ECRMC quake work rolls ahead after long, shaky journey

For five years El Centro Regional Medical Center has been on shaky ground in its efforts to become earthquake-proof when two prior attempts to secure tens of millions of dollars to do the work stalled.

What’s more, that inability to move forward on funding the state-mandated seismic construction projects had impacts on affiliation talks with Scripps Health of San Diego and Pioneers Memorial Healthcare District, according to ECRMC officials.

But those hurdles, however, appear to be behind the hospital.

A third attempt at securing lending through revenue bonds for new construction to meet the state’s deadline five years from now has been approved, clearing the way for stepped-up affiliation efforts, according to hospital officials.

Last week the El Centro City Council convened as a special financing authority to sign off on seeking $50 million in bonds — $25 million in new construction funding and $25 million for refinancing an earlier building project that will save the hospital between $3 million and $4 million in interest, ECRMC Chief Financial Officer Alex Wells said.

What Wells and others explained is, the ability to become seismically compliant with a deadline looming means the hospital will be able to keep its acute care license.

“No. 1, it allows us to be complaint with regulations and it makes us safer,” said Tomas Virgen, chief executive officer for the El Centro hospital.

Virgen said not meeting the deadline puts the hospital in jeopardy of losing its acute care license, and patients would have to be transferred to other facilities.

Because the hospital is city-owned, it has been under an exemption from the Legislature — Senate Bill 306 — that extended the compliance deadline to 2020.

Also, with the funding of what is being referred to as “phase 2” of the building project, the hospital is confident it can move forward on phase 3, with both construction projects going concurrently, Wells said.

Building out both phases at once will mean the hospital doesn’t lose any beds, Wells said. That is significant because ECRMC cannot fall below 100 beds if the nonprofit hospital is to continue to collect state and federal disproportionate share funding and related drug funding tied to the low-income population it serves.

That funding, Wells said, accounts for $5 million to $6 million a year, almost the exact amount that puts the hospital in the black plus some.
“If we sat still and didn’t do anything,” Wells said, “we’d lose all of that.”

WHAT’S PLANNED?

In 2001 the hospital took out a bond package worth $39 million from CalMortgage to build out “phase 1,” the new emergency room, medical-surgical wing, intensive-care unit tower, a surgery center and move the lobby and admissions area to Imperial Avenue from Ross.

All of the work was made seismically compliant, Wells said.

Yet many other crucial departments needed to run an acute-care facility, or a full-service hospital, were not brought into compliance, he said, which increased the urgency for phase 2.

Among the most crucial is the hospital’s central utility plant, which is basically the guts of the hospital: cooling, heating and water treatment systems, among other functions.

Wells said $10 million of $25 million bond package will be used for that alone.

Another $10 million will go to reconstructing the multi-story hospital outpatient facility that stood off Ross Avenue. The building had to be leveled after it was destroyed by the April 2010 earthquake.

Putting that location back into operation alone will save the hospital $500,000 a year in rent and leases, as financial offices, information technology and other important departments are spread out among the city, Virgen said. A hospital-run oncology office on LaBrucherie Road will also be moved into that building.

“We get to bring our people back after the earthquake and that kind of helps pay for the building itself,” Virgen said.

Rebuilding some portions of the hospital will remove beds, bringing the bed count to around 60 beds, below the threshold for disproportionate share funding, Wells said.

Thus, the necessity to begin phase 3, which is being designed now, he said.
The hospital will have to put together another bond package for phase 3 in a couple of years, but it’s not clear how much yet.

In that phase, ECRMC will look to move pharmacy, dietary and sterilization services for surgery, among others, Wells said.

Virgen would like to see 110 to 120 licensed beds added at that point to deal with anticipated consistent and moderate growth.

As it stands now, the hospital has seasonal spikes where as many as 100 beds can be filled during the winter, Virgen said, with patients suffering flu and other seasonal illness.

Virgen said he’d also like to see the ER expanded in phase 3. Coming from an ER background himself, Virgen said the hospital has already outgrown an ER that was substantially expanded in 2004.

THE PROBLEM PAYING FOR IT

It’s been a rocky road to this latest bond go-round.

Five years ago, when Wells first came to ECRMC, he was tasked with putting together the first failed bond outing.

The hospital was then working with Rabobank as the prime lender, he said.

City Councilwoman Cheryl Viegas Walker, who has been a long-time employee of Rabobank and at the time served on the hospital board, recused during voting due to her employment.

However, Wells said, there was a section in the state government code that said Walker’s recusal wasn’t enough. The bonding attempt fell through, despite protests with the state Attorney General’s Office.

He said there is considerable time invested in a request for bonds, including 18 months worth of research and updated financials from the hospital each time.

The second go-round occurred in 2012-2013, he said, when the hospital went through nearly all the footwork to get it done, including finding lenders, preparing the documentation and getting approval from the hospital board.

However, the process was again shelved before it went to the City Council. It was decided the city would try to sell the hospital, so, in essence, the first flirtation with affiliation stopped the attempt to bond construction.

The rub was, Wells said, in investigating the potential sale of the hospital with Scripps, it was discovered that a transfer of title would make SB 306 void, thereby moving up the state seismic retrofit deadlines.

So not only did the city lose out on the bonding, but that initial part of the Scripps affiliation stalled as the city looked into its options and how to make the relationship with Scripps work.

Mayor Efrain Silva said exclusive negotiations with Scripps ended, as Scripps was taking too long to work with the city.

A second affiliation then cropped up with Pioneers about a year ago, with both parties realizing they needed to work together and become efficient to survive in the age of the Affordable Care Act.

However, Wells said, as the hospital decided to move forward with this third and final bonding, Pioneers and ECRMC temporarily called off its affiliation talks.

At the time, a joint press release stated that the bond lenders on this present go-round wanted to see the bonds finalized before affiliation would occur.

The banks’ perspective was, former hospital Trustee Alex Calderon said at the time, “We want to lend it to you, not who you are affiliating with.”

Wells would not be specific, but a minor subplot to that was the desire to build a new combined hospital.

Yet at a cost between $250 million and $300 million, Wells was of the opinion that the hospitals could not afford that and he advised against it.

AFFILIATION BACK ON TRACK?

Now, with the financing out of the way, Wells believes that talks with Pioneers can resume if that is the way the affiliation task force wants to go.

“We are definitely exploring all avenues, and that includes Pioneers and a possible San Diego partner,” Virgen said.

A source close to the hospital, who declined to be identified, believes that a deal could be announced within 90 days.

Silva said affiliation talks with a health care provider “outside” Imperial County have been ongoing for a while.

“We hope to take the next step toward a final affiliation soon,” Silva said.

This story first appeared in the Imperial Valley Press, March 12, 2015.