PROJECT NO: CITY: Highland Park

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1 DOCKET NO: BOARD MEETING: PROJECT NO: PROJECT COST: A-8 November 29, 2001 FACILITY NAME: Highland Park Hospital CITY: Highland Park Original: $3,604,745 Current: $ TYPE OF PROJECT: Substantive HSA: 8 PROJECT DESCRIPTION: The applicants, Highland Park Hospital and Evanston Northwestern Healthcare are proposing to establish a Positron Emission Tomographic Scanning (PET) service at Highland Park Hospital.

2 STATE AGENCY REPORT Highland Park Hospital Evanston Northwestern Healthcare Highland Park, IL Project # I. The Proposed Project The applicants propose to establish a positron emission tomographic scanning (PET) category of service at Highland Park Hospital in Highland Park, Illinois. The total estimated project cost is $3,604,745. II. Summary of Findings A. The State Agency finds that the proposed project appears to be in conformance with the provisions of Part B. The State Agency finds that the proposed project appears to be in conformance with the provisions of Part III. General Information The applicants are Highland Park Hospital and Evanston Northwestern Healthcare. Highland Park Hospital is an acute care hospital located in HSA VIII, Lake County. Evanston Northwestern Healthcare is a not-for-profit corporation that operates three acute care hospitals, Highland Park Hospital, Highland Park, Illinois, Evanston Hospital- Evanston, Illinois, and Glenbrook Hospital, Glenview, Illinois. At the present time, there are facilities that provide PET service in the greater Chicago area: Rush Presbyterian- St. Luke s Medical Center, University of Chicago Hospitals, Northwestern Memorial Hospital, Sherman Hospital ( a mobile unit), Condell Memorial (a fixed site unit), MacNeal Hospital, Resurrection Hospital, Edward Hospital and Advocate Healthcare. The State Agency has determined a need for 3 PET scanners in HSA VIII. Two of the 9 facilities listed above, Sherman Hospital and Condell Memorial Hospital, are in HSA VIII. This is a substantive project which is subject to both a Part 1110 and a Part 1120 review. Obligation will occur after permit issuance. An anticipated project completion date is September 01, 2003.

3 Page 2 An opportunity for a public hearing was offered on this project; however, no hearing was requested. IV. The Proposed Project - Details The applicants are proposing to establish a PET category of service at Highland Park Hospital. The service will be located in the nuclear medicine department. A total of 3,068 GSF will be allocated between 4 rooms in the department upon project completion. Of the total GSF, 1,530 will be for dedicated nuclear medicine use and 1,538 will be allocated for PET scan use. In addition, 1,313 GSF currently housing 1 Gamma camera on the 1st floor will remain as is. A new addition of 568 GSF will be added to the department as part of the project. The proposed PET scanner at Highland Park Hospital will serve patients from all of the Evanston Northwestern Healthcare facilities. V. Project Sources and Uses of Funds The applicants propose to fund the project with $3,604,745 in cash and securities. Table I Proposed Uses of Funds Preplanning Costs $25,000 Site Survey and Soil Investigation 14,000 Site Preparation 32,000 New Construction Contracts 173,000 Modernization Contracts 812,000 Contingencies 121,995 A& E Fees 102,750 Consulting and Other Fees 66,000 Movable or Other Equipment 2,205,000 Other Costs to be Capitalized 53,000 Total Project Costs 3,604,745 Table II outlines the projects cost, existing GSF, and the proposed GSF.

4 Page 3 Table II Gross Square Feet Total GSF Department Cost Existing Proposed New Remodeled As Is Human Resources $1,532,663 2, Record Storage 748,686 1,265 1,265 Nuclear Medicine 2,521,886 3,078 4, ,500 1,313 Total $3,604,745 5,578 6, ,265 1,313 Table III outlines the category of service, occupancy percentage, average length of stay, and average daily census for Highland Park Hospital for the period 10/01/ /30/2000. Table III Category of Service # of beds Occupancy % ALOS ADC Medical Surgical % Pediatrics* 10 * * * Obstetrics 25 46% Intensive Care 17 49% AMI 25 50% LTC 28 66% Total 239 *Pediatrics included in med/surg Table IV outlines the category of service, occupancy percentage, average length of stay, and average daily census for Evanston Hospital for the period 10/01/ /30/2000.

