A $460 million gamble

In the highly competitive world of health care, one business is taking a $460 million gamble on Everett.

That gamble is a 12-story, 680,000-square-foot medical tower, which Providence Regional Medical Center Everett plans to open June 14. The debt for the project will take 40 years to pay off


The medical tower, at 1700 13th St., ranks as the most expensive construction project ever undertaken by Providence Health & Services, the Everett hospital’s corporate parent. This in an organization that operates 28 hospitals in five western states and took in $8.1 billion in revenues last


“There’s certainly a huge commitment to this which brings about huge risk,” said Dave Brooks, the Everett hospital’s chief executive.

Providence officials say there are ample reasons to believe the mammoth

financial bet will pay off. The new building is the final piece in a nearly decade-long building program on the Everett hospital’s two campuses — part of a business strategy to keep Snohomish County patients from choosing hospitals in Seattle, Bellevue or Redmond.

“We went for a period of time where Seattle-based (health care) providers were able to develop and invest in themselves at a quicker pace than we did locally,” Brooks said. “And I think a lot of people felt they needed to leave the local community to get access to the best care.”

The project also was launched in anticipation of two demographic trends. The county’s population is expected to grow to an estimated 900,000 people by 2025.

At the same time, there will be increasing numbers of people age 65 and over — an estimated 18 percent of the population by the quarter century mark — as baby boomers hit retirement age and beyond.

“The population that generally needs the most amount of health care will grow at an even faster pace,” Brooks said. “That will generate tremendous demands in health care.”

* * *

Everett’s new $460 million medical tower is one of dozens of such major construction projects now under way across the nation. Collectively, their cost is estimated at $24.9 billion, according to a survey published by Health Facilities Management magazine.

Two of the biggest are in Chicago and Dallas. The costs of these projects are more than twice the size of Everett’s, $1 billion each.

Just about any hospital project is a gamble, because of the current payment system for hospitals to provide medical care, said Chad Beebe, an associate director for the American Society of Healthcare Engineering.

“You’re looking at a business with a 1 to 3 percent profit margin,” he said. “It’s difficult to say how it will pay off.”

Yet big construction projects like Everett’s medical tower are probably on the cusp of preparing for upcoming trends in health care, said Douglas Erickson, deputy executive director of the healthcare engineering organization.

“We’ve got technology that’s rapidly changing around us,” he said.

Interventional radiology uses imaging technology to conduct minimally invasive procedures. And electronic medical records allow health care workers, sometimes from different organizations, to share information within seconds, speeding diagnosis and treatment.

Accommodating these changes often triggers major remodeling or new construction projects.

Some sections of the Everett hospital’s Colby campus date back to the 1920s, with additions and major upgrades added in the ’60s, ’70s and ’80s.

Sooner or later, vintage medical buildings have to be replaced, Erickson said.

* * *

The national recession made some health care organizations hesitant to go forward with major building projects. Many of those which did were able to renegotiate material and constructions costs. “They really got a big bang for their buck,” Erickson said.

Everett was among those taking advantage of the opportunity. The final tab for the tower is now estimated at $460 million — $40 million less than initial estimates.

But big, new hospitals and their expensive, cutting-edge machinery must be run efficiently, at near-capacity, to pencil out financially.

Federal health care legislation, which puts increased focus on reducing medical costs, will drive further development of regional health care systems, said Ray Pentecost, a Norfolk, Va.-based specialist in health care architecture and former president of the Academy of Architecture in Health.

“If you’re getting less and less per procedure, you’ve got to do more procedures to cover your costs,” he said.

Health care organizations are continuing to develop hub-and-spoke systems, similar to those used by the airlines, with outlying clinics referring patients to large medical centers for procedures.

In the Puget Sound region, this has led Seattle-based Swedish Health Services to expand into the suburbs, opening satellite emergency rooms in Issaquah, Redmond and south of Everett and to take over management of the former Stevens Hospital in Edmonds.

Providence not only has referrals from its eight Providence Physician Group clinics in Snohomish County, but also is working on a long-term business deal with Valley General Hospital in Monroe.

While the public might question how Providence could afford to spend $460 million on a new building, the answer may be that hospital can’t afford not to, Pentecost said. One hospital administrator told him: “I’m spending $1 billion on one facility not to lose ground.”

