Lutheran intends to replace St. Joseph
By Sherry Slater | The Journal Gazette
If Lutheran Health Network's new downtown hospital adopts a protocol to treat skepticism, it might quickly fill up its 100-plus beds.
On Wednesday, officials unveiled plans to invest about $100 million – or more – in a full-service facility that will replace St. Joseph Hospital. Plans call for construction to begin next year with occupancy about two years after that.
“Unveiled” might be too strong a word. Lutheran network officials didn't display renderings, specify a dollar amount, name a location or offer a bed count. That lack of detail fueled doubters, who question whether parent company Community Health Systems can afford a project of that scope.
Mike Poore, the network's CEO, and Jerry Henry, chairman of St. Joe Hospital's board of trustees, understand why people wonder whether the project will materialize.
“It's been talked about for years,” Poore said. “And I think because it's been talked about for years, there was some skepticism.”
Henry, a local business leader, said serious talks about a replacement hospital began at the board level about a year ago.
“I feel pretty confident this isn't a pipe dream,” he said. “I think CHS realizes their reputation in Fort Wayne is impaired, and they're ready to make amends.”
The strained relationship between the parent company and some local Lutheran network workers and community members dates back to the spring.
In May, the corporate board rejected the effort of 10 local doctors to persuade CHS to sell its share of the network to an investment group approved by the doctors.
CHS said the $2.4 billion buyout offer was at least $1 billion too low. The doctors said the real reason CHS doesn't want to sell is that Lutheran's network makes $200 million to $300 million in annual profit, and CHS needs to continue siphoning off that money to prop up its failing corporation.
The corporation's debt is about $15 billion.
Dr. William Cast, a retired local physician, is among those who have cast doubt on CHS's ability to invest in Lutheran's network. He is a founder of Northern Indiana Citizens for Healthcare Excellence, or NICHE.
“It is easy to announce a project when one owns no land and has no renderings, let alone no budget,” he said in an email. “If it is a full-scale hospital replacement for St. Joe, then good for them and good for us.”
He went on to say the announcement is “good publicity for those who believe developers of any stripe.”
Tomi Galin, CHS spokeswoman, said the 137-hospital corporation uses its “strong positive cash flow” from operations to pay for numerous capital projects every year.
“Last year, we invested more than $740 million in capital projects that added healthcare services and upgraded facilities in our markets,” she said Wednesday in an email. “Over the past six quarters ... we have produced $1.6 billion in cash from our operations.”
“Community Health Systems is capable of funding our capital investments in Fort Wayne and completely committed to our $500 million investment in Lutheran Health Network over the next five to six years,” she said.
The downtown hospital investment is included in that $500 million total.
Henry, chairman of St. Joe's trustees, is also a private business owner. He said he's “forever amazed” by how much publicly traded companies are able to spend on capital projects despite the numbers included on financial reports they file with the Securities and Exchange Commission.
“For the life of me, I don't know where they get the money,” he said.
Henry believes a brief visit from Wayne Smith this month helped seal the deal. Smith, CEO of Community Health Systems, was flying back to Tennessee from a meeting in Chicago and decided to stop in to look at prospective building sites in person, Henry said.
When the men met, they talked about the specific sites, traffic counts, St. Joe's history and the community as a whole, Henry said.
Plans call for putting a portion of CHS's capital spending toward a new multi-story hospital, supporting medical facilities and parking in downtown.
“The current facility, which has gone through many physical changes over the years, has limitations that make it more difficult to add today's medical advancements and create an optimal environment for staff to deliver the experience patients need and expect,” officials said in a news release.
St. Joe Hospital is licensed for 191 beds and offers the full 191 to patients, unlike some hospitals, which are licensed for more beds than they actually offer.
“As the population has shifted outward from the center of the city over the years, we've rarely approached that number of in-patients,” Lutheran spokesman Geoff Thomas said in an email. “With so many new and proposed options for folks to live downtown, we hope this project helps influence and benefit from that momentum.”
The in-patient census Wednesday was 100, or 52 percent occupancy.
The new hospital will have enough beds to accommodate the current patient load – at least 100 beds, Poore said. If officials stick close to the 100 number, that would put capacity at about half of St. Joe.
St. Joe's average occupancy rate was about 40 percent last year, according to data provided by JPMorgan Chase.
Poore said the new hospital will offer emergency services, intensive care and an accredited burn unit.
Dr. Brian Youn, who formerly treated burn patients at St. Joe, was happy to hear that Wednesday.
“That's great news for Fort Wayne,” he said, adding that workers in the area's steel and molten plastic industries are especially susceptible to those kinds of injuries.
Youn described St. Joe's burn unit as unusual for a community of this size. It's the only one in northeast Indiana, he said.
What won't be transferred to the new hospital, however, is the St. Joe name. Although officials might christen the chapel after St. Joseph, the facility will have a new name, which hasn't been selected.
“We've chosen to eventually adopt a 'Lutheran' name to help build the brand and more closely align with the rest of Lutheran Health Network and the service lines it provides,” Thomas, the spokesman, said in an email. “Greater continuity is part of it.”
Henry, whose father was also a St. Joe trustee and whose children were all born in the downtown hospital, is grateful the name has survived as long as it has.
He's not fighting the change.
“We're at peace with that,” he said.
Poore, Lutheran network's CEO, has accepted that some critics doubt any plan that he and CHS roll out. Since the day after he was officially named to the position, he has asked people to let him earn their trust.
His short-term plan is to build trust during planning meetings for the new hospital. Various workers in each department will have input in how the campus is designed.
“Hospitals are almost like fingerprints,” Poore said. “They have their own personalities. They have their own dynamics.”
Fort Wayne's new downtown hospital, he said, will be unique.