Washoe Med to build new hospital

Even though Washoe Medical System is spending big on new facilities its just-opened hospital in South Meadows, a $220 million expansion in downtown Reno the organization isn't cashstrapped.

Just about the same time that hospital executives were announcing their latest expansion plans last week, the Reno City Council gave its OK to a $380 million bond issue for Washoe Medical System.

When they're sold, the bonds will pay for the downtown addition and provide permanent financing for a couple of other projects Washoe Medical Center South Meadows and a rehabilitation hospital that Washoe Health Systems bought from HealthSouth in 2003.

The new bonds will leave Washoe Health Systems with a total debt load of about $470 million, said Dennis Pettigrew, chief financial officer of the organization.

The organization's existing debt is rated A2 by Moody's and A+ by Standard & Poors.

The Moody's rating places the debt as investment grade.

The Standard & Poors designation means its analysts believe Washoe Medical Center has strong capacity to meet its obligations although it may be somewhat susceptible to down turns in the economy.

The new bonds needed the City Council's approval so that Washoe Medical System can sell them at a taxexempt rate.

The exact structure of the bond issue hasn't been set, although city analysts said it's likely to include a combination of fixed-rate and variable-rate borrowings.

Pettigrew said Washoe Medical System was able to finance the South Meadows expansion as well as the HealthSouth acquisition through its own resources including its bank lines but it views the current low interest rates as a good opportunity to nail down permanent financing.

While the $220 million to be spent on a new 12-story tower and other facilities at the downtown campus won't stretch Washoe Medical Systems, its top managers keep a close eye on the system's ability to keep financing the growth it needs.

Andy Pearl, who heads facilities and acquisitions for Washoe Medical System, said the downtown expansion as well as the construction of Washoe Medical Center South Meadows were recommendations of a master plan the organization commissioned in 2001.

That plan, he said, identified some immediate needs to meet the requirements of the region's population growth needs that were so pressing that Washoe Health decided to start with the South Meadows project because it could be built more quickly.

Those growth pressures on hospitals aren't unusual, particularly for hospitals in the Sun Belt regions popular with retirees, said Rick Wade, a senior vice president with the American Hospital Association.

"The Baby Boomers are going to be big consumers of health care," Wade said in a telephone interview last week.

But even in regions where population growth is slow,Wade said technology pushes hospital organizations to build new facilities.

Many of the nation's hospitals were built shortly after World War II, he said.

Those facilities don't meet the needs of new technology or new types of care such as extensive use of outpatient surgery.

Even though the existing Washoe Medical Center along Mill Street dates only from the 1980s, Pearl said installation of new medical technology sometimes leaves planners scratching their heads.

"While it's challenging, we're able to overcome it but at a price," he said.

That's part of the reason that planning for the new 12-story tower calls for a lot of flexibility.

For starters,Washoe Medical Center probably will use only seven or eight floors of the new tower when it's complete in 2007.

The remaining floors will be finished as they're needed to meet demand.

And the rooms, sized to handle increased levels of bedside technology, will be configured so that they can be used either for private or semi-private patients.

Washoe Medical System hasn't yet hired a general contractor for the project, but executives said last week they expect the job will employ about 500 construction workers.

Once the expansion is complete, Washoe Health System expects to add 500 jobs on its own.

The expansion was designed by HDR of Omaha, Neb., an architectural firm that specializes in health-care facilities.