The goal “is to be the hub of the network, not left on the outside looking in,” Pentecost said.

* * *

The opening of the medical tower is the latest in a string of $608 million in building projects at Everett’s hospital, beginning in 2002. In part, it was to staunch the flow of patients out of Everett for health care services, which began in the late 1990s.

In business terms, the hospital was losing market share. Patients were leaving to get a number of medical services elsewhere, including baby deliveries, cancer services, orthopedics, neurosurgery and heart procedures, said Mike Butler, executive vice president and chief operating officer for Providence Health & Services.

“We didn’t have the capacity to provide the services,” he said.

The first step to reversing that trend came in the spring of 2002, with the opening of the five-story, $56 million Pavilion for Women and Children.

A $2.25 million maternity center on the Pacific campus was closed in 1996, less than six years after it opened, part of the fallout from the 1994 merger of Everett’s two, formerly competing hospitals.

The baby unit was moved to the Colby Campus, with 14 labor rooms, 30 postpartum beds and mostly semi-private rooms.

With new or refurbished baby units opening at competing hospitals, Everett’s baby unit was like an aging family car, dependable but dowdy, rather than new, shiny and showy.

The pavilion, with its 52 private rooms, was a game changer, Brooks said.

Before it opened, about 3,000 babies were born at the hospital each year. “Within about two years, we were up to (nearly) 4,000, he said, a level it has maintained since then.

It was a similar story with cancer services.

In January 2001, The Seattle Cancer Care Alliance, a collaboration among the Fred Hutchinson Cancer Research Center, UW Medicine and Seattle Children’s Hospital, opened its new building in downtown Seattle for outpatient services.

In Everett, services were scattered among various sites, the hospital, The Everett Clinic, Western Washington Medical Group and Northwest Radiation and Oncology Associates.

The four organizations wanted to build and operate one big, comprehensive cancer center in Everett.

In June 2007, the $62.4 million Providence Regional Cancer Partnership opened, offering both traditional and integrative medical services, such as massage and yoga, for cancer patients.

Some 4,316 patient visits were scheduled there last year, said hospital spokeswoman Cheri Russum, a nearly 27 percent increase over the 3,402 treatments in 2006.

* * *

Plans for Everett’s medical tower began to develop in 2004. People from throughout the five-state Providence system, specialists in finance, administration, technical and medical experts, were pulled together.

“We had a series of meetings here in Everett with people from Alaska to Los Angeles,” Brooks said.

They discussed the trends that would shape health care over the next 40 years, population growth, where patients were getting health care and how medical services are expected to evolve — fewer surgical procedures to more reliance on medications.

Initially, plans called for two medical towers, which would be completed by 2015. But in July 2006, officials announced that construction would be shaved by four years. There would be one tower instead of two. Its parking garage would nearly double, with space for 1,000 rather than 600 vehicles.

“The change in strategy was driven most by the growth we were experiencing,” Brooks said. The hospital also was trying to respond to concerns from neighbors and the city of Everett over the length of the construction project and its impact on the neighborhood, he said.

The new tower was being built on the same site and shoulder-to-shoulder with a hospital that houses one of the state’s busiest emergency rooms. Construction had to be completed in a kind of do-si-do.

First, a 45-foot-deep hole was dug, the first step in the $30 million parking garage that was finished in June 2008.

Construction on the new medical tower began on Sept. 27, 2008, just as the national economy was tanking.

“There were other organizations that stopped construction on things,” Butler said. “We did not do that.”

Work progressed at such a rapid pace that in January, Brooks announced the building would open in June, two months ahead of schedule.

* * *

The public will get its first glimpse of the new building during open houses scheduled for June 11 and 12. The building’s $20 million in high-tech equipment, including three CT scanners and two MRI scanning machines, will likely get much of the attention.

Yet the medical tower includes a number of design features aimed at making it more welcoming for family members — fold-down couches in patient rooms, play areas for children, and kitchens family members can use while a loved one is hospitalized.

Visiting hours are more flexible. With the approval of the patient and medical staff, family can stay as long as they’re needed.

Nearly all the 240 in-patient rooms in the medical tower are single-patient rooms.

