Legacy Emanuel eyes major expansion
Project includes a building, more beds and a garage
Portland Business Journal - by Robin J. Moody Business Journal staff writer
Despite a track record of financial struggles, officials at Legacy Emanuel Hospital & Health Center are exploring a massive expansion that would add 67 new beds and a 500-car parking garage to the campus.
The hospital, 2801 N. Gantenbein, is located in a neighborhood that houses many low-income individuals. Its trauma center and pediatric hospitals serve many uninsured or poor patients from out of the area. Charity care and bad debt totaled 9.5 percent of Legacy Emanuel's revenue in 2007.
The proposed expansion, which must still be approved by Legacy's board of directors, includes:
* A new 225,000-square-foot building where the emergency center parking lot now sits.
* A remodel of 100,000 square feet of existing space.
* A 500-car parking garage.
* 21 pediatric care beds and a remodel of existing rooms so that all pediatric patients have single-occupancy rooms. It would also add capacity for 46 new adult beds.
Legacy Emanuel provides cancer care, a Level 1 trauma center, emergency services, neurosurgery, a burn-victim unit, surgical services and other lines of business. Legacy Emanuel Children's Hospital is located on the third and fourth floors of the main hospital.
With 401 staffed beds, the hospital is among the three largest in Portland.
"The hospital is frequently at capacity to provide care to both its adult and pediatric communities," said Legacy Health System interim CEO Pam Vukovich.
Legacy's board of directors has not approved the expansion, but has approved gathering information for the project and reviewing potential designs with architects. The project is not subject to approval under certificate of need, a regulatory process for certain health care construction projects, because plans involve expansion on an existing hospital campus.
Research on the project is expected to continue for several months, and Legacy leaders estimate they'll receive design recommendations and cost estimates in early 2008.
The move comes as the health system is recovering from losses incurred in the wake of opening Legacy Salmon Creek, a new $275 million hospital in Vancouver. The health system's consolidated operating income was $28.5 million for the year ended March 31, 2007, compared with a loss of $9 million the prior year.
Emanuel also carries a growing burden of uncompensated care.
"Because of that it's difficult to have a profitable hospital," Vukovich told the Business Journal in August 2007.
Prior to construction of Legacy Salmon Creek, about 30 percent of Vancouver residents came to Portland to get medical care. Health care experts say many more of those patients are now staying in Washington, reducing volumes in Portland hospitals.
In addition, Oregon Health & Science University, Providence Portland Medical Center and Providence St. Vincent have already flooded the market with hundreds of additional hospital beds.
"The business case for this will need to be compelling. It's not immediately obvious that there's a need for additional pediatric and adult beds in the Portland area," said Bill Kramer, former CFO at Kaiser Permanente and principal at Kramer Health Care Consulting.
"In that part of town, population growth is minimal and Legacy would need to draw patients from other parts of the state and from competitors like Doernbecher" Children's Hospital at OHSU, Kramer added.
Legacy Emanuel is slightly busier than the average Portland hospital, with an occupancy rate of 69.48 percent in 2006, compared with 71.8 percent in 2005. The average 2006 occupancy rate for Portland-area hospitals was 66 percent in 2006.
How the hospital would finance the expansion is an open question. The health system's recent Vancouver expansion drained cash from the coffers, and bond-rating agencies Moody's Investment Services and Standard & Poor's both downgraded Legacy's long-term bond rating in 2006. The Moody's bond rating has not fully recovered, and a lower bond rating may make borrowing difficult.
Legacy Emanuel Hospital in 2007 reported net income of $7.9 million on operating revenue of $452.6 million, compared with a net loss of $1.1 million in 2006 on operating revenue of $416.8 million. The hospital was founded in 1912 by the Lutheran Church.
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