Sgro: The Status of the Private Hospital Development

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Guam – The below is an open letter from Pete Sgro, the President & Chairman Of the Guam Healthcare & Hospital Development Foundation regarding the progress on the development of a private hospital for Guam.

Dear  Friends of our Foundation:

During the past few days, we have been asked a variety of questions relative to the progress of the private hospital development, as well as requests for comments to clarify certain positions as it relates to the development of a hospital facility.  Despite many decisions now being in the hands of developers, investors, construction managers, investment bankers and consultants with decades of experience in the management and operation of hospitals, we are pleased they continue to engage our Foundation for input since considerable respect has been demonstrated to consider our island’s unique needs.

This entire effort started close to three years ago by initially 22 individuals that were either born and raised on Guam, or have spent more than 20 years of their lives on Guam. That continues to be the case where this entire effort which continues to date is one that is a community initiative, where the focus is on simply making life better for so many people on Guam, as well as the region. We have noted concerns raised about health care issues associated with the military build-up, many of which have been addressed over the past few years. Our work could not be possible without the support of so many people in our community and so many that have volunteered or donated their own personal resources to bring this project where it is today. The members of our board and so many volunteers and people that have either attended our many conferences, have been involved in providing their input and have contributed their time and resources to bring this project to where it is today, are people I will never forget.

We hope that this message provides some degree of recognition that an initiative by our own local people has gotten this far with absolutely no expectations in return except to raise the standard of care for the benefit of the people of Guam, which is one of our Foundation’s primary purposes. We have and will continue to demonstrate our sincere desire to collaborate with those that seek to collaborate with us in good faith. The work and sacrifice by so many people with not a penny earned, is one free of any desire of recognition, free of any desire to financially benefit, free from any political motivations and one that has focused on a need which we described below takes years to truly accomplish and detailed work has been done over years. We ask those that express concerns about the military build-up impact to our health care system to not ignore the work of so many good people, but to support our efforts and the efforts of those that have been so supportive of our work, which I cannot help but feel have the same passion as many of us do. We have always been open about our work and our doors open to those that share common passions relative to our health care system. We hope that the following will provide insight into the work we have done over the past two years.

As Chairman and President of our Foundation, I cannot proceed down a path that places people who trust in our work at great financial risk.  Unlike a government funded hospital, using private funding to develop a private hospital does not give investors the opportunity to simply ask the government later for subsidies if things go wrong. It has to be just right the first time around with as much work done to mitigate any margins of error.

Unlike most developments, a hospital development is considered one of the most complex structures to develop. The preliminary planning and work literally takes years to reach the pre-design phase. A significant amount of due diligence, including months of work in the preparation of detailed financial projections and financial models that will pass the scrutiny of investors, requires expertise by those with prior experience in developing a hospital facility. The same applies to any government owned hospital facility which must also be justified with the same level of diligence to insure that any questions relative to revenue and expenses will not only be answered, but answered with credibly backed conclusions.

It appears the entire focus is on building a hospital building for our community when what the focus should be is on building a comprehensive integrated health care system for Guam which includes a hospital as part of the system. It is critical for the success of any hospital facility that the focus not be on just developing a hospital facility, but also to support and foster important collaborations not just for the hospital, but to support the entire island’s health care system. In order for a hospital to succeed, the internal infrastructures of the hospital that need to be developed must be complimented by development of external infrastructures. For instance, fostering and supporting collaborations between the likes of the University of Guam, the Guam Community College and the Department of Education are needed to provide not just a long term sources of professional staff to support the needs of Guam’s entire health care system, but also to address serious chronic levels of diseases. Increasing the capacity of educating medical professionals locally such as nurses and therapists, securing grants to support collaborative research studies to help mitigate our high level of chronic diseases and using grants to begin addressing childhood obesity at the elementary school levels must be incorporated in planning any hospital development.

There are nationally recognized and accepted hospital bed need calculation methods to determine the number of beds a community needs. Hospital bed capacity cannot be isolated only to calculations based on just total population numbers or projected population numbers. In order to justify the expense associated with developing additional hospital bed capacity, calculations must include Guam’s demographics including the number of people over the age of 65 and the number of people under the age of 65. Additional consideration must also be given to the number of people on Guam that suffer from chronic diseases and how many people are leaving Guam annually for hospital care and what is the diagnosis of this pool of patients. Even if one was to assume the number of hospital beds being calculated to meet the needs of the community as a result of the military build-up is correct, no matter what that number is, there must be a strategic plan in place to insure that each of these hospital beds and the patients that will occupy them will be staffed to insure the highest standard of care.

Without first addressing the staffing issue, it does not make sense to build hospital rooms for patients if there is no medical professionals and other requisite staff to provide care. The industry standard for hospitals across the United States which is also used by many hospital systems in Japan is 2.5 to 3 employees per hospital bed. If you assume a hospital with 100 beds, that hospital’s payroll should not exceed 300 personnel. Anything in excess of 300 employees starts to adversely impact the hospitals ability to cover the cost of critically needed supplies, equipment and those assets that directly affect patient care and safety.

Federal laws require that certain automated systems such as medical records systems be implemented within the next few years and this is being incorporated in the private hospital planning. There are several good software’s and hardware’s for this use and IT professionals have been retained by the developer to assist in choosing that system that best works for Guam. The goal is not just to have a system that provides data to be transmitted within the hospital, but also for data to be transmitted between the private hospital, GHM, Public Health Clinics and private clinics. Telemedicine is also a must for any hospital especially for Guam and collaborations are already in place to make daily telemedicine consults available with not just specialist in States, but in Manila, Japan and Korea.