These types of features are about more than aesthetics, said Erickson, of the American Society for Healthcare Engineering. He also is chairman of a national nonprofit group that writes construction guidelines for hospitals and other medical facilities.

Hospitals have evolved into a more hotel-like environment, he said, such as having single rooms to promote rest and privacy.

“You’re not in a room where the other patient is moaning and groaning or family members are coming in and wanting to have a party because they’re going home,” he said.

High noise levels have been shown to increase blood pressure, and heart and respiratory rates, according to a 2008 study the Journal of the American Medical Association.

* * *

Studies have found other benefits for single-bed rooms, cutting back on medication errors, patient falls, and bacterial infections such as MRSA, Erickson said.

“In a semi-private room, there’s a direct correlation — if your roommate’s got it, there’s a very good possibility you’ll come down with MRSA,” he said.

The costs of treating patients for hospital-acquired infections are shifting more to hospitals.

The financial stakes are high. A recent federal study found that on average, a typical hospitalization costs about $9,377 dollars. The cost of treating a patient with a hospital-acquired infection can cost about $43,000.

A quieter environment and more family interaction with patients have been found to speed recovery and decrease a patient’s hospitalization by 12 to 18 hours, Erickson said.

With a typical hospital stay averaging about three days, reducing it by even a half day not only makes for happier patients, it can have big financial impacts, he said.

For all these reasons, features such as single-bed patient rooms pay for themselves over the years a medical building is in use, Erickson said.

Historically, hospitals have transitioned from 30-bed wards to rooms with eight beds, then four, then two. “Then we really got smart,” he said. “The reason why we’re getting out of 1970s-vintage buildings is they were truly built like institutions.”

Some people may look at the big, new hospital buildings springing up across the nation and wonder: “Why are we building these Taj Mahals?” Erickson said. “You don’t have to be an accounting major to figure this one out.”

Providence’s projects, 2002-11
Providence Regional Medical Center Everett’s new medical tower, which opens next month, is the final piece in the hospital’s nearly decade-long plan of new construction projects, aimed at upgrading services and keeping patients from getting health care outside Snohomish County.

Here’s an outline of the hospital’s four major construction projects:

May 2002: Providence Pavilion for Women and Children opens. The five-story, $56 million building at 900 Pacific Ave., includes a birthing unit, a newborn intensive care unit, and mammography services.

June 2007: The $62.4 million Providence Regional Cancer Partnership building opens at 1717 13th St. with nearly $11 million in high-tech cancer-fighting machinery.

June 2008: The nine-story, $30 million parking garage, at 1800 13th St., opens with space for 1,000 vehicles.

June 14, 2011: The new 12-story, $460 million medical tower is scheduled to open at 1700 13th St.

How local hospitals compare
Valley General Hospital, Monroe
Description: A taxpayer-supported public hospital district
Established: 1960
Number of hospital beds now being used: 51
Number of hospital employees: 305 full-time equivalents, 475 overall
Operating budget: $55 million

Providence Regional Medical Center Everett
Description: Private, nonprofit hospital owned by Providence Health & Services
Established: 1905 (merged with Everett’s General Hospital Medical Center in 1994)
Number of hospital beds now being used: 395
Number of hospital employees: 2,393 full-time equivalents; 3,299 overall
Operating budget: $600 million

Cascade Valley Hospital, Arlington
Description: A taxpayer-supported public hospital district
Established: 1909
Number of hospital beds now being used: 35 (will increase to 41 next year)
Number of hospital employees: 285 full time equivalents; 360 overall
Operating budget: $39 million

Description: The former Stevens Hospital, now managed by Swedish Health Services
Established: 1964
Number of hospital beds now being used: 156
Number of employees: 1,077 full time equivalents and 1,563 total employees
Operating budget: $200 million
Source: Information provided by the hospitals

Pacific campus ER to close June 16
Providence Regional Medical Center Everett’s emergency room at 916 Pacific Ave. is scheduled to close at 5 a.m. June 16, two days after the company’s $460 million medical tower, about two miles away at 1700 13th St., opens. For the first week after the closure of the Pacific Avenue emergency room, the hospital will have a private ambulance parked out front. Crews will hand out maps to direct people to the new emergency room.

The hospital’s emergency department will be consolidated at the new 13th Street building. The 67,460-square-foot emergency department will be located on its ground floor.

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