Posted 5/28/2012 12:00 am
Updated 11 months ago
On June 13, Arkansas Children’s Hospital of Little Rock is scheduled to unveil its largest construction project in its 100 year history — a 258,000-SF, $121 million South Wing.
The four-story addition connects to the existing hospital and will offer a nearly 30,000-SF emergency department, an outpatient clinic for patients with cancer and blood diseases and an expanded neonatal intensive care unit.
“It’s a 21st-century children’s hospital,” David Berry, chief operating officer of ACH, said last week.
The original construction value was $85 million, but the general contractor, Nabholz Construction Corp. of Conway, and the architects, Cromwell Architects Engineers of Little Rock, were able to trim building costs to $75 million, Berry said. The bulk of the balance was spent on furnishing the addition.Construction started in September 2008, just as the economy was starting to tank. The project came at the right time for Nabholz.
“In an economy that’s been down, for us to have that project meant tons for our company,” said Bill Hannah, CEO of Nabholz. “We desperately needed work, as most contractors did, and it was a big boon for us to have that project.”
Nabholz is No. 1 on the Arkansas Business list of largest commercial contractors, which is ranked by revenue. For the fiscal year that ended Sept. 29, Nabholz reported $544 million in revenue, an increase of 25.6 percent increase over its 2010 fiscal year.
In addition, the South Wing project kept construction workers busy, Hannah said. At peak construction times, about 250 workers were on the site.
Last week, an army of workers were putting the finishing touches on the project. Patients are expected to start using the building at the end of June or the first week of July.
Berry also said about 100 additional workers would be hired to staff the addition.
The timing, so fortuitous for Nabholz, is not so ideal for ACH. It is unclear what the South Wing will mean in terms of additional revenue for the hospital.
“The projections we had are probably no longer valid,” Berry said.
Between 2006 and 2008 “we were on an upward trend,” he said. There’s “not quite as much demand [now] as there was during those days.”
ACH had revenue of $532.1 million for its fiscal year that ended June 30, which was down 0.1 percent from its previous fiscal year.
Need for Space
The idea for the project started around 2006. Between 2002 and 2006, patients from across Arkansas and neighboring states flocked to ACH, the only children’s hospital in the state.
Between June 30, 2002, and June 30, 2006, inpatient admissions jumped 26.11 percent to 13,417. In addition, the number of operations performed increased 35.5 percent to 12,895 during that period.
“We were needing more neonatal intensive care unit beds,” Berry said. “We needed better space for our infants and toddlers, and we had outgrown our emergency department.”
The South Wing was given the green light. But construction of the project in the fall of 2008 came at one of the worst economic times.
ACH wanted to issue bonds to pay for the project. Standard & Poor’s Ratings Services assigned the bonds an A+ rating, which means a “strong capacity to meet financial commitments, but somewhat susceptible to adverse economic conditions and changes in circumstances,” according to Standard & Poor’s website.
With the economy faltering, ACH decided to shelf the bond sale in October 2008.
“We weren’t able to sell bonds on the track that we wanted to,” Berry said. “We sort of waited for the economy to recover.”
In the meantime, the project pushed forward using money from donations and the hospital’s reserves.
Hospital officials still were nervous. “At that point, we were concerned we might not be able to sell the bonds, so we had a pause plan in place,” Berry said.
In April 2009, ACH tried again to sell the bonds. It also received another A+ rating from Standard & Poor’s. “The stable outlook reflects ACH’s essentiality as the only children’s hospital in the region and the hospital’s continued favorable operating performance,” the April news release from Standard & Poor’s said.
The bonds were sold in May 2009 and were a success, Berry said. The total amount of bonds sold was $111.2 million.
As the project was being built, other changes occurred: The large increase in patients that ACH saw between 2002 and 2006 had slowed down — or even declined.
Inpatient admissions for its fiscal year that ended in June stood at 14,114, essentially flat for the past two years. Outpatient visits were 307,023 in its fiscal 2011, which was down 1.07 percent from the previous year. The number of operations was up, though, to 13,814 in fiscal 2011, an increase of 3.6 percent.
Berry said the declines in patients weren’t tied to the sluggish economy. “We’re not absolutely certain what it’s about,” he said.
It might be attributed to the decrease in the number of babies being born, Berry said. Between 2007 and 2010 the annual number of births in Arkansas fell 13 percent to 5,229.
In addition, other hospitals around the state have opened their own neonatal nurseries, which treat some of the patients that previously would have been cared for at ACH, he said.
Also, more treatments are taking place in the clinics or as outpatient procedures. “We have kids that are treated for cancer that very seldom spend a night in the hospital,” Berry said.
Before the South Wing was built, ACH projected it would have between 240 and 250 patients a day in the hospital and then the numbers would grow.
“We’ll have 370 beds, and we knew we weren’t going to fill those instantly,” he said. “I think we’ll get there. … Things come in cycles. We just happen to be in a slower cycle at the moment.”