Fans of Looney Tunes’ Bugs Bunny may recall his signature question: “What’s up, Doc?”
Seventy-seven years later Bugs’ question is relevant. What’s up with the rumors of a third hospital system in Fort Wayne?
The Journal Gazette suggested that the announcement of a new hospital by Lutheran Health Network (LHN) owner Community Health Systems (CHS) might be “a preemptive strike.” It may have been designed, that is, to disrupt other entrants’ plans and a signal that LHN must be committed to downtown that CHS is here to stay and that CHS is not going bankrupt. As NICHE has reported recently, this could bring into question whether CHS will ever actually build anything. After all, CHS’s promise of a new hospital in Knoxville, Tenn., dating back to 2014, has not been realized. It’s worth asking, therefore, whether the “new St. Joe” will be just another announcement and another project that is never built.
However, some recent developments may suggest otherwise. For example, CHS CEO Wayne Smith is rumored to have visited town within the last few days to survey possible locations for St. Joe’s proposed replacement. The vacant Omnisource property on Clinton has been widely discussed, and a proposal to the City may yet be in the works, but that has become less likely due both to EPA clean-up problems and to opposition within the City Council. The old Lutheran Hospital site on Fairfield is an option to serve the inner city, but it is no more downtown than Parkview Randalia. Any other site would appear to involve significant teardown work.
Yet, reports continue to circulate about IU Health entering the market, with the recent announcement of a new Riley Children’s Health pediatric clinic merely foretelling more ambitious plans.
Rumors of a Mayo Clinic hospital are far less believable since Mayo recently closed a hospital near Minneapolis.
Others have suggested that former LHN CEO Dr. Michael Schatzlein’s recent visit might show interest from Ascension Health, a faith-based 114-hospital system based in St. Louis. Dr. Schatzlein was CEO of Ascension’s St. Thomas Hospital in Nashville and also had duties related to St. Vincent’s Hospital in Indianapolis.
Finally, we have reports of a visitor from faith-based Franciscan Health, operators of 14 hospitals in Indiana and Illinois.
Cleveland Clinic (CC) may once have been a possibility given that it had begun a clinical joint venture with LHN entailing a substantial financial investment. That partnership was canceled (by CHS, we are told by area physicians), however, making CC interest unlikely.
Building downtown is not the only option, of course. We see vacant patches of land near Dupont, Lutheran Hospital, and Parkview North. All it takes is money. Ah yes, money. Money is in short supply at CHS–as is, we presume, inexpensive credit. We don’t know the balance sheets of either Ascension or Franciscan Health, but the last we looked, both had very good credit ratings, in the “AA” range. It is feasible, if unlikely, that either could build a hospital here. And then, there is IU Health, whose debt, ultimately backed by the State of Indiana, was upgraded by Moody’s to “Aa2” on about $1bb of debt. IU Health would seem also to be a candidate with a service footprint in Indiana that already reaches north to Lafayette, Kokomo, and Hartford City. A recent Journal Gazette story included this bit with quotes from about Tomi Galin, CHS Senior VP for communications:
“CHS 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.’”
NICHE finds it odd that six quarters were needed to produce the cash she reports when only four quarters of spending were cited for the capital projects amount. But why quibble? The real problem is not cash, but instead enough cash to pay annual debt interest of over $900 mm on $14 billion, more or less. Maybe CHS’s upcoming investor conference call will tell us what the true cost is.
According to reliable sources, LHN CEO Michael Poore has indicated that he believes there will be no third system hospital built in Fort Wayne. Observers said that he appeared confident in those remarks. Of course, what made Looney Tunes funny was the unexpected. Elmer Fudd (Doc) never catches Bugs Bunny. The Roadrunner defeats the best plans of Wile E. Coyote. So, could a third hospital system be the first to build Fort Wayne’s next hospital? And if so, will it have LHN saying, “That’s all, folks”? Only time will tell.