KGH says Southridge hospital construction could start this year

After years of delays, the Kennewick Public Hospital District could break ground on a new hospital at Southridge by the end of this year.

Kennewick General Hospital CEO Glen Marshall told the Herald that although a funding source for the $112 million project is yet to be made public, he is confident the project is poised to start construction soon.

"We are not at a point today that we can make any kind of an announcement, but I believe in the very near future the board will be making an important decision and the project will be moving forward," Marshall said. "We are certainly not sitting back and doing nothing on this."

KGH came under fire from Kadlec Regional Medical Center officials last week, who said they don't believe the hospital district has a viable plan to build at Southridge.

"Based on what we know, there are no plans," Kadlec board member David Lippes told the Herald. "There has been a lot of talk -- a lot of talk that Kadlec's actions have resulted in the absence of a hospital at Southridge. The evidence is that KGH's proposals were financially untenable. ... As far as we know, that hospital has no chance of being built and if it does get built, it will be years and years in the future."

During a meeting with the Herald's editorial board last week, Kadlec board members pointed to letters they obtained from the federal Department of Housing and Urban Development showing the department was leery of KGH's plan back in late 2009.

KGH was in negotiations with HUD for more than a year to get a loan to pay for the hospital, but HUD officials balked at KGH's requested need for 101 beds.

HUD officials argued in November 2009 that KGH didn't need that many beds because it was filling slightly less than half of that number at its Auburn Street hospital, and that the Tri-Cities as a whole had enough beds to meet community needs.

KGH planned to have 74 beds at Southridge and keep 27 beds in service at the Auburn Street facility for pediatric and obstetrics patients.

Hospital officials offered a compromise to HUD in September 2010 to have only 86 total beds available for patients, while keeping its license for 101 beds to accommodate future needs.

In its pre-application package, KGH argued the occupancy statistics that had led HUD to believe KGH needed fewer beds were misleading, and didn't account for high demand in particular parts of the hospital -- such as obstetrics -- where patients were being turned away for lack of beds.

Even though KGH had empty beds in other parts of the hospital, hospital officials had consulted with architects who told them it wasn't feasible to renovate or reconfigure the Auburn Street hospital, the KGH letter said.

The bottom line was that KGH needed a new, modern hospital, the letter said.

Marshall said he believes KGH and HUD were on the verge of a compromise when Kadlec filed a series of legal actions trying to get KGH's state approval for the Southridge hospital revoked.

"When the litigation happened, that stopped the process," Marshall said.

Kadlec's legal actions ultimately were dismissed or dropped by the Richland hospital, and KGH resumed talks with HUD.

But HUD told KGH officials they had to start over with their application for financing, Marshall said.

The application was resubmitted in September 2010 with the compromise KGH officials thought would resolve HUD's earlier concerns about the project, but by January of this year, it became clear no compromise would be accepted, Marshall said. HUD insisted on only 74 beds, and only one hospital campus.

"We had already told them that was not acceptable," Marshall said.

So KGH went back to the drawing board -- this time looking to the private sector for financing.

It wasn't the first time KGH officials were forced to rethink how to pay for the hospital. An overwhelming two-thirds of voters living in the hospital district in 2007 said no to a property tax levy intended to help pay for the hospital.

KGH officials told the Herald editorial board Feb. 24 -- after the decision to abandon the HUD application was announced in late January -- that they hoped to identify private funding by May.

"We firmly believe by mid-May we will have a commitment to do the project," Marshall told the Herald at the time.

Once May came and went, Marshall told the Herald he hoped to have funding lined up by the end of the summer.

In the meantime, Kadlec announced its own plans to build a $16 million stand-alone emergency department in south Kennewick.

Kadlec officials told the Herald last week that decision was driven by an increasing demand for emergency medical services -- with more than 10,000 of the estimated 65,000 patients expected to visit Kadlec's ER this year coming from Kennewick and northeast Oregon.

"We said our job is to serve our constituents," Lippes said. "Our constituents obviously are in areas outside of Richland. We would serve them better by going into Kennewick. It is the right business decision. I think the whole board agreed on that."

Kadlec Health System CEO Rand Wortman told the Herald last week that the new ER could be open in about 18 months.

On Friday, Marshall said an announcement about Southridge should be coming soon, and the hospital could be open for business in as little as two years.

"Our commitment to the board and to the community is to get the project developed and break ground this year," he said.