Industries Healthcare

Cure-all for local economies?

Hospitals drive jobs and development in Virginia

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Print this page by Marjolijn Bijlefeld and Robert Burke

When Fredericksburg’s Mary Washington Hospital moved nearly 20 years ago to a spacious new building on a hillside next to Route 1, the land around its new site was mostly woods and empty pasture. The new building replaced one about a mile away, and city leaders, naturally, were thrilled that the hospital didn’t leave town for one of the neighboring counties.

Today it’s easy to see why the hospital was such a prize, beyond keeping what still is one of the city’s top employers. The 442-bed hospital now anchors a thriving 70-acre medical campus. What was once farmland now is the site for scores of physician offices and specialty practices. There are also major new projects from Mary Washington Healthcare, the hospital’s parent company, such as its new Regional Cancer Center, which opened in September near the top of the hill above the hospital.

Even though the hospital is not-for-profit and thus not on the tax rolls, it still drives a lot of jobs and investment to this city of about 20,000 people. Across Cowan Boulevard, which connects Route 1 to the city’s Central Park retail center, there are new housing developments and senior living facilities built after the hospital opened. In total, about 3,600 people work for Mary Washington Healthcare at the hospital and its other medical facilities, says Karen Hedelt, director of economic development and tourism for Fredericksburg. “It’s a huge employment and tax generator,” she says.

While there’s not much agreement on how to make the nation’s health-care system work, there are plenty of people who say hospitals are good for business. A lot of localities would like to duplicate Mary Washington’s growth, for good reason. Not only are new hospitals a major capital investment, but they stay around for a long time and create well-paid jobs. And, as Fredericksburg has seen, they stir up more development.

The economic impact of health care in Virginia is impressive on its own. A 2010 study by the Virginia Hospital and Healthcare Association found that the state’s hospitals and health systems spent $14 billion on payroll, capital projects and other operating expenses in 2009. (Figures for 2010 are still being collected.) They directly employed more than 122,000 people and created another 72,000 jobs indirectly. The total indirect impact of the industry in 2009 was $11.3 billion.

Even in a weakened economy, those employment numbers are expected to climb: another 104,000 workers will be needed in Virginia by 2018 to fill the health-care demand created by baby boomers entering retirement, says Jeremy Greenfield, director of PAC (Political Action Committee) and advocacy for VHHA. When the 2010 employment figures are tallied later this year, Greenfield expects Virginia’s health-care-related employment to rise, driven by demand and by the new hospitals that opened last year. “We’ll probably see even larger direct employment. Not significantly, but a good number,” he says.

New facilities usually draw a crowd, just because being close is easier for doctors and patients. Tennessee-based HCA opened the 126-bed Spotsylvania Regional Medical Center in June 2010 on land adjacent to Interstate 95 just south of Fredericksburg. A few physician practices already have opened locations across the road from the new facility and more are coming.

A 40,000-square-foot building called Parkway Medical Plaza is under construction now and is about 75 percent leased, says Sheila Coleman, a broker with the Silver Cos., which handles sales and leasing for the project, called Cosner East. She’s negotiating with two more potential tenants, an oral surgery practice and an ophthalmology practice. Coleman says she’s also working with a company that operates “memory care” centers for people with Alzheimer’s disease on plans for an 80-bed facility.  In addition, South Carolina-based Johnson Development Associates was scheduled to break ground near the hospital in October on a 250-unit apartment complex.

Coleman says the hospital definitely drives some of the new development, but many of the other projects are attracted to amenities nearby, from shopping to easy access to I-95. Build-out of the 65-acre project should take about five years or more, she says.

New Hampton Roads facilities
This summer brought a major reorganization of health-care services in Virginia Beach. In August, the new $173 million, 160-bed Sentara Princess Anne Hospital opened on a 72-acre campus along the Princess Anne Road corridor. The project is a joint venture of Sentara and Bon Secours Hampton Roads.

As part of the new arrangement, the former Sentara Bayside Hospital stopped providing inpatient care and became an outpatient facility called Sentara Independence. It has an emergency department and a handful of other services and operates as an extension of the Sentara Virginia Beach General Hospital. In addition, Sentara Virginia Beach General moved its neonatal and obstetrics services to the new Sentara Princess Anne hospital.
In 2007 Sentara and Bon Secours had separate plans to build new hospitals in this part of Virginia Beach but negotiated a deal to build a single facility. Sentara controls 70 percent of the partnership, and Bon Secours has 30 percent. The new campus is in a fast-growing region of Virginia Beach.

Williamsburg is also getting a new facility. Workers broke ground in July on the new 100,000-square-foot Riverside Doctors’ Hospital, which is scheduled to open in late 2012. The facility is licensed for 40 beds and is on 25 acres in the Quarterpath project, a 280-acre, mixed-use development.

The Riverside facility will be the second new hospital to open in the area since 2006. Sentara Williamsburg Regional Medical Center, which opened in August of that year, is licensed for 140 beds. It replaced Williamsburg Community Hospital.

