Delay Costs Looming For Medical Center As Relocation Lags
With questions on relocation still open-ended as the Princetons and the Regional Planning Board all consider how to re-zone the main University Medical Center at Princeton campus on Witherspoon Street, the hospital must now start considering the cost of any delay in its quest to relocate to a new campus outside Princeton.
And while neither the hospital nor its parent entity, the Princeton HealthCare System, have incurred delay costs yet, they are not far off, said PHCS President and CEO Barry Rabner. In fact, those costs, up to $40,000 a day, could be coming "soon."
"We're going through this very public and highly-participatory process because we have to satisfy the needs of the Borough and the Township, and it's very time-consuming and I get very anxious as time goes on because of the construction-related costs," Mr. Rabner said.
"It's decision time."
Mr. Rabner, who cited rising costs in building materials, oil, and sheer inflation (the hospital has factored approximately $30 million into its envisioned $350-million new facility), said that the municipal process has contributed to the delay in a relocation announcement, and could offset PHCS' target date of June 2010 for moving to a new campus.
"Everyone needs to fully understand the implications of the building of their hospital."
Mr. Rabner focused on construction costs, about $200 million, and medical equipment, about $50 million.
"You've got this $250 million nut, and the issue for us is that every year that the project is delayed, the costs in those two areas go up."
To determine a range of cost escalations of between 4 and 8 percent, PHCS surveyed three construction companies: Turner Construction Company; Skanska; and Power. "We were conservative. We worked into our business plan an assumption that in 2006, the cost increase would be about 4 percent, and that after 2006, it would be 3 percent a year."
What has exacerbated the process, Mr. Rabner said, are "spectacular -inflationary increases" in the last six months, including the rising cost of oil. He even cited a building boom in China that has created a scarcity in steel for other construction products: "It's that profound."
The long-term impact of recent disasters like Hurricane Katrina have also off-set initial inflation estimates, although Mr. Rabner said the hospital will have to wait a year to see how that impacts long-term costs.
And while the hospital is not yet off-schedule, Mr. Rabner worried that further delays in Princeton will negatively impact it, adding that there could be more delays depending on which municipality the hospital chooses.
"Obviously, not knowing the site, we don't know what the site-specific issues will be that could force more delays," he said, adding, however, that he would "be surprised if meaningful delays" occurred on that front.
Mr. Rabner said the most crucial time, however, is now, as the hospital courts developers to purchase the present site, adding that if the hospital did not sit on valuable Princeton property, "I don't believe we'd be able to build a replacement hospital," as the sale of the property is expected to finance a large chunk of a new facility.
While the hospital must acquire a certificate of need from the state before it receives the official go-ahead to move, Mr. Rabner is confident that the state will not have problems with a move. He said, however, that the process of getting a future site zoned for a hospital will be arduous.
The hospital is currently in talks with the municipalities of the three final proposed relocation sites: one in West Windsor, one in Lawrenceville, and one in Plainsboro: "They've all been very supportive about us going there."
But in the meantime, Mr. Rabner and PHCS are juggling concurrent tasks of waiting for the Planning Board to revise the Princeton Community Master Plan to allow different development on the hospital site and Merwick, setting its sights on a new location, and coming up with contingency plans as those processes are delayed.
The Planning Board has yet to set a new hearing to discuss Master Plan changes.