Grady Health System officials say a planned expansion at the Atlanta hospital will cost more than expected, and they are asking Fulton and DeKalb counties to pitch in millions more to fund construction.
Last year, Grady officials said the construction of a surgical center and the expansion of a center dedicated to HIV and AIDS treatment would cost $203 million, and the two counties agreed to contribute a combined $90 million to the projects. The rest of the money would come from fundraising, tax credits and the hospital's reserves.
But since the project was first announced, its estimated costs have increased to $231.3 million, a more than $28 million jump. Now Grady wants the two counties to kick in another $21 million as part of a public-private partnership to fund the construction.
“It’s about the health of the organization,” said Shannon Sale, Grady’s senior vice president, chief of strategy. “We need the capacity as soon as possible.”
Sale said Grady’s beds are nearly full and it needs the additional space to bring more voluntary surgeries into the hospital. That improves the payor mix, and helps keep the health system on track financially. The main hospital in downtown Atlanta nearly closed in 2007 because of massive debts, but its finances have been restructured and strengthened in recent years.
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The Fulton and DeKalb boards of commissioners would each have to sign off on more money, which would add to the bonded debt that taxpayers will have to pay back.
The counties jointly control Grady Health System, whose Atlanta hospital and network of clinics serve medically needy and indigent residents. Local funding is generally split between Fulton and DeKalb on a 2-to-1 ratio to reflect the patient mix at Grady.
The Fulton Board of Commissioners has been asked to increase its funding from $60 million to $74.2 million. Grady representatives have made presentations to commissioners about their request, but it has not yet appeared before the full board, and has not yet been scheduled to.
Lee Morris, a Fulton County commissioner, said he was “favorably inclined” toward the request, but wanted to hear other commissioners’ thoughts.
“It’s an important project, and certainly, we’ve seen construction costs skyrocket,” he said.
‘It’s really to keep up’
DeKalb commissioners were briefed earlier this month about the request to increase funding for the planned expansion from $30 million to $37.1 million. Zach Williams, the county’s chief operating officer, said county staff is reviewing Grady’s proposal to make sure there is consensus on the numbers and return on investment.
“We’re in agreement with the concept of the facility, so it’s really working out the details of project oversight and management,” Williams said recently.
Chris Kane, principal at the consulting firm Progressive Healthcare, said he expected Grady to get the additional funding. In the past, money was simply needed to keep the doors open at the safety-net hospital. But in recent years, he said, Grady has been “impressive” and its success has led to restored trust.
“You’re investing in a strong performer,” he said. “My sense is they will approve it.”
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Grady has submitted a letter of intent ahead of applying for a certificate of need that would allow it to move forward with construction for an outpatient center.
Most of the additional money the health system asked for will go toward building the $188.1 million Center for Advanced Surgical Services, a new building planned on the Grady Memorial Hospital campus. The center will increase capacity for surgeries, outpatient services and cancer treatments at Grady. Kane said the industry is moving toward more outpatient surgeries, and the investment would help strengthen Grady’s offerings at a time when competition has increased for hospitals downtown.
“It’s really to keep up,” he said.
Sale said she knows the market demand is there, but that when people having outpatient or elective surgeries are shunted from the schedule, they will go elsewhere for their medical needs. The expansion is meant to free up dedicated surgery space for those types of patients.
In addition to construction costs rising, the surgical center’s site plans have expanded by 28,000 square feet since the original approvals. Sale said that’s because a plan to build two separate buildings, one for a parking garage and one for the surgical center, was scrapped in favor of one larger building with a garage underneath that would make better use of the space.
The building is scheduled for completion in mid-2021. Once it opens, space will be freed for 40 to 50 additional inpatient beds at the main hospital.
In addition to building the surgical center, Grady is also planning to expand the Ponce de Leon Center, which provides medical and support services for people living with HIV and AIDS. It will be the first major update to the center since it opened in 1993.
“This building doesn’t change the mission,” Sale said. “If we can’t grow, we will go backwards.”
