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New hospital may be patient ready by 2011

A brand new, $39 million hospital could be under construction by this September--and ready for patients in 2011.

When completed, Perham Memorial Hospital may also be under a new name.

That's the scenario that is being outlined at a series of public informational meetings held throughout the hospital district.

The final meetings of the series, which included sessions in Perham, New York Mills and Richville, will be in Perham again, and in Dent. The final Perham meeting is Thursday, May 21, 3 p.m. at Perham Memorial Hospital and Home--Town Center. At 7 p.m., the meeting will be at Sacred Heart Church, 36963 Hwy. 108, Dent.

"We decided it was time... the building is more than 50 years old," said PMHH hospital district board member Kathy Hemmelgarn.

Hospital officials insist that the project will not increase taxes to residents in the hospital district. "We won't be raising taxes for the project," said PMHH chief executive Chuck Hofius at a May 6 meeting in Perham.

About $35 million will be borrowed for the project, said Hofius, mostly through conventional financing. The hospital district will put up $4 million in cash.

The debt will be financed through growth in services and billings, increased Medicare and insurance company reimbursements, and a projected 15 percent increase in rates.

Patterns have indicated that hospitals which build on busy highway locations, such as Highway 10, have experienced a 20 percent increase in business.

The hospital will be built on a 60 acre site, along Highway 10, south of the Perham elementary and middle schools.

Hofius and the hospital district board are confident that the project will come to fruition.

There are a few potential stumbling blocks:

----The legislature, facing a nearly $5 billion budget deficit may cut health care funding by several actions, which would have an impact on cash flowing the project. Among Gov. Tim Pawlenty's proposals is the elimination of the "Minnesota Care" program for working families. Based on past history, Minnesota Care reimbursements represent about $2 million a year in revenue to PMHH.

----Hospital officials are confident about securing adequate financing--but the interest rates and terms may not be as attractive because of the current atmosphere of tight credit.

----PMHH and MeritCare have not yet come to terms on a contract. MeritCare will occupy the equivalent of about 15 percent of the square footage of the new hospital.

MeritCare leases space from PMHH. Nearly all the physicians are actually MeritCare employees. In total, MeritCare employs about 50 percent of the workforce in Perham--while PMHH has 380 employees, said Hofius. About 30 of those employees were added over the past three years.

Fundraising will not be necessary for the basic financing of the project, though Hofius said the hospital board hopes to raise more than $2 million through philanthropy for equipment, furnishings and other items that are not part of the basic package--but will greatly enhance the hospital.

Attending one of the Perham informational meetings was Mary Wilkowski, a senior citizen with a long association with PMHH. She recalled hospital fundraising campaigns from the past.

"We used to go door to door and get pledges for the hospital," said Wilkowski.

Like virtually every facility of its kind in the state, the nursing home portion of the PMHH operation is losing money.

"In 2002, our nursing home was in the black, but it has lost money every year since," said Hofius at a presentation to the Perham Lions Club May 7. The decline in profits is due, for the most part, to government reductions in Medicare reimbursements. "Sixty percent of the nursing homes in the state are losing money," he reported.

Perham's hospital and clinic, however, experienced the "best year ever." PMHH recorded $1.5 million in net profits in 2008, said Hofius.

The new hospital is designed for 20 percent growth. Further, the physical design of the facility allows for expansion to every wing of the building, noted Hofius.