Hillsboro to get new hospital

Staff reporter

Those who gathered the afternoon of June 18 knew something big was going to be happen. It's not often that the Hillsboro City Council calls a special meeting and invites members of the business community to attend.

And it was big news.

Hillsboro is getting a new hospital.

Following information and a question and answer period, the council approved the signing of documents to sell the hospital to the developing company.

The city's bond counselor, J.T. Klaus, was the one who actually broke the news.

As it was revealed, HMC/CAH Consolidated, Inc. of Kansas City, had agreed to purchase all of the assets and liabilities of Hillsboro Community Medical Center, and build a new hospital at Industrial Road and U.S.-56.

The City of Hillsboro and the Hillsboro hospital had somewhat of a partnership where the city provided funds for capital improvements such as equipment and building expenses. The city is the owner of the hospital building.

The council had reviewed options from HMC for about eight weeks, Klaus said.

Larry Arthur, president of HMC, said his company targets older, smaller hospitals, purchases them, and then builds new hospitals.

"The rural communities compete with newer, larger hospitals," he said. Patients prefer to be treated in a newer, more attractive setting which is no reflection on the people who care for them.

"It's a win-win situation," Arthur said. "We're in the business of operating hospitals and patients can continue to receive their care locally."

He said there were an additional 17 hospitals in different stages of procurement by HMC.

The company owns hospital in Oswego and Horton. Arthur said the company is planning to build a total of 40 hospitals.

During the question and answer part of the council meeting, Arthur answered the question regarding additional providers being brought to the hospital.

"It is not our intent to bring in competing providers," Arthur said. "We don't want to disrupt what has been created."

He continued that the company will bring resources to the table that Hillsboro wouldn't have otherwise. The same hospital personnel will remain in place.

HCMC administrator and chief executive officer Michael Ryan said the Salem Hospital board of directors who currently oversee operations of HCMC will remain as an advisory board.

When asked why the developer chose Hillsboro, Arthur said the following questions were asked.

Are the facilities aged and need to be replaced? What's the ability of the hospital to generate sufficient revenue to pay bonds? Is it an economically solid community to provide a 30-year return on the investment?

"Hillsboro is right at the top," Arthur said.

The question was asked whether the new owners would take over the operation of the Hillsboro Emergency Medical Services (ambulances and personnel) that currently are being managed by Marion County. Arthur said "no."

Dalke said the hospital was being designed to serve the needs of Hillsboro residents first but the market-share area includes surrounding communities.

When asked, Ryan said the hospital's maximum census for the 16-bed hospital had been 12 patients but the hospital averages three a day. He added that the hospital had a "positive operation" during the past few years and a new hospital building might have been something the hospital could have done on its own down the road but not now.

"It's a tremendous opportunity," Ryan said.

Obstetrics and delivering of babies will not be included in the plans because the number of deliveries probably wouldn't offset the operational costs.

It also was clarified that the new facility will not include a pharmacy but Arthur said he would welcome the construction of a pharmacy at the new hospital site.

Klaus said an extensive background check of HMC had been conducted and the company has to come up with $1.2 million toward the project.

"This speaks volumes to the company's liquidity," Klaus said.

The remainder of the funds will come from private sources, Arthur said.

About the new hospital

The proposed hospital would be located on the southwest corner of Industrial Road and U.S.-56. The city owns 14 acres in that quarter section which should be sufficient space for expansion in the future.

The new location currently is zoned for agricultural use. A conditional use permit or zoning variance will be obtained through the Hillsboro Planning Commission or Hillsboro Board of Zoning Appeals.

A $10 million 15-bed hospital is being planned to replace the current 16-bed hospital. A 25-bed facility is the largest allowed for the hospital to maintain the critical access status for insurance reimbursement purposes.

Each room in the new facility will be private, instead of semi-private as in the current location, with private bathrooms and showers.

The facilities will include surgery, physical therapy, emergency room, outpatient, and cardiac care departments.

Long term care will continue at its current location.

Also included in the plans is a helipad which Arthur said typically is located near the emergency department of the hospital.

Construction should begin by late summer or early fall and will be completed in three to five years.

While the new hospital is being constructed, operations at the current location will continue but HMC will own the operations. The city will retain the building.

When the new hospital is built and hospital services are moved, the building will to return to the city.

Construction of a new physicians' clinic is planned.

"We have a state-of-the-art physicians' building," Dr. Randal Claassen said. "What would happen to that?"

Arthur responded that the idea is to have everything on one campus.


Hospital Management Consulting, LLC consolidated with Arthur Clark Associates to offer services to hospitals, nursing homes, physicians, and other health care providers.

The company has worked with 800 hospitals in 42 states with most being rural providers.

The principals of HMC have a 30-year history of working with rural hospital, both in consulting and managing. The company claims that by replacing the outdated hospital with new, state-of-the-art facilities, recruiting physicians and staff members is easier and a revenue increase should be realized.

Why it's a 'good deal'

In an interview after the meeting, Arthur said his company contacted HCMC about the possibility of being purchased. After discussions between the company and the hospital board, the hospital board then contacted the city.

As part of the deal with the city, HMC will acquire the city's indebtedness of $1,175,000 worth of bonds, Klaus said. A nominal fee of $100 for the lease will be paid to the city. Lightening the debt-load of the city will make future bonding more readily available for future city projects, Dalke said.

Currently the hospital is not on the property tax roll because it is owned by the city. When HMC constructs the new facility, the company will be required to pay property taxes.

"The first two factors many companies consider when deciding whether to relocate or expand to another community are the quality of the schools and the quality of health care," Ryan said. "These are the same concerns of any individual moving to Hillsboro.

"A new hospital will add new jobs and expand the economic base of the community," he said.

HMC will then own and operate the hospital facility.

The next steps

Prior to the council approving the transaction, councilman Byron McCarty abstained from voting because his wife works at HCMC which would be considered a conflict of interest. With that being said, councilman Shelby Dirks made the motion to approve the sale and lease with councilman Bob Watson seconding the motion. The motion then passed 2-1 with Dalke giving her verbal approval. Councilman Shane Marler was not present.

The hospital board will have to approve the venture and sign documents. Approval also will have to be obtained from the Kansas Attorney General's office.

Utilities already are in place at that location, Dalke said, which will reduce infrastructure expenses associated with new construction.

Highway accessibility will remain the same, off Industrial Road. No additional accesses or expansion of the current access are planned by Kansas Department of Transportation, Dalke said. She indicated that she was told, more or less, that KDOT won't consider changes to that corner unless there are more casualties caused by vehicle crashes.