KGH to secure private money, not HUD, for new campus

KENNEWICK — Kennewick General Hospital officials are soliciting private financing for the new Southridge campus after a federal agency wanted the hospital to scale back and stay on one campus.

Financing initially was being sought through the U.S. Department of Housing and Urban Development for low-interest government-backed bonds for the $112 million project.

But Friday, CEO Glen Marshal announced plans to turn to the private sector for money.

"If they moved forward with Kennewick General Hospital, what they wanted us to do is significantly reduce the size of our hospital and go back to one campus," Marshal told the Herald. "We just felt like that was not an appropriate thing for KGH to do. Obviously we had to make a decision that HUD was not an attractive financing option for us."

KGH has a license from the state for 101 beds and plans to move 74 of its beds to the new Southridge hospital while keeping 27 beds at the Auburn Street campus. Officials want to build in Southridge because they want a hospital that's more centrally located to the community's population and to provide an upgraded facility to replace the cramped hospital that's more than 50 years old.

They said that the new building will accommodate new medical technologies, increase the size of overcrowded patient rooms and departments and deliver 21st century medical care more efficiently and comfortably.

Marshal said HUD's decision is frustrating because hospital officials had been working with HUD on a financing application for more than a year, had sent in a second pre-application in September and "felt pretty good" about the prospects.

They knew dealing with HUD was a complex, regulated process and had been working with federal officials on some issues. Marshal said KGH previously had dealt with HUD on the split-campus issue and had an agreement that having two campuses was not a barrier.

But that was cited again as an issue, and HUD officials suggested the new hospital's size be reduced because "they basically believe that the Tri-Cities is overbedded," Marshal said.

Marshal explained that KGH's average length of stay is three days, which is very low, but it also means the hospital has high patient turnover and needs beds to accommodate that. A majority of admissions also are urgent or emergent and can't be scheduled, Marshal said.

The HUD decisions led hospital officials to scrap the federal financing plan and turn to private partners.

"While we're disappointed by HUD's approach, the KGH board, its management and staff, as well as all of our community supporters, remain determined to get this hospital built," said Jim Mefford, president of the Kennewick Public Hospital District board. "To that end, KGH management is exploring alternative financing options with private sector partners that will allow us to build this hospital without additional tax dollars. We support this option and applaud their swift action."

Marshal said it could take three or four months to get a firm commitment on private financing. And while the change likely will mean higher interest rates, Marshal said, there were some costly fees and requirements in the HUD program that may not be part of a private deal.

"I think there are going to be some trade-offs," he said, but added, "I'm extremely optimistic about our future now."

KGH officials have met with private companies interested in partnering with KGH that believe the Southridge project is feasible and attractive, Marshal said. They also have met with industry leaders who combine expertise in health care with a deep understanding of the real estate industry, he said.

"While it's premature to discuss the financing options. ... We are committed to a transparent process and will report back to the community as the alternate financing strategy is developed," he said.

Marshal said the community should know the project won't change -- just the way it's financed -- and there's no question the project is good for the community and for KGH.

"We're committed to this project, and we're going to stay focused and work diligently to get it done," Marshal said. "I believe we will be able to break ground this year."

* Paula Horton: 509-582-1556; phorton@tricityherald.com