As reported by the Journal Inquirer, January 31, 2007.

UConn Bracing for Battle Over New, $495 Million Health Center

By Keith M. Phaneuf

While University of Connecticut trustees were endorsing a $495 million plan to replace the John Dempsey Hospital in Farmington, they also were hoping to mitigate an anticipated clash with competing hospitals in the Hartford area.

The board of trustees voted unanimously to endorse the project, which also would renovate Dempsey into a new research tower for the UConn Health Center. More important, administrators say, a new hospital would provide the revenue needed to preserve a first-class medical and dental school.

"We are running a hospital that is almost too small," said Trustee Gerard N. Burrow, who also chairs the health center's board of directors. "It allows no flexibility at all."

If the center is to maintain the quality of its medical and dental schools and post-graduate specialty programs, "I need a first-class, world-class facility to do that," Dr. Peter J. Deckers, executive vice president and dean of the UConn's School of Medicine, told the board.

Though the proposal now heads to the General Assembly and Gov. M. Jodi Rell, UConn officials aren't asking the state to borrow new funds for it.

UConn's plan would redirect about $45 million from existing state bonding planned for health center projects, with private contributions covering providing an estimated $25 million additional funding.

The bulk of the money, about $425 million, would be borrowed directly by the university and repaid over time with hospital revenue, with state government guaranteeing the loan should the university default.

Replacing the 32-year-old Dempsey Hospital with a new 546,000-square-foot, 352-bed facility on the Farmington campus is key - not only to improve health care in the region, but also to guarantee the educational quality and financial stability of the entire health center, Deckers said.

Though the center includes both the academic programs and the hospital, only the schools receive state support.

And since 2001, UConn officials have watched the annual state block grant grow, on average, by less than one-half of 1 percent. The grant has grown from $75.3 million to $76.9 million, or 2.1 percent, since 2001.

Meanwhile, the self-funded hospital, which has operated in the black over that period, increasingly has had to funnel more of its revenue into the schools to cover what UConn officials call the "academic gap."

Last fiscal year, despite $5.6 million in hospital revenue being diverted to the schools, the overall health center finished with a $6.9 million deficit.

This fiscal year officials tentatively are projecting a $16.5 million shortfall, again with school-related deficits surpassing the hospital's surplus.

"We have hit the wall," Lorraine M. Aronson, UConn's chief financial officer, said.

The health center's annual budget this fiscal year stands at $660 million, with about $355.1 million going for the academic programs.

Decker said Dempsey faces many of the funding challenges facing private hospitals, including:

  • Medicaid payments that cover less than 70 percent of patient treatment costs.
  • A similar problem with rates negotiated with private insurance companies given leverage by a lack of competition.
  • A shortage of nurses, which drives up salary costs and overtime.

But unlike private hospitals, the relatively small Dempsey must provide its staff with the same generous state benefits afforded other state government employees, even though no tax dollars are sent to the hospital.

Deckers said fringe benefit costs at Dempsey represent about 40 percent of salaries, compared to an average of 27 percent at Connecticut's private hospitals.

And while Dempsey also is relatively small, with 228 beds, it's required by state law - unlike private hospitals - to reserve some of those beds for psychiatric patients, prison inmates, and neo-natal programs. That leaves just 108 beds for general surgery and other medical procedures.

Deckers said expanding capacity would enable the hospital to treat more patients, expand programs, and generate more revenue to maintain academic programs.

But Trustees Thomas D. Ritter and Lenworth M. Jacobs Jr., said that while they support the expansion, they are concerned about the impact it could have upon Hartford Hospital and the St. Francis Medical Center in Hartford.

If wealthier patients, who don't use Medicaid and generally have higher-paying insurance plans, opt for UConn's new hospital, that could leave the other facilities in the Hartford area with a disproportionate number of poor patients - and a revenue loss.

"I would just ask that this be a real concern as we move forward," Ritter said.

"This needs a lot of discussion so that they are not hurt," Jacobs said.

Deckers added that despite Dempsey's location in affluent Farmington, 22 percent of its caseload involved Medicaid patients. Not only is this fifth highest among Connecticut's 30 acute-care hospitals, but it already is comparable to Hartford and St. Francis, he said.

The proposal also would need approval from a second government entity that's charged with assessing its potential impact upon other hospitals.

Hospitals seeking to add new services or add new facilities first must obtain a certificate of need from the state Office of Health Care Access.