Banner Health Systems awarded certificate of need

Banner Health Systems was awarded the certificate of need to build a hospital in Pahrump last Friday. Officials from a competing company, Johnson Controls Inc., called the process biased and are considering an appeal.

Banner, which operates Churchill Community Hospital in Fallon, Pershing General Hospital in Lovelock, a clinic in Fernley and numerous other hospitals in the country, proposes to build a 40-bed hospital at the north end of Pahrump on Blagg Road and Desert Trails Boulevard across from the Mountain Valley skilled nursing home on 25 acres donated by the Hollis Harris family.

Johnson Controls Inc. submitted a competing application to build a 40-bed hospital on land owned by the Pahrump Hospital District board next to Pahrump Medical Center on Calvada Boulevard.

The state examiner said the Johnson Controls' application left taxpayers potentially liable, didn't include a secondary maket, overestimated the average length of patient stays and should've included information on any adverse actions taken against their operator, Community Health Systems, not the hospital district.

"We're excited that the state awarded us a CON and we're looking forward to getting building as soon as possible," said Joe Sladek, a member of the High Desert Hospital Committee, which worked for the Banner proposal. Banner expects to break ground Dec. 1, finish construction May 1, 2003, and be open for business July 14, 2003.

Asked why Banner won the certificate, Sladek said, "They really liked the design of the Fallon facility and how the work flow is designed for all the nurse stations and physicians. So I think we're looking at using a lot of that design."

Banner will have to secure all the permits to build the hospital, which Sladek estimated will take two to four months. In the meantime, they'll do work like soil testing to prepare for breaking ground, he said.

"I think it was just a cleaner proposal, one group doing everything and using their money and the fact that they're proven in the state and they run a fantastic facility up in Fallon, that never hurts," Sladek said.

One of the objections to the Banner proposal was its location, at the north end of Pahrump Valley. Another question was raised during the hearing process about whether Banner would pay property taxes as a nonprofit corporation, an argument Sladek called a fallacy, because the hospital district property is owned by the public.

"Just getting a hospital in the valley is the key issue. It would've been nice to get a site on (Highway) 160 with 40 acres and all the facilities, but it just didn't exist. The Harris family was nice enough to donate the property," Sladek said. "If you're in an ambulance it's going to take a few more minutes to get up there, but it's better than going to Vegas and being diverted for a few hours."

Sladek was referring to the procedure of diverting patients on Pahrump ambulance runs to various hospital emergency rooms in Las Vegas until finding one that has space. Sladek said Yucca Mountain and projects at the Nevada Test Site will contribute to growth on the north end of Pahrump Valley while the growth of Las Vegas will continue to fuel growth on the south end.

While the work of the High Desert Hospital Board is finished, Sladek said Banner plans to establish an advisory board open to members of the community to develop its hospital.

Bob Chance, an account executive with Johnson Controls, said he was disappointed by the decision, made by Charlotte Crawford, Nevada Department of Human Resources, following a review by Mark Hemings, health resource analyst for the Bureau of Health Planning.

"Obviously, we feel the evaluation wasn't fair. It looked very biased to us, but we feel that we were not given a fair evaluation. The way he set it up, he compared Banner with us and basically downplayed all our key strengths and played up Banner's key strengths," Chance said. "We're disappointed, we tried very hard on it.

"We're really looking at appealing it right now. We feel that based on the information that was provided to us regarding the evaluation, we feel there's some key issues that were not brought forth that should've been. We're looking at doing an evaluation right now on appealing it," Chance said.

Johnson Controls attorneys are studying an appeal which would be made on their behalf by the Pahrump Hospital District board. The appeal must be filed within 10 days of the decision, or by June 18. Chance said the appeal would be heard by Gov. Kenny Guinn, who will probably appoint a committee to study it. Chance had a few suggestions if Banner does build the hospital.

"I would hope that they would reconsider the location. If we were not going to get the CON I would strongly consider having Banner look at the land we were going to build on. It's owned by the citizens of Pahrump, it's got all the ancillary services there, it's a great location as far as access."

Chance said Johnson Controls would've addressed providing medical care in the interim, while it built a hospital. The Pahrump Hospital Board submitted the application on behalf of Johnson Controls Inc., a factor that could've entered into the decision.

