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Lafferty unveils initial PDH upgrade details

Mona Hill
Staff Writer
5/16/2012

 

Chief Executive Officer Doug Lafferty revealed initial cost estimates and building plans to Plumas District Hospital directors and a handful of community members at a special board meeting May 10.

Lafferty said the hospital building is sound although it does require some seismic and safety upgrades, such as strapping and sprinklers.

Inpatient facilities, he said, do not meet current Health Information Portability and Accountability Act (HIPAA) standards to ensure patient privacy. Modern facilities have or are remodeling to provide private inpatient rooms.

The current operating room is also outdated and does not accommodate some surgical procedures. The emergency room is notoriously small. Patients have limited privacy offered by the curtain between beds.

Lafferty said these conditions make it difficult to meet the community’s need for additional health care services. Without clinic or surgical services such as oncology, physical therapy or another surgeon, patients travel out of district to receive those services elsewhere. The CEO believes expansion of lab and outpatient services is key to assuring the hospital’s long-term financial health.

Seismic standards, a significant issue in previous construction plans, have changed. In 2000, those standards were regional, placing Quincy at the same earthquake risk as San Francisco. Standards have since become site-specific, effectively rendering Plumas County a low-risk area with less stringent standards.

With that important change, Lafferty had more flexibility to revive the construction project at less than half the original cost.

Former CEO Dick Hathaway and Chief Financial Officer John Nadone had insisted that the original project was bare bones at a cost of $21 million. With looser seismic standards and by eliminating a second floor, Lafferty proposes an addition to the existing hospital to add five emergency rooms and two operating suites, as well as a new entrance to the hospital, for an estimated $7.6 million in new construction, based on three estimates or “high bids” he solicited. When directors give permission to proceed, the project will go out for competitive bidding.

Another $1.2 million would remodel the hospital, including patient rooms, and pay for seismic and safety upgrades. Equipment costs add another
$1 million for an estimated $9.9 million total cost.

Emergency treatment rooms would include a specialized cardiac unit and an isolation room that staff could also use for other patients. ORs would have the same functional flexibility.

Lafferty and Facilities Director Dan Brandes carefully considered workflow, patient access and maximum functionality in developing the current plan. Lafferty indicated that he’s been working on the idea since he arrived last fall.

Once the addition is complete, work will begin to remodel the old hospital. Present plans call for radiology to move into the old emergency room space, move the CT facility out of its trailer, expand the lab, retain the original OR for cesarean sections and move offices into the old recovery room.

As he considered financing, Lafferty assumed an interest rate of 3.78 percent, no increase at all in assessed property values over the next 30 years. At present, the interest rate is at 3.32 percent and it is unlikely that assessed property values will remain unchanged over 30 years.

If values decrease, taxpayers would pay less and the hospital more. Property tax bills would reflect any increase in property values but taxpayers would still only pay $50 per $100,000 assessed value. PDH would service the increased debt from its revenues.

Lafferty also presented the hospital’s financial statements dating back to 2002 to support his financial analysis. Using a three-year average 2009 – 2011, he demonstrated that PDH would have approximately $700,000 annually to service its debt load.

To emphasize his belief in PDH’s future growth, Lafferty told directors that the current board-adopted budget projected a $350,000 loss on the year. However, at the end of May, Lafferty expects PDH to post a $600,000 year-to-date profit that will grow to $700,000 by June 30 — a $1 million swing to the positive.

Lafferty will make similar presentations to PDH medical staff, management and employees, asking for feedback on the plans. He said that could result in some changes, but he was confident the building plans are well conceived.

Director John Kimmel commented that he’s “worried the public thinks this is a done deal, but I want to get public input without the appearance of commitment. We’ve gone from nothing to something very fast.”

Kimmel also commented on possible overages, saying he was sure Lafferty had done his homework, but mistakes happen. Lafferty replied that overages are a result of poor planning and specifications; when the project goes out to bid, it will be a well-defined project.

He added that smaller, poorer communities have spent far more on their hospital projects: Willits, $42 million; Tehachapi, $75 million; and Kaweah Delta (Visalia), $120 million.

Director Bill Wickman said when the board members looked for a new CEO, they knew that person would be responsible to move the construction project forward. Board president Valerie Flanigan agreed, “It’s our responsibility to see this project through. We can’t be afraid of the economy if we have made careful plans.”

Lafferty stressed the key is to “grow the business.” Each new doctor meant three to five additional employees. He said he had a verbal commitment for expanded orthopedic services if the hospital updated its operating room capability.

Director Kathy Price observed that she has a 37-year association with PDH and has taken for granted what’s there. “We’ve always prided ourselves on our staff, but I recognize changes need to be made. I was recently visiting EPHC (Eastern Plumas Health Care), they have 16 – 18 doctors available.”

She summed up, “The board needs to articulate this vision and plan to the public.”

By the June board meeting, Lafferty expects to present a 2012-13 budget for the board’s consideration. In addition, he will schedule at least one townhall meeting and “go anywhere, anytime, any place” to discuss his proposal.


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