ProHealth plans new 40-bed hospital

Waukesha Freeman, December 6, 2006

By ERIK BROOKS
Freeman Staff

WAUKESHA ProHealth Care is partnering with a St. Louis company to build a $13 million, 40-bed inpatient rehabilitation hospital in either Waukesha or City of Pewaukee, a Waukesha Memorial Hospital executive said.

Details of the project emerged Tuesday, as officials with ProHealth Care and Centerre Healthcare argued the development will lead to cost savings and higher quality care for a growing number of victims of stroke and other serious injuries.

The deal ProHealths third major construction project announcement in the last seven months also could lead to expanded services at Waukesha Memorial.

WMHs current 15-bed inpatient rehabilitation facility will close once the new facility opens, likely by summer of 2008 freeing approximately 16,000 square feet of space for other unspecified uses, said Ed Olson, CEO of Waukesha Memorial.

The location of the 45,000-square-foot, about five-acre development, to be called Rehabilitation Hospital of Wisconsin, is uncertain, Olson said.

He said ProHealth has narrowed its choice to two or three sites near major highways in western Waukesha and City of Pewaukee, with a decision expected by early 2007.

The site selection takes on added importance because, unlike WMH and many other area hospitals, the owners of the rehabilitation hospital will pay property taxes due to ProHealths partnership with for-profit Centerre.

The ProHealth board approved the project Monday, and the deal is a complex one.

Olson said ProHealth Care itself will likely purchase the acreage for the hospital and build the $13 million facility. ProHealth will then lease the property to a joint venture corporation of ProHealth and Centerre, he said. Centerre will have a 51 percent stake in the new entity, while ProHealth will have a 49 percent share.

ProHealth and Centerre will split the hospitals profits, estimated to top $2 million annually, said Andrew Rosen, vice president of development for Centerre.

The joint venture will also purchase laboratory, diagnostic and other services from Pro-Health, providing added revenues for WMH, Rosen said.

An industry observer said hospital revenues will be limited somewhat since the hospital will primarily serve Medicare recipients, those 65 and older.

The amount of money Medicare the federal government insurance program reimburses hospitals for inpatient rehabilitation care is low, and has forced many small providers of such care to discontinue the service, said Steve Brenton, president of the Wisconsin Hospital Association, Madison.

The trend has been and will be to try to consolidate programs in larger facilities, he said.

The closure of the eight-bed Sacred Heart Rehabilitation Institute on the Oconomowoc Memorial Hospital campus in November 2005 reflected that trend and only heightened the local demand for inpatient rehabilitation services, Olson said.

The number of patients they were serving was not sufficient to justify keeping that unit open, he said, stressing the economies of scale that will come from the larger facility.

Brenton said there is easily demand for the stand-alone hospital in the county, but added: This place is unlikely to be a huge money maker for anybody.

The deal reflects ProHealths continued growth in the county, as it comes less than seven months after it announced plans for a $37 million renovation and expansion of Oconomowoc Memorial and a $2 million to $4 million investment in a joint venture project with area physicians called the Oconomowoc Physician Center.

In addition, competitor Aurora Health Care is finalizing its plans for a new Pabst Farms Hospital in the town of Summit a development that Pro-Health fought vehemently for years by labeling it a costly duplication of services.

We havent changed our mind on that, Olson said Tuesday. There isnt a need for additional acute-care beds in the community.

Aurora spokesman Jeff Squire declined comment Tuesday on the ProHealth plans.