One of the most recognizable buildings in south Springfield will soon be expanding as CoxHealth plans to build a nine-story, $130 million patient tower to meet rising demand for services.
Health system CEO Steve Edwards said the 310,000-square-foot expansion to the northwest portion of Cox South is expected to be complete by Thanksgiving 2014.
To fund construction, the hospital system issued $200 million in bonds at 10 a.m. April 3, and Edwards said they were sold out to investment groups within the hour.
“The bond market may be the best I’ll ever experience in my career. If interest rates went up a point and a half, it would cost us $43 million more,” Edwards said. “I think there are few economists out there that would argue they’re going down; they’re going up probably, so that’s a motivator for us. That’s why we’re acting now.”
When CoxHealth issued construction bonds in 2008, Edwards said they sold out in one day.
CoxHealth recently received bond ratings of A from Fitch and A2 from Moody’s. According to Moody’s, CoxHealth’s A2 rating reflects its trend of profitability and Moody’s expectation that the system will maintain stable operating margins and improve balance sheet ratios in the coming years given its favorable market position.
“Our bond rating, A2, was reaffirmed, and I think that gives a sense of stability to investors,” Edwards said of the current sale.
“If you think of it, these are not-for-profit bonds, which means in the future, the income is not taxable. The value of that as an investment mechanism is attractive.”
Bank of America Merrill Lynch is the hospital’s bond facilitator, he said, adding local investors should be able to still buy bonds through a financial adviser.
“What happens is big, institutional investors gobble them up. Investment houses buy them too, and they make them available for retail,” Edwards said.
From the bond sale proceeds, $115 million is slated to fund the Cox South patient tower, Edwards said, noting an expected savings in budgeted construction costs. He said $25 million would refund CoxHealth for the donation it made to the Skaggs Foundation as part of the acquisition agreement, another $25 million would be devoted to facility improvements in Branson and some $30 million is slated to refinance debt incurred by Skaggs. Edwards said projects to be funded in Branson have not yet been finalized.
Though construction bonds have been sold, CoxHealth Foundation President Lisa Alexander said the nonprofit hospital system was still seeking support from the community.
“In this new tower, and throughout CoxHealth, donations help to generate economic growth, job creation, sustainability and, obviously, help us to support quality patient care,” Alexander said.
She said several multimillion-dollar donations have been made to the foundation to back the initiative, and an announcement would be made detailing those gifts at the tower’s groundbreaking ceremony in May.
The tower is designed to house a women’s and children’s hospital, as well as a neuroscience hospital.
Edwards said about 80 additional patient beds in the tower would allow Cox South to transition its semiprivate rooms to private rooms. He said the hospital could revert back to semiprivate rooms in case of an emergency.
“In terms of actual inpatient beds, this is the first material project on this campus since 1985, when the first beds were built,” Edwards said.
“As long as I’ve been in health care, I’ve never understood why at the worst state of your wellness, that you’d have a roommate. We do what we can to assure private beds for people, but that’s not always the case,” he added. “There’s a lot of signs that say nosocomial – hospital-borne infections – are reduced with private beds. Meyer Orthopedic Hospital is all private beds, and patient satisfaction is in the 90-plus percentile.”
He said the patient tower is needed because of a growing and aging population in the Springfield area.
“There is an undeniable wave of population growth coming. And it is not just population growth, it is aging population growth. Typically, if you look at the consumption of health care, once you turn 65, you tend to use three to four times more health care dollars than you did when you were below 65,” Edwards said, citing Medicare data. “Baby boomers began retiring about a year ago, and as that big group moves through, they will drive demand.”
As older baby boomers approach their 70s, and the number of folks living in the Springfield area steadily climbs – the 2010 Census shows the city population grew by 5.2 the last decade – there is another factor driving hospital construction in the Ozarks: rising obesity rates.
A study released in February by the Robert Wood Johnson Foundation and The Trust for America’s Health projects at least 6 million new cases of diabetes, 5 million cases of heart disease and more than 400,000 cases of cancer during the next 20 years.
The reason, according to the study, is a national adult obesity rate that has doubled since 1980, jumping to 35 percent in 2010.
The 310,000-square-foot expansion would add to the northwest portion of Cox South. Officials are shooting for a Thanksgiving 2014 completion date.
