Kodiak Daily Mirror - Care center s estimated cost skyrockets
  
Care center’s estimated cost skyrockets
by James Brooks/ editor@kodiakdailymirror.com
Nov 26, 2012 | 211 views | 0 0 comments | 3 3 recommendations | email to a friend | print
The price tag for a new hospital expansion has skyrocketed since major discussions began earlier this year, and federal Medicaid rules are to blame.

New estimates provided by the Kodiak Island Borough indicate a 22-bed nursing home — officially called a long-term care facility — could cost as much as $20 million.

That amount is almost double the amount analyzed in an April feasibility study, which determined an $11.7 million, 24-bed facility could be built and replace an existing 19-bed hospital wing with no significant financial impact to the borough.

Next month, the Kodiak Island Borough will be asked to consider a far more costly facility and one smaller than the April proposal.

Interim borough manager Bud Cassidy said the cost increase has come from a variety of factors, including better estimates, difficulties with site work and a dormant bald eagle’s nest that requires special federal permitting to remove.

The biggest cost, however, is the project’s intense timeline. Plans call for construction to begin and end within a single year.

“What’s going to have to happen is they’re going to have to put a second crew on it,” Cassidy said.

The unusually fast construction schedule is driven by federal regulations.

If the facility can be used by Jan. 1, 2014, it becomes eligible for a higher Medicaid reimbursement rate. That’s an important consideration for Providence Health and Services, which operates Providence Kodiak Island Medical Center.

Under borough code, the borough owns Kodiak’s hospital and leases it to Providence. The same will be true for the long-term care facility. The borough will pay for construction, then make its money back in lease fees.

If the care facility can’t be used by the Jan. 1 deadline, Providence’s reimbursement doesn’t rise until years later, making the project less attractive.

Details of the proposed lease between the borough and Providence have not yet been made public — Cassidy said that lease is under final negotiations — but a draft contract was released by the borough in September.

That draft calls for a rental rate “in the neighborhood of $66,000 a month” and a lease lasting 20 years.

If the $20 million cost estimate is applied, the draft rental rate would take more than 25 years to pay the price of construction.

Cassidy cautioned that any price estimates given at this point in the construction process are just estimates.

The state permit for the long-term care facility includes an estimate of $16,573,911 for construction, though Cassidy said the borough would ask the assembly to authorize bonds of up to $20 million in order to cover any contingency.

The Kodiak Island Borough Assembly meets at 7:30 p.m. Thursday for a work session.

Contact Mirror editor James Brooks at editor@kodiakdailymirror.com.

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