management commitment and philosophy - the distinction between the previous provider and a new provider would be substantially different. Rather than placing primary interest upon feeding a larger facility in the next county, the new hospital’s management would be focused on maximizing local services to local needs. However, the ultimate project’s success is significantly dependent on recruiting quality physician specialists that are supported by Orange County primary care physicians.
➢ Competition – strong - Baptist Beaumont historically receives 16 – 20% of Orange County’s market share and continues to operate an ER and outpatient facility , Christus and the draw to the Houston Medical Center
➢ Service mix - includes heavy emphasis on marketing outpatient services such as diagnostics and outpatient surgery.
➢ Community Benefits – a new hospital would add 100 – 115 jobs, serve as the economic cornerstone for ancillary services surrounding the campus and create a positive impact on local sales tax receipts .
Appendix
October, 2015
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Orange Texas POPULATION (Census Bureau)
Orange County Population
Estimate 2014: 83,433
Estimate 2013: 82,980
Estimate 2012: 82,951
Estimate 2011: 82,328
Census 2010: 81,837
Census 2000: 84,966
Population of the County Seat (Orange)
Census 2010: 18,595
Census 2000: 18,643
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