To use a factor of $1,000,000 per bed does not reflect the true cost of building a new hospital on Guam, nor does it reflect the true cost of expanding an existing facility. The details of financial projections and construction costs that our Foundation has assisted the private hospital developer, the private hospital consultants and their investment bankers are detailed to the point where it accounts for every square foot of the facility, as well as all equipment, fixtures, furnishings all the way down to the cost of one hospital bed and the bed stand beside that bed. A hospital bed can range anywhere from $20,000 to $40,000 per bed depending on such things as the unit that bed will be in, and also the projections that are also needed when calculating the life of every piece of equipment since the financials must account for replacement of equipment when it either becomes obsolete or it has lived its useful life based on manufacture standards.

Based on current construction costs on Guam and accounting for the increases in construction costs based on the military build-up at a rate of approximately 15% annually, the cost of building a hospital now exceeds $1,300,000 per bed which includes all equipment and furnishings for a primary care hospital. When you start to incorporate specialty care, because the equipment and staffing are more expensive for specialty care, the cost then increases. Such financial studies take close to one year to do especially since many assumptions need to be made because Guam’s data base of health care related information needs significant improvements and is not readily available as they are in most states. Since there is only one hospital on Guam, comparative financial analysis must be made within communities on the mainland of a similar demographics as Guam.

Building a building is one thing, staffing it is the greatest challenge and that takes years to accomplish which requires multiple trips to Medical Schools, establishing relationships with large hospital systems not just on the mainland, but in places like Japan, Korea and the Philippines where there is a pool of US Board Certified Physicians. Board members of our Foundation have joined me on these missions and this Tuesday two board members will join me to not just meeting representatives of the developer, investors and their consultants, but we will again meet with more nursing and physical therapist recruiting companies to determine which can be relied upon and which cannot.

Whether one needs to justify the cost of developing a hospital to private investors or any agency of the Federal Government, no one will provide funding unless they can rely on the financial projections prepared to support the development. A detailed business plan is also necessary that clearly states where every dollar is going to be spent and mechanisms be in place that insure funds provided are spent accordingly.

What is not on any financials, but is our focus, is the value of one life and that is a value we take seriously and will continue to do all we can to make life for so many a lot easier no matter what the military decides to do.

What Can Be Done Now to Mitigate Overcrowding Now

While efforts are being made to continue asking the Department of Defense for money for health care, efforts can be done now to mitigate overcrowding conditions by using an existing Federal law for guidance.There is a Federal law called the “Emergency Medical Treatment Act” or commonly known as EMPALA. This law mandates the inclusion in any hospital an emergency room if the hospital receives any Federal funding including Medicare, Medicaid, TRICARE and Federal Grants. The developers and architects of the new hospital are aware of this law and an emergency room must be part of the private hospital design.

Consideration: EMPALA defines what constitutes an “emergency” which under its primary definition is:

“a medical condition manifesting  itself with acute conditions of sufficient severity where the absence of immediate medical attention could reasonably be expected to result in placing the health of an individual in serious jeopardy or serious impairment of bodily functions.”

There are some hospitals on the mainland and other counties designed not to have an emergency room because of fear it will serve as the gateway to all types of non-emergency conditions that then adversely affect the need to immediately respond to those that need immediate medical attention. Patients with such minor medical conditions such as the flu that do not fall within the definition of an “emergency,” will often create backlogs within emergency rooms. Controlling this is a matter of coordinating the care of such minor conditions with public health clinics and private clinics that are better suited to provide care for these types of conditions.

Guam local law requires that all patients be seen at the Guam Memorial Hospital regardless of condition, and a significant number of patients that enter the GMH emergency room system are cases that would not constitute an emergency under the definition of EMPALA. It would be worthwhile to research the legislative history of EMPALA, as well as the Federal law itself, and consider using as a framework to amend existing laws to include the definition of an “emergency” and use the same definition as the Federal Government used in EMPALA. By legally identifying what constitutes an emergency and then creating a plan to shift non-emergency cases to the Public Health and private clinics, especially with increases in Medicare and Medicaid, will reduce GMH’s Emergency room patient flow.

Generally in many cities and municipalities, government owned hospitals work closely with government owned clinics and with private clinics for purposes of insuring the community is informed of what is deemed an “emergency” so that a patient is appropriately treated at a hospital facility or at a clinical facility.

A hospital development is one that requires a developer and investors to surround themselves with those with significant experience in the construction and design of hospitals. The developer has already entered an MOU with dck which has over $1.6 Billion in hospital construction and construction management experience (see first attachment beginning at page 12). Two years ago we first started discussions with the design division of Joint Commission Resources Design Division and the developer agrees with the Foundation’s position that Joint Commission Resources Design Division have a role in reviewing work  by the primary architect for the Guam private hospital project. A site has been selected by land use consultants of the developer after a six month review of over 10 different sites with a Land Purchase Agreement entered into between the owners of the property and the developer.

In conclusion, our Foundation is not the developer of this project, nor can we have any ownership interest in the project as specifically outlined in our articles and by-laws. The primary purposes of our Foundation is to foster improving the standard of care for the benefit of the people of Guam and to advocate for the development of a privately owned and managed hospital on Guam. All those that are and have been members of our board and committees have volunteered all their time and personal resources to this effort.

I will be leaving island tonight with another member of our board for meetings relative to the private hospital development and will be back in the office next week Monday. If you have any questions, please feel free to email me at [email protected] or call me next week when I am back on island.

Regards,

Peter R. Sgro, Jr.; President & Chairman

Guam Healthcare & Hospital Development Foundation