St. David’s HealthCare had been planning to expand its North Austin Medical Center for some time, so when the sale of the unopened Forest Park Medical Center Austin came up, the hospital system jumped at the opportunity.

David Huffstutler, president and CEO of St. David’s HealthCare, said purchasing the nearly 150,000-square-foot FPMC Austin for $115 million expedited St. David’s NAMC expansion plans by 18 to 24 months. St. David’s announced plans May 13 to use the site as a new campus for St. David’s NAMC.

“[St. David’s NAMC] has been a rapidly growing campus for us, and we anticipate that will continue,” Huffstutler said. “What this does is it is a bit of a relief valve for other growth that would be different from the activities that we expect housed here. It would free up capacity at North to grow other areas of our business and other clinical areas.”

The sale to St. David’s includes an adjacent 80,000-square-foot medical office building.[/caption]

Expansion opportunity

The purchase price includes almost 9 acres of land and the adjacent 80,000-square-foot medical office building that St. David’s will use for some of its activities and also lease to other physicians, Huffstutler said.

St. David’s anticipates opening the new campus in four to six months. In that time St. David’s will hire about 130 employees to staff the new facility and get state licensing, Medicare certification and accreditation, he said.

Huffstutler said St. David’s has not yet gone through naming or branding the new campus, but to keep in line with Medicare requirements the name would likely have a tagline of “a campus of St. David’s North Austin Medical Center.”

“It’s a beautiful facility—great functionality, big operating rooms, wonderful patient accommodations. We think this will be very attractive to [patients], too,” he said.

The hospital has 46 patient rooms, including some VIP rooms that have an extra room for visitors.[/caption]

Similar to the original intent of FPMC Austin, the campus will be an elective surgical facility, meaning surgeries will be planned in advance. The campus will have an emergency department, but if any patients need more complex care, they will be transferred to St. David’s NAMC, Huffstutler said.

“We will typically do surgical procedures that do not require a lot of significantly complex subspecialty support,” he said. “We would not have patients that would require extended intensive care unit stays or significant multiple subspecialists to support their care.”

St. David’s will spend about $20 million to furnish and equip the hospital, which is vacant. In total St. David’s will spend more than $275 million in Central Texas health care infrastructure during the next two years.

The hospital includes a cafeteria, coffee bar and outdoor terrace.[/caption]

Funding for the purchase of FPMC Austin and other infrastructure comes from operating expenses from St. David’s HealthCare, which is a joint partnership of Hospital Corporation of America, St. David’s Foundation and Georgetown Community Health Foundation, Huffstutler said.

“After a fairly invested bidding situation, St. David’s and its partner prevailed in the bids, and I think they make a fantastic partnership and a great contribution to the community,” said Todd Furniss, CEO of NRG Austin Development LLC, the general partner of FPMC Austin Realty Partners LP, which represents the real estate investors.

Forest Park past

The physician-owned hospital was originally slated to open in late 2014. That date was pushed back to September, but the hospital never opened. The cost for the land and construction of the hospital and adjacent medical office building was $95 million, former FPMC Austin CEO John O’Neill previously told Community Impact Newspaper.

On Jan. 5, FPMC Austin Realty Partners LP filed for Chapter 11 bankruptcy protection, according to court documents. San Antonio attorney Ray Battaglia, who represents that group, said an auction was planned, but St. David’s offer was more compelling.

The hospital includes a cafeteria, coffee bar and outdoor terrace.[/caption]

“This is an example of when bankruptcy works in the benefit of all the buyers,” he said. “They’ll pay investors, [who will] get their money back. That’s rare in a bankruptcy case.”

Battaglia said St. David’s offer exceeds the amount owed to creditors, of which Austin-based Frost Bank is the largest. He said Frost Bank will be paid at closing, which is anticipated by the end of May, and the rest of the creditors will be paid shortly after closing.

As for the investors, Battaglia said anyone invested in the real estate group, FPMC Austin Realty Partners LP, “should expect their investment plus a return.”

This group does not include Forest Park Medical Center at Austin LLC, which was to lease and operate the hospital and included physician investors.

David Huffstutler is president and CEO of St. David’s HealthCare, which bought the hospital.[/caption]

Costly investment

For the 95 physicians who invested about $13 million in the hospital, currently “they are left holding the bag,” said Dr. Bryan Kansas, president of the former hospital’s five-member governing board, represented by Forest Park Medical Center at Austin LLC. But Kansas said the sale to St. David’s brings some relief because it is progress.

“Our best option is we have to enter into discussions with the St. David’s system to create a partnership,” he said.

FPMC Austin was set up as a physician-owned hospital in which the physicians made investments. Kansas said physician investors individually contributed anywhere from $25,000 to $500,000, and the average investment was $150,000.

Kansas said it was a positive experience until hospital management struggled to secure a line of credit and financing to purchase equipment.

“It was the inability of the management company to get us properly funded to open,” he said. “Essentially we had to go to bankruptcy before we could do something about it.”

Moving forward, he said the physician investors are open to see what kind of mutually beneficial relationship they could have with St. David’s. Kansas said more details could be expected in the coming weeks.

“We have to wait and see how this goes, but I think this can be launched quickly,” he said. “[St. David’s] has good contracts. … They know how to run a hospital and surgery center, and this will be a combination of those.”

The site of the former FPMC Austin is located in the city of Austin’s 2-mile extraterritorial jurisdiction, meaning Austin is the only jurisdiction authorized to annex the land.

It is also located in Williamson County, which collected $875,754 in property taxes for 2015 on March 7. The county collected $60,424.94 in property taxes for 2014. A county employee confirmed the site is up to date on all tax payments.

FPMC Austin was one of six physician-owned hospitals that began in Dallas in 2009. Other FPMC facilities have been or are in the process of being sold to other health care systems.

FPMC Southlake filed for Chapter 11 bankruptcy protection Jan. 19 and will be sold to Methodist Health System.

On March 31, the sale of FPMC Frisco to HCA North Texas, a subsidiary of Hospital Corporation of America, closed for more than $96 million.