Financing hospital expansion;

              Student housing project completed recently at Research
Hospital and Medical Center in Kansas City, Missouri, cost
one-and-one-half million dollars.
To adapt to a changing medical environment, hospital
trustees and managers are continually striving to mod-ernize
existing facilities to provide new services. Usually
this modernization process evolves over a period of
years and only rarely does a hospital undertake a sig-nificant
capital expansion program. Consequently, when
it becomes necessary to expand, even the most experi-enced
and sophisticated hospital managements and
boards find themselves unprepared for planning, de-signing,
financing, constructing, and equipping an addi-tion
to their facilities. Since most hospital board mem-bers
serve in a part-time capacity and have careers of
their own which require attention, the careful and de-tailed
planning which should be completed before at-tempting
to finance and construct hospital expansions
often is not given sufficient attention.
A hospital's expansion program usually begins with
the observation that the historical utilization rate has
been high and therefore an addition to the bed-comple-ment
is needed. The parameters for an expansion plan
are then developed, reviewed, and adopted by the board.
Next, an architect is commissioned to prepare a set
of plans for the addition of a certain number of beds.
When the architect has completed his assignment and
estimated the construction costs, only then does the
board focus on the financing aspect of the problem.
At this point, the goodwill of the hospital board mem-bers
is called upon to assist in the financing. But how
often is an orderly examination of the financing alterna-tives
made with an analysis of the pros, cons, and costs
of each method?
Operating plans and projections are usually prepared
to satisfy the minimum requirements set by the favored
lender. But how often are such projections used in plan-ning
the expansion itself?
Heretofore, the unnecessary costs associated with
such an ill-conceived expansion program have been re-covered
from third-party reimbursement agencies and
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