Lawrence Memorial Hospital plans to soon spend nearly $70 million on a west Lawrence expansion and likely will spend another $30 million on other property and improvements around town.
More details emerged Wednesday about a large medical office building that LMH is seeking to build near Rock Chalk Park in northwest Lawrence. Documents presented at an LMH Board of Trustees meeting are now estimating the building will be about 200,000 square feet and will cost about $64 million to build.
But a key part of the deal remains in negotiations, board members learned. Russ Johnson, LMH president and CEO, said he expected to have a land deal ready for the board to approve at Wednesday’s meeting, but he said negotiations had not yet gotten to a point that allows him to recommend the deal.
“We are getting very close, but there are some elements that we are not going to rush through, and some elements that we are not going to give in on,” Johnson told board members. “It is not a concerning delay, at this point.”
LMH is working to purchase a 20-acre site of vacant, commercially zoned property that is basically kitty-corner from KU’s new indoor tennis facility at Rock Chalk Park, which is near the Sixth Street and South Lawrence Trafficway interchange. The property currently is owned by a local development group led by the Schwada and Fritzel families.
Plans call for OrthoKansas to move its practice to the center, creating a regional center for knee, hip and other joint replacement surgeries and treatment. Johnson previously has said a host of imaging services — X-rays and CT scans, for example — would be available at the center, plus other outpatient services. At Wednesday’s board meeting, there also was discussion that the Lawrence Surgery Center could move from its location at Sixth and Maine streets to the west Lawrence site.
Johnson, however, said he wasn’t ready to provide more details about the “enormous” west Lawrence project. Instead, he said hospital staff were planning to make a detailed public presentation at next month’s board of trustees meeting.
“Some aspects of the project are still changing,” Johnson said. “I think we are coming out of the gate organized and collaborative. The feedback we're getting on preliminary design is really good almost across the board.”
But the hospital board on Wednesday did approve a design-build contract with a Kansas City, Mo., construction firm for the project. That approval caused some details of the project to be released. Per that agreement, LMH is planning a facility that could be as large as 198,912 square feet, although the hospital is reserving the right to scale back the proposal. About 160,000 square feet would be for LMH services, while about 30,000 square feet would be tenant space that the hospital would lease to other companies. Another 10,000 square feet of shell space would be built for expansion purposes.
Kansas City, Mo.-based McCownGordon Construction was chosen to lead the design-build process. Also on the team is Pulse Design Group of Lenexa and PEC Engineering of Lawrence. The agreement calls for the team to be paid about $3.8 million. LMH did not conduct a sealed bid process for the design-build contract, Janice Early, vice president of marketing for LMH, said. But the company did conduct a request-for-proposals process. McCownGordon was the hospital’s top choice, but also offered the least expensive price, Early said.
The west Lawrence medical building is part of about $100 million worth of property acquisitions or improvements that the hospital is planning. The board approved two property acquisitions on Wednesday:
• The board agreed to pay $15.5 million to purchase the Lawrence Medical Plaza at 1112 W. Sixth St. That building at Sixth and Maine streets — which is just a couple of blocks away from the hospital — houses OrthoKansas, the Lawrence Surgery Center and other providers. The board also agreed to pay $1 million for 10 residential properties just north of the medical office building. Both the medical office building and the homes are owned by the Lawrence-based real estate group H&S; Holdings. Board Member Bob Moody was the lone vote against the purchase.
• The board agreed to pay $1.37 million for the Reed Medical Building at 404 Maine St., which is across the street from the hospital. LMH previously had purchased the medical practice of Reed, but had not yet purchased the office building from the group of doctors.
LMH likely will issue a significant amount of debt to fund its $100 million program. The board on Wednesday was scheduled to approve a resolution of intent to issue up to $85 million in bonds as part of the plan. However, the board delayed action on the resolution.
LMH’s building and buying spree comes at a time when the hospital markets in Lawrence, Kansas City and Topeka are becoming more competitive. The University of Kansas hospital earlier this year opened its first medical facility in Lawrence, an orthopedic and sports medicine center along Wakarusa Drive. KU hospital also was part of a major deal to buy the former St. Francis Hospital in Topeka, and many hospital companies in Kansas City have been involved in acquisitions.
In other news from the LMH board meeting:
• The board approved a 2018 budget that projects a healthy bottom line for LMH.
Board members unanimously approved a budget that calls for $271 million in revenues. That’s up nearly 11 percent from the $245 million the hospital expects to collect this year. LMH’s bottom line also is budgeted to remain strong. The hospital expects revenues to exceed expenses by $11.6 million in 2018. That’s in line with past profits the hospital has turned, although it is down from the $16.5 million profit LMH expects in 2017.
The hospital — which is owned by the city but receives no tax dollar support — is a nonprofit entity, so any profits generated remain with the hospital to fund capital projects and other improvements.
The hospital plans to have about 1,430 employees in 2018, with salary and wage expenses of about $110 million.