A mechanical, electrical and plumbing facilities report for Southwest Memorial Hospital details a recommendation for $9.2 million in replacements, upgrades and repairs over the next five years.
The Oct. 26 report from Denver-area engineering firm Smith Seckman Reid Inc. details the deficiencies of aging infrastructure in the hospital, particularly in the south campus, which was originally an assisted living facility built in 1986, and in the main hospital, built in 1975. Various renovations and additions were completed in 1994, 1999, 2003, 2011 and 2017. A new medical office building and patient wing were built this year.
George Augustini, a principal with SSR, spoke to members of the Montezuma County Hospital District Board of Directors and interim hospital executives Wednesday night. The report divides the $9.2 million list of upgrades in three tiers based on priority. Tier 1 items should be replaced within the next 12 months, the report states. Most of those items serve the original campus.
“That whole building is the original south campus and everything in there is just of age, quite frankly,” Augustini said.
The report recommends nearly $3 million in upgrades over the next year, including $362,000 to replace a rooftop air conditioning unit, $940,000 to replace the 1970 and 1976 electrical system distribution and $772,300 to replace a boiler, steam traps, heat exchanger, piping, steam valves and the emergency fuel system.
Augustini said the hospital has two boilers. One boiler was replaced and is in good condition, but the other is original from 1970. He said that 48-year-old boiler has a normal life expectancy of 35 years. The report states the old boiler has problems with overfilling, meaning it pushes water through the steam piping distribution.
Both boilers run on natural gas with a backup fuel oil system. The report, however, states neither boiler can run on the fuel oil system for an unknown reason. Augustini said that if the natural gas system failed, he said the entire campus would go down.
“The boilers run everything on this campus – we’re talking about health care – think of it as this is the heart of the building,” Augustini said. “If they go down, you lose domestic water, you lose temperature control – it’s all gone.”
The report comes during a difficult year for the hospital. In April, Southwest Health System, the hospital’s management arm, fired three members of its senior leadership team. In May, SHS reported financial challenges to the Montezuma County Board of Commissioners, including falling out of compliance with bonding covenants. Then, in August, SHS laid off 40 employees, or 9.5 percent of its staff.
The staff changes have continued, particularly in the chief financial officer position. The hospital fired CFO Angela Kobel in April then hired Interim CFO Sam Radke in June. The hospital has since terminated Radke and hired interim CFO Rick Shrader about five weeks ago, in early October.
More recently, Sudduth said SHS in early November “parted ways” with Chief Medical Services Officer Craig Oswald, who joined the hospital in August. He said Oswald’s termination was not part of a planned reduction in force, but was rather part of the “normal everyday things” that come with hospital operations. He said it is unclear if there will be additional staffing changes.
“It just wasn’t a good fit for the organization,” Sudduth said of Oswald.
After the meeting on Wednesday, Sudduth said he hoped SHS could begin making some of the upgrades a year from now. He said the priority now is meeting the terms of the forbearance agreement that SHS recently executed with its lenders.
Those terms require SHS to prove to lenders that the hospital has cash on hand to operate the hospital for 81 days, which amounts to $13.3 million. Also, lenders have to approve any capital expenditures.
“We feel like ... if we show good performance over the next 12 months, we feel confident they would be more willing to do something like that,” Sudduth said. “In the meantime, obviously, if something breaks, we have to fix it.”
Fred DeWitt, a Montezuma County Hospital District board member, said the hospital is “damn lucky” that some of the 48-year-old pieces of equipment still work. He urged everyone at the meeting to be more proactive regarding facility maintenance.
“From now on, if something comes up that needs to be taken care of, it needs to be done someway, somehow by this whole group of people sitting in here,” DeWitt said. “No more of this, ‘Well, we’ll wait and patch it.’”
There is good reason for urgency. Augustini said construction costs are rising in part because of a labor shortage and political factors. He said he expects up to 20 percent markup for some construction costs in early 2019.
“I’ve tried to capture as much as I can to give you escalation, but quite honestly, the longer you wait for some of this, the higher it will go,” Augustini said.