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VA facility replacement could benefit MUSC
By Shelia Watson
Contributing Writer
The recent introduction of the Department of Veterans Affairs Medical Facility Authorization Act could be the catalyst to get a shared facility between the VA and the Medical University of South Carolina beyond the study phase and into construction.
H.R. 5815, introduced by Reps. Henry E. Brown Jr., R-S.C., and Michael Michaud, D-Maine, includes an authorization for the VA to enter into an agreement with MUSC to design, construct and operate a co-located, joint-use medical facility in Charleston.
However, H.R. 5815 is hardly a mandate for the two entities to share a facility. In fact, the resolution specifies a cost limitation of $70 million, with that money to be used only for advanced planning and design, not for construction.
Facility assessment
In August 2005, the VA and MUSC formed the Collaborative Opportunities Steering Group to conduct a feasibility study that reviewed both short-term and long-term ideas for better collaboration between the two entities, such as sharing expensive medical equipment and the construction of new, joint facilities.
However, replacing the existing facility is not yet certain. Last year, the Capital Asset Realignment for Enhanced Services Commission, which produces comprehensive long-range assessments of the capital asset requirements of the VA health care system, studied the Ralph H. Johnson VA Medical Center in Charleston.
The Sept. 26, 2005, report from the U.S. Government Accountability Office noted, “the most recent VA facility assessment and the CARES Commission concluded that the (RHJ VA) Charleston medical facility is in overall good condition and, with some renovations, can continue to meet veterans’ health care needs in the future.”
The report also said, “the CARES Commission did not recommend replacing VA’s facility in Charleston as it did with facilities in some other locations.”
VA officials attribute the positive assessment to the VA’s continued capital investments in the facility. Over the last five years, the VA has invested approximately $11.6 million in nonrecurring maintenance projects. To maintain the facility’s condition over the next 10 years, VA officials from the Charleston facility have identified a number of planned capital maintenance and improvement projects totaling approximately $62 million.
Replacing the RHJ
Yet despite the endorsement from the CARES Commission on ongoing renovations, some people, including VA personnel, believe replacement of the facility is inevitable.
“(The RHJ VA facility) is approaching 50 years old,” said Jeffrey Philips, a spokesman with the VA in Washington, D.C. “The collaboration has been studied to ensure that the VA and MUSC can maximize their already significant clinical and educational partnership. To that end, the committee, the chairmen in particular, thought it prudent to consider rolling in the VA’s portion of the facility while MUSC is undertaking the overhaul of its entire medical campus, which happens to physically envelope the VA.”
Philips said two options have been identified in terms of a new site for a VA tower, both of which are on the existing MUSC campus.
“If a viable model for collaboration is achieved, and depending on what phase of the MUSC project it is in, RHJ will have land to erect the new facility,” said Philips. “Depending on the final models identified through the (planning) process, the current building could be razed or could be used for administrative space. It is unlikely that it would continue to be used as clinical space.”
Dr. Ray Greenberg, president of MUSC, said the university is still focused on Phase I of its five-phase plan, but is evaluating options in the event the VA’s plan moves forward.
“What we’ve tried to look at is doing the rest of the hospital replacement in one step instead of multiple steps,” he said. “Running a facility in two places is inefficient. Building a Phase II then a Phase III would prolong the multi-location challenge, and so over the last year and a half, a lot of our thinking has been what it will take to do all of the hospital construction in one phase instead of multiple phases.
“How long it will take and how we will do it depends on our financial ability to do the construction.”
What could help MUSC in both the construction and financial challenges is having the VA commit to a shared facility, although Greenberg admits that even that would evoke challenges.
“To the extent that there’s enough overlap to move the VA forward, we’d like to be in sync as much as possible,” he said. “There are multiple steps in both processes, and being able to line up perfectly is clearly a challenge.”
MUSC’s financial inventive
One item that could further delay negotiations is the financial arrangements. The GAO report noted that, “The Secretary (of the VA) indicated that MUSC would need to provide a financial incentive for the VA to participate in the joint venture. Specifically, MUSC would need to make up the difference between the estimated life-cycle costs of renovating the Charleston facility and building a new medical center—which VA estimated to be about $85 million—through negotiations or other means.”
When asked about whether MUSC had responded to the request for financial incentives, Greenberg said although he wouldn’t call it a financial incentive, there is the ability to augment revenues for the VA on an ongoing basis.
“One of the things I learned in this process is that the VA basically has two ‘pots’ of money,” he explained. “They have access to capital money, used for the purchase of equipment and facilities, and they have their operating funds.
“To the extent a capital investment can be made (by the VA), a revenue stream can be returned (from MUSC) that will be very attractive to the administrators running the VA. Typically with a facility of this type, the greatest constraint is operating funds. If they use capital dollars to build extra capacity with shared services and shared facilities and then lease that extra space to MUSC, that revenue stream becomes a way to subsidize operating funds. This clearly would be advantageous to the VA and to its client population.”
Without such an arrangement with the VA, Greenberg said the remaining construction would be paid “in the same way we funded the first phase: We’d go out and borrow money, financing through bonds.”
Greenberg pointed to MUSC’s Thurmond/Gazes shared facility as precedent for a lease arrangement with the VA.
“Federal funds were an important part of that building,” he said. “It was federally built, and we lease part of it. It’s the same with some of the equipment lease arrangements we have with them.”
A similar solution was found for challenges in the property lines. For instance, although MUSC owns most of the property that will be used for phases I through III, Doughty Street is owned by the VA and serves as an access road to the Charleston facility and its parking lots.
The planned facility for Phase I encompasses Doughty Street; therefore, MUSC could not proceed with Phase I as originally planned until it secured rights to Doughty Street. To help MUSC move forward with construction, the VA executed a lease agreement for use of the street, with MUSC paying the VA $342,000 for initial use of the street and $171,000 for each of the following eight years. The VA also entered into a 75-year lease agreement with MUSC for a one-block segment of Doughty Street.
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