A service of the California Health Care Foundation

Loma Linda University Health Plans $1.2B Inland Empire Expansion

Following a string of development projects in the Inland Empire, Loma Linda University Health is about to launch its most expensive and extensive project to date.

The health system is planning a $1.2 billion expansion on its main medical campus in Loma Linda. The health system also is planning to expand its hospital complex in Murrieta.

The project in Loma Linda will entail building a new adult hospital and an addition to the children’s hospital, which is expected to cost $823 million, said Richard Hart, president of Loma Linda University Health. Another $60 million is being set aside for the Center for Discovery, which will house interdisciplinary research facilities and the Wholeness Institute, which will be focused on research in epigenetics, the study of changes in gene activity.

Hart said the expansion in Loma Linda is needed to fulfill the health system’s academic and health care missions.

“To do that effectively we must maintain all the latest services and technologies that people expect today,” he said.

The health system, which operates the region’s only Level 1 trauma center and the only children’s hospital in the Inland Empire, has 1,076 beds in six hospitals in the Inland Empire.

The existing adult medical center in Loma Linda does not meet seismic safety standards and is nearly 50 years old. It will be replaced with a new 276-bed adult hospital that will have 96 intensive care beds and 180 medical-surgical beds. Hart said a goal of the project is improving the adult facility to include more single-bed rooms, which are needed to keep infection rates low and meet patient quality expectations.

“This is not primarily an intention to expand the number of beds but to work with regional hospitals on a more efficient distribution of care,” Hart said.

The health system has been forming partnerships with county and community hospitals which will take on patients in need of primary and secondary care, while Loma Linda will focus on tertiary and quaternary care, he said.

The children’s hospital, which was built in the early 1980’s and has 348 beds, meets seismic safety standards but is in need of more capacity, Hart said. A new tower with 100 beds will be constructed connecting to the children’s hospital. The hospital also will expand its neonatal intensive care unit, which it claims is one of the largest in the nation.

“Many community hospitals are getting out of pediatrics,” Hart said, explaining that as the region’s only children’s hospital, Loma Linda has worked to fill that gap by providing pediatric sub specialties which would otherwise not be available.

The project on the main medical campus will be partially funded through fundraising. Last month, the health system announced what appears to be one of the largest gifts in the Inland Empire’s and California’s history. Dennis and Carol Troesh donated $100 million toward the $1.2 billion project. Another $49 million has been raised through smaller donations, said Rachelle Bussell, the health system’s senior vice president for advancement. Additional funds will be sought from federal, state and local sources.

Three organizations — California Hospital Association, American Hospital Association and the American Society for Healthcare Engineering — declined to comment for this story.

High Cost of Construction vs. Competitive Advantages

Hospital construction can be incredibly costly. Experts agree that on average the cost per hospital bed in new construction is around $2.5 million.

But despite the high costs, experts say there is a competitive advantage for Loma Linda University Health to invest in expansion.

“Health care is a very regional industry,” said Dylan Roby, assistant professor and researcher at the UCLA Center for Health Policy Research. “There is quite a lot of consolidation in Northern California. In L.A. and Southern California, you see a different situation.”

In Southern California, hospitals that perceive financial opportunities related to expansion are taking action, he said. For example, UCLA is expanding its primary care capacity in the South Bay and San Fernando Valley. Meanwhile, Loma Linda University Health appears to be positioning itself to broaden its customer reach and to strengthen its negotiating power with providers and health plans, he said.

“Loma Linda is probably in a favorable position because they can become the 800-pound gorilla that drives specialty care, and they know anyone who needs any kind of specialty care will have to come through them,” Roby said. “They are in expansion mode because they see market share that they can get, and they want to compete with Kaiser because there is no other large hospital system out there.”

Experts also say there is an incentive for the health system to maintain its academic reputation as a medical school as well as its reputation for providing high quality care because the health system can then charge higher prices and attract more physicians.

“If you’re the only system providing certain types of specialized services, you’re going to be in a really strong bargaining position with private health plans,” said Chapin White, senior policy researcher at the RAND Corporation.

He added, “Most metro areas only have one children’s hospital, and if you are the system that owns that hospital, every health plan has got to have you in that network. Then the private networks are at your mercy when you are negotiating prices with them.”

He noted that there has been a long-term shift away from in-patient hospital construction projects because the revenue earned from out-patient services has been gradually increasing.

Many of the hospital construction projects in the state have been seismically driven and not about expansion, said Jennifer Bayer, vice president of external affairs for the Hospital Association of Southern California. Hospital rebuilds often have fewer beds, even though the square footage may be greater, she said.

“Larger rooms are needed to accommodate the new technology that’s required today,” she said. “I think the public today often confuses a brand new hospital with money rather than necessity. … The entire community will benefit.”

Further Growth Predicted

Loma Linda University Health also is growing in southwest Riverside County. This month, the Murietta City Council signed off on a plan allowing Loma Linda University Medical Center – Murrieta to sell up to $310 million in tax-exempt bonds to refinance the hospital.

The money freed up through refinancing will result in savings for the hospital that can be used for other purposes.

“It reduces our interest rate and makes it so that we can then allocate funds toward an expansion,” said Kathryn Stiles, the medical center’s executive director of marketing and communication. “The downstream impact will be that we will be expanding our hospital and our services.”

The hospital and its associated medical offices currently occupy half of a 40-acre site. The health system plans to develop the other half of the property.

“We have a team in place that is looking at every square inch of the hospital and the needs of the community and are pulling that together into a strategic master plan,” Stiles said. “This area is severely underserved when it comes to medical specialties, in-patient beds and out-patient procedures. There is a lot of need here.”

In recent years, Loma Linda University Health has built a number of new facilities. In 2009, a 90,000-square-foot out-patient satellite campus called Highland Springs Medical Plaza opened in Beaumont.

In 2011, the health system opened Loma Linda University Medical Center – Murrieta, a 106-bed hospital with associated medical offices near Temecula.

In 2013, the health system announced plans for a medical and educational complex in San Bernardino that will serve up to 250,000 patients each year. This past June, San Gorgonio Memorial Hospital, a stand-alone medical center in Banning, announced it was pursuing an affiliation with Loma Linda University Health. If an agreement is reached, Loma Linda University Health would manage and operate the hospital in a long-term arrangement, according to a press release.

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