"We did have the nemesis of their reputation which we feel was unjust. They (the hospital board) did the very best they could in a difficult situation, that medical clinic was doomed from the day it opened. So they did a very good job keeping that place afloat over the years that otherwise you wouldn't have had. We feel that the district board, teaming with them, was the only real way to go. By the state deciding with Banner it really jeopardizes the clinic now," Chance said.

Johnson Controls was ready to go on its project, he said. Chance predicted Banner's hospital won't open until 2004, not 2003. Chance also noted Hemings used to work for Samaritan Health Care, which was merged with Lutheran Health Care into Banner Health Systems, a fact Hemings disputed.

"We tried to be fair and objective. We tried to judge the applications on their merits," Hemings said. "When you read the findings of fact, that comes out."

Hemings disputed Chance's comments that Crawford didn't adequately see the applications. He said Crawford received the applications March 19 and Hemings' presented her his findings of fact May 21.

"One way or another, the citizens will have a hospital. We just feel we can not only build it and get it open quicker, but we feel the location is better. We feel that paying the $1.8 million debt is important; we feel that ending the existing tax debt is important," Chance said. He was referring to the hospital district debt and accompanying tax rate of 13 cents per $100 of assessed valuation.

Both companies estimate the population of Pahrump Valley to grow to 30,000 to 32,000 by 2005, with 16 percent to 18 percent being over 65, the highest user age category. But the state noted Banner outlined a secondary service area of 10 percent of their patients from Beatty, Death Valley, Shoshone and Tecopa, Calif. Last year Las Vegas hospitals had 2,873 admissions from Pahrump.

With the exception of Douglas County, which is served by Carson-Tahoe Hospital, Crawford said, "Pahrump is by far the largest town in the state without a hospital." By comparison, she notes Banner is starting to build a 25-bed hospital in Mesquite, with only 16,000 residents. A 40-bed hospital would serve Pahrump for the next 30 years, the state examiner said.

Unlike Banner, the state noted Johnson Controls identified its partners in the design-build team: ABN-AMRO, finance company; Sutro and Co., bonds; McCarthy Construction, general contractor; HKS, architecture and engineering; Community Health Systems, hospital operator. However Crawford said, with the hospital board as an applicant, a public body, it would have to go through a public bidding process that could break up the team.

In a key finding, Crawford said Banner plans to finance the entire project through the sale of tax-exempt corporate bonds at no risk to the county or taxpayers. Under the Johnson Controls plan, the district would obtain a $26.3 million revenue bond which will be backed up by a corporate guarantee, but the district board could still be liable and a default would have an indirect impact on taxpayers.

"Failure of a revenue bond is an investor risk, but the risk of default could have an indirect impact on taxpayers," Crawford said. She said the plan to have Community Health Systems pay $35 million up front to the district board for an up-front, long-term lease upon completion of the construction would pay off the bonds and leave $7 million for future projects.

The hospital district's estimate of an average stay of 4.4 patient days, 7,941 per year and an average occupancy rate of 54 percent, was described as overoptimistic, Banner estimated an average stay of 3.3 days, with 6,292 patient days per day and an average occupancy of 43 percent.

The state notes, "Information contained in the exhibits and support documents show Banner and CHS the principal in the district board's application to be financially sound and capable of undertaking the project."

The state noted that while the Pahrump Town Board and Nye County Commission passed resolutions supporting a hospital, they didn't indicate a preference for either proposal, although local officials spoke about supporting the elected hospital district board. Ten letters from the School of Medicine's Center for Education, Health Services Outreach and the nursing facility were in favor of Banner, Crawford noted.

The findings note Banner outlined the equivalent of 214 full-time positions at the hospital, Community Health Systems would staff it with 197 positions.

Hospital board member Jeanne Howard countered that a new state law, Senate Bill 61, would allow Johnson Controls Inc. to keep its design-build team. The Intellimed medical research service estimates an average length of stay of 4.6 days, she said. Nye County Commissioners did pass a resolution endorsing Johnson Controls, Howard said.

Regarding the financing liability, Howard said, "I can't fathom what he's talking about. We've taken out all liability."

"The proposed location, about 15 minutes from the center of town, is the biggest shortcoming in Banner's application," Crawford states. "However it will be across the street from the only skilled nursing facility in Pahrump Valley and is appropriate for the area."

Crawford said the Banner site still meets the state criteria for location time and distance.