At their Oct. 24 meeting, the University of Central Florida (UCF) Board of Trustees approved a public-private partnership with Hospital Corporation of America (NYSE: HCA) to establish an academic hospital at the UCF Health Sciences Campus at Lake Nona.
At the meeting, University of Central Florida College of Medicine (UCF-COM) Dean Deborah German, MD, told the UCF Board of Trustees it's "now or never" to develop the academic teaching hospital. Otherwise, the opportunity "would likely be lost forever," according to UCF-COM notes to the Board.
Here's why all the haste: On Aug. 1, both Florida Hospital and HCA filed Letters of Intention (LOIs) indicating their intent to build an acute care hospital in Orange County. The Florida Agency for Health Care Administration (AHCA) has indicated only one new acute care adult hospital certificate of need (CON) will be approved to serve the growing Lake Nona area.
"The proposed academic hospital will provide the missing link for clinical services at Lake Nona Medical City, which currently has hospitals that serve only children and veterans," German pointed out.
The development of a university teaching and research hospital has been on the agenda since 2006, when German helped establish the UCF-COM. An academic hospital would serve as an essential lab, catalyst and resource for clinical and translational research and also support population health and health outcomes research. It would allow the UCF-COM to easier recruit employed clinical faculty in procedural specialties.
In 2012, UCF purchased 25 acres of land adjacent to the 50-acre COM campus as the site of the planned hospital. However, potential hospital partners warned that Lake Nona did not yet have enough rooftops to provide a market for the services. The following year, a housing boom hit the Lake Nona area, and in 2014, the City of Orlando Economic Development Department produced a Growth Management Plan Projections Report, showing the region surrounding Lake Nona is expected to increase by 67 percent by 2040. Over the next five years, Osceola County is projected to experience greater growth than Orange County, for an overall growth rate of 16.6 percent.
In August, the UCF-COM dispatched Invitation to Negotiate (ITN) bids for a public-private partnership on the academic hospital. The Big 3 health systems in Central Florida submitted bids. On Sept. 1, the UCF Academic Health Board - German chairs UCF Academic Health Inc. (UCFAH) - unanimously selected the for-profit HCA as its partner. Both parties have formed Central Florida Health Services LLC as the academic hospital's governing body.
Among the reasons for the Board's favorable decision: HCA's standing as the largest hospital operator in the U.S., with 48 HCA hospitals delivering care to one in four Floridians. The Board also liked HCA's model of favoring affiliation with physicians rather than employing them. The current balance is approximately 35,000 affiliated physicians and 3,500 employed ones. Last year, HCA's Florida hospitals spent roughly 8 percent of their net revenue on Medicaid and indigent patients. Also, HCA's deep pockets provide the strength to fund the academic hospital's development and services and importantly also cover losses.
The proposed hospital partnership structure allows 50-50 representation on the Governing Board and reserved rights for UCFAH's representatives on 17 specified major decisions. The 100-bed hospital includes emergency services and eight Labor & Delivery beds. An 80-bed hospital was also proposed as a secondary option.
According to the hospital pro-forma, the capital investment is projected at $150,000,000 with HCA owning 80 percent and UCF owning the balance. At the end of the first full year of operations, the hospital is projected to break even, with an estimated operating revenue of $71,242,000 and net income of $10.2 million. The return on investment suggests 12.9 percent.
On Oct. 12, the complete CON, along with 350 letters of community support, was filed on behalf of the hospital partnership. AHCA plans to issue its initial decision on the CON application Dec. 2, and it may take until Jan. 9, 2017, to become final, if uncontested.
If HCA develops a free-standing emergency department in advance of the hospital, HCA will initially sublease a portion of the 25.2 acres at fair market value, according to October 24 meeting materials.
German told the Orlando Sentinel recently that if UCF can attract fly-in patients for medical care, "what UCF and the Medical City can do for all of Central Florida in the medical area would be like what Disney did in the area of attractions."