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Health care district begins process of taking over facility

GREENBRAE – The Marin Health Care District this month commenced financial planning for the return of Marin General to public control, and though advisers focused recently on the $50 million needed on the day of transfer, the group also faces a hospital rebuild now topping $300 million.

“We are at beginning stages of putting together a business plan,” said district Executive Director Lee Domanico.

“Obviously people are concerned because of the economic times, and I can appreciate that concern, but we have the same goal for the patients as the employees and the physicians at the hospital: that this change in ownership is as seamless and successful as possible.”

Though the district still does not know exactly when Sutter Health will relinquish managerial control, officials haven’t wasted any time progressing on the long list of complex planning needed. Besides looking to secure funding in less than favorable borrowing times, the board must create a management body for day-to-day operations, renegotiate insurance and employee contracts and reconstruct the technology and records system.

During the most recent Feb. 10 board meeting, health care specialists from Shattuck Hammond Partners financial advisers presented the near-term funding needs, estimating about $50 million on the day of transfer that will pay back loans from the county and for an IT company. The money will also be used as working capital until the district can incur some profit. The advisers said the board has a good chance of securing the credit because of good financial standing, but it will also depend on having a sound transition plan.

In 2007, the hospital had an operating margin of about 11.5 percent, which is a relatively high number compared with similar hospitals that averaged just 2.6 percent that year. Marin General has also consistently increased operating income, growing from about $9.6 million in 2005 to about $32 million in 2007.

The district is not completely without risk, according to consultants, who said investors will also consider the group’s limited cash reserves, large capital needs and competitive environment.

Among the impending financial needs, the district is required to break ground on extensive construction by 2011.

Preliminary conceptual drawings submitted in December call for up to three new hospital wings that will basically replace most of the existing structure, depending on the need at the time. The hospital must complete at least two of the wings before 2013, but it can qualify for a two-year extension once construction begins.

San Francisco-based HGA Architects released renderings of a complex with three possible phases during the board’s Dec. 12 meeting, estimating construction costs of about $300 million. Mr. Domanico said construction will be financed through a combination of long-term borrowing and a voter-approved general obligation bond.

According to the drawings, the first stage would move patient services from the oldest central and west wings to an adjoining 173,000-square-foot structure to be built on the south side of the hospital, and old structures would remain for non-medical uses. Also in that phase, a 96,000-square-foot extension would be added to the north side of the campus and house administrative offices, outpatient services and a larger emergency room and surgery suites.

The new construction will increase bed capacity to about 180 beds in the first phase, and up to the license maximum of 235 if the final phase breaks ground. A three- or four-story parking garage would also be needed to replace the 600 spaces covered by the new buildings.

The still tentative phase of the project would call for the demolition of the oldest wings, which would be replaced by a 130,000-square-foot building for about 50 additional inpatient beds and possibly physician offices.