Updated May 13, 2:15 p.m.
St. David’s HealthCare had been planning to expand its North Austin Medical Center for some time, so when the sale of 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 the purchase and its plans for the new campus May 13.
“[St. David’s NAMC] has been a rapidly growing campus for us and we anticipate that will continue,” 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 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.
Similar to the original intent by FPMC, 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 sub-specialty support,” he said. “We would not have patients that would require extended intensive care unit stays or significant multiple sub-specialists to support their care.”
St. David’s also will spend about $20 million to furnish and equip the hospital, which is currently vacant. In total St. David’s will spend about $275 million in Central Texas health care infrastructure during the next two years.
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.
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Updated May 12, 4:20 p.m.
A bankruptcy court is scheduled May 13 to approve the sale of Forest Park Medical Center Austin for $115 million to St. David’s HealthCare.
“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, which is the general partner of FPMC Austin Realty LP.
Representatives from St. David’s have declined to comment until the sale is approved by the judge.
The 140,000-square-foot, 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.
The 46-bed elective hospital would have provided surgeries not considered medical emergencies. The facility has 10 operating rooms, an emergency room, a lab, pharmacy and cafeteria. About 100 physicians bought into the hospital as investors, according to O’Neill.
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 for May 11, but St. David’s offer was so compelling that the partnership moved ahead with them as a buyer.
“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 who is invested in the real estate group, FPMC Austin Realty Partners, "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 numerous physician investors.
Furniss said St. David’s has been looking for opportunities to enter the marketplace, and this was the best opportunity for the hospital system. St. David’s expressed interest in buying FPMC Austin a couple of months ago, he said.
FPMC Austin is located in the city of Austin’s two-mile extraterritorial jurisdiction, meaning Austin is the only jurisdiction authorized to annex it.
The site 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. An employee confirmed the hospital is up-to-date on all tax payments.
FPMC Austin is one of six physician-owned hospitals that began in Dallas in 2009. Other FPMC facilities have faced similar challenges, and most 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. The facility will be renamed Medical City Frisco.
This post has been updated to clarify the sale is to St. David's HealthCare and correct which investors would be repaid.