Spurring development
Sometimes just news of a major new hospital plan can spur development, as Andrew Dracopoli can attest. He is a principal with Worrell Land and Development Co., which has developed the 240-acre Peter Jefferson Place project in Albemarle County just outside Charlottesville near Interstate 64 and U.S. 250. In the late 1990s, Martha Jefferson Hospital officials “sort of came to us out of the blue and said they were looking to relocate out of downtown. Certainly it was never part of our original plan to have a hospital out there,” he says.

The Peter Jefferson project always was planned as a mixed-use development, and Martha Jefferson ended up in the mix. The hospital bought more than 80 acres of land a decade ago and opened its new hospital in late August. Dracopoli says the Peter Jefferson project has been reaping benefits ever since the hospital bought the land. Martha Jefferson quickly built an outpatient care center on part of the property, a move that had a quick effect. “That started bringing medical groups out here. It increased our demand,” he says.

Albemarle’s gain was Charlottesville’s loss, says Mark Graham, the county’s director of community development. “We’re already seeing a significant number of doctors and support facilities moving out of the city,” he says. “A lot of doctors like to be close to the hospital.”

Rockingham County hopes a similar hospital relocation will spur development there. Last June the old Rockingham Memorial Hospital in Harrisonburg closed its doors and moved to a 254-acre site in the county just a few miles to the east, across Interstate 81.

The new 238-bed hospital is next to one of the biggest residential areas in Rockingham, says Joseph Paxton, the county administrator. The area is zoned for mixed-use, and Paxton hopes the hospital will attract development.

The county already has expanded the road network near the new hospital, with improvements to state Route 253, the main road to I-81. The county also is working on plans for a project called the Southeast Connector, a new corridor that would let traffic in the county move east and west without going through the city.

The city and county are collaborating on the road network “because we both see the benefits in having a new state-of-the-art medical facility in the community,” Paxton says. “Transportation, hospitals and schools, all those things go together when you want to attract businesses.”

The move to outpatient care
The new Rockingham hospital is 630,000 square feet, a big project by any standard. But a pair of new Bon Secours projects reflect the growing move toward outpatient care, in smaller buildings that fit more easily into mixed-use commercial projects.

In Chesterfield County the Bon Secours St. Francis Watkins Centre facility is being built in the midst of the Watkins Centre project, a 625-acre mixed-use development at the intersection of Midlothian Turnpike and state Route 288.

The first two buildings of the St. Francis project, totaling 100,000 square feet, are under construction now. One building, scheduled to open in early November, will be a freestanding emergency department with 16 bays, along with a diagnostic imaging center, a lab and a breast center. The second building is a professional office building with space for Bon Secours physicians and independent doctors.

The office building is just 4.5 miles from the Bon Secours’ 6-year-old St. Francis Medical Center. If needed, patients can be admitted directly to the hospital, says Kevin Barr, CEO of Bon Secours HealthSource in Richmond. “Health care is moving to an outpatient setting,” he says. “Freestanding EDs are not unusual anymore.” There is room at the Watkins Centre site for a third building of 100,000 square feet, Barr says, and it will be constructed when there is market demand.

While Bon Secours completes the Watkins Centre project, it has new plans for its Harbour View Health Center in Suffolk, which opened about five years ago. The health center has 165,000 square feet of office space, a 17-bay freestanding emergency department, an imaging center, plus an outpatient surgery center and other services.

Bon Secours is seeking permission from the state to build a cancer center there, too, Barr says. (The proposal recently received preliminary approval.) The Harbour View center operates as a department of the Bon Secours Maryview Medical Center in Portsmouth. It’s located just west of the intersection of Interstate 664 and U.S. 17. Like the Watkins Centre, the Harbour View center is in an area of rapid development, with new housing, grocery stores and some restaurants being built in the past 18 months, Barr says, “which shows how vibrant and growth-oriented the area is.” 

But even a region with a lot of growth potential doesn’t guarantee success. In the Fredericksburg region, for example, Mary Washington Healthcare’s 100-bed Stafford Hospital, which opened in early 2009 north of the city in Stafford County, had operating losses in 2009 and 2010. And it has been slow to attract physician offices. The new hospital’s three-story Stafford Medical Pavilion building has some vacancies on every floor, and so far there’s been no additional development around it.

The Stafford hospital and the Mary Washington Hospital appear to have lost ground in the past two years, partly because of the recession and competition from the new Spotsylvania Regional Medical Center in Spotsylvania County. In September, Moody’s Investor Service downgraded Mary Washington Healthcare’s bond rating, citing the losses in revenue and admissions. Still, the rating agency noted, Mary Washington dominates the inpatient market, with a 69 percent share, and the Stafford hospital is in a good location in one of the wealthiest and fastest-growing counties in the nation.

The Moody’s downgrade, from A3 to Baa1, might not matter to Mary Washington Healthcare, which says it doesn’t have any plans to expand. The opening of a cancer center on its Fredericksburg campus took up one of the last open sites there, says company spokeswoman Deborah Morris. “That’s it for a very long time,” she says.

For the localities that host the new health centers, what matters now is getting the most out of what’s already been built. When VHHA’s new figures for 2010 come out, total spending will likely show some effect from the recession, but it’s money that still would be a welcome cure for an ailing economy.

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