5 Page 4 Table IV Category of Service # of beds Occupancy % ALOS ADC Medical Surgical % Pediatrics 5 130% Obstetrics 52 73% Intensive Care 30 85% Burn* 2 * * * AMI 36 36% Neonatal 44 76% Rehabilitation 24 70% LTC 32 93% Total 466 * Burn included in med/surg Table V outlines the category of service, occupancy percentage, average length of stay, and average daily census for Glenbrook Hospital for the period 10/01/ /30/2000. Table V Category of Service # of beds Occupancy % ALOS ADC Medical Surgical % Pediatrics % Intensive Care % Total 144 VI. Review Criteria - Modernization Criterion Modern Facilities A. Nuclear Medicine The applicants are proposing to add a PET scanner to the nuclear medicine department at Highland Park Hospital. This would entail adding one room to the existing 3 rooms in the nuclear medicine department at the Highland Park facility. The applicants have indicated that they are projecting more than 1,000 PET scans within two years of operation. The projections for this utilization which have been presented by the applicants appear reasonable. Presently, the applicants have 3 cameras and 1 thyroid probe area in the hot lab. The applicants have documented that utilization in the nuclear medicine department over the past three

6 Page 5 years has increased approximately 3.0 % per year. Table VI documents utilization by procedure. Table VI Procedures Avg. Scan Time Heart 3,081 3,290 4,009 1 hour Bone 1,099 1,257 1, hours Lung hours GI/GU hours Endocrine hours Tumor/Infection hours Total 5,840 6,148 6,310 It appears that the proposed expansion of this department is needed. B. Human Resources/Record Storage The human resources department will be relocated and downsized from 2,500 GSF on the first floor to 500 GSF in the basement. The new location will be near an employee entrance and the vacated space will be used to accommodate additional space for nuclear medicine and records storage. Record Storage is currently at capacity and the applicant did not want to relocate the function offsite. It appears that the modernization of these two areas is reasonable and necessary. VII. Review Criteria - PET A. Criterion a., Projected PET Volume The applicant must document that the projected number of PET scans will meet or exceed the target utilization level of 1,000 PET scans per year.

7 Page 6 The applicants have documented that Evanston Northwestern Healthcare growth in cancer patients has averaged more than 2% per year. The applicants have also provided referral information from physicians and facilities in the planning area. In addition, the applicant provided multi-institutional referrals as required. The applicants have justified their need for the PET service by the growing number of cancer patients. Total scans proposed are based upon the following formula: 2,022 new cases x 50% = 1,011 initial cancer PET scans 1,011 initial Pet scans x 1.5 = cancer staging and restaging scans plus heart and neurological scans Total scans possible = 1,517 From the information provided, it appears that the applicants will have sufficient P.E.T volume. Table VII below provides the number of new cancer patients for each of the last four years. Table VII Facility annualized* Highland Park Hospital Evanston Healthcare/Glenbrook Hospital 1,601 1,724 1,687 1,642 Total 1,977 2,151 2,114 2,022 * CY 2000 data projected based upon first 6 months of CY2000 data B. Criterion b., Multi-Institutional Systems The applicant must document that the proposed project will result in the establishment of a multi-institutional system with regard to the utilization of PET Scanners. The applicants have documented that Evanston Northwestern Healthcare is itself a multi-institutional system (Highland Park Hospital, Glenbrook Hospital and Evanston Hospital Medical Center).

8 Page 7 C. Criterion c., Unnecessary Duplication of Services The applicants must document that the establishment of a PET category of service will not result in an unnecessary duplication of service in the planning area. According to the State Agency, there is a need for 3 PET scanners in Health Planning Service Area VIII. At the present time, there are no PET scanners in the planning area. Two PET scanners were approved at the October 11, 2001 State Board meeting. One was a mobile unit in Elgin and one was a fixed site unit in Libertyville. It appears that the establishment of a PET service in Highland Park will not result in the unnecessary duplication of services. D. Criterion d., Medical Staffing The applicants must document that each facility or site where the PET service is proposed has a medical director who is a board-certified physician by the American College of Nuclear Medicine and has demonstrated expertise in conducting and interpreting PET scans. The applicants have provided the appropriate information as required. It appears that the applicants have fulfilled the requirements of this criterion. E. Criterion e., Data Collection The applicants must document that they will provide the following information: 1. Number of PET scans performed 2. Number of patients that received a PET scan 3. Number of physicians who referred patients for a PET scan 4. Number of physicians who performed PET scans 5. Payor source for the PET scan

9 Page 8 The applicants have provided a letter that indicates Evanston Northwestern Healthcare's willingness to provide the data as requested by this criterion. The applicants have met the requirements of this criterion. F. Criterion f., Assurances The applicants must provide the following assurances: 1. that the service will cease operation in the absence of a medical director and will not resume until a medical director who meets the medical staffing criterion of subsection (d). 2. that the PET service will be made available to patients regardless of source or payment. 3. that it has secured the availability of the isotope from a provider. The applicants have provided the appropriate assurances as required by the criterion. VIII. General Review Criteria A. Criterion a, Location The applicants are establishing a category of service. Therefore, the applicants must document that the primary purpose of the proposed project will be to provide care to the residents of the planning area and that the location selected will not cause a maldistribution of service. The applicants have provided patient origin information as required and have documented that the PET scanner will serve the patients of the planning area. The applicants have also documented that the four PET scanners now in use service the population of the City of Chicago and the southern and western suburbs. These four PET scanners are more than 30 minutes from the applicant s proposed location. It appears from the documentation provided that the location of the PET scanner will not cause a maldistribution of service in the planning area.

10 Page 9 B. Criterion b., Background of the Applicant The applicants have provided licensure and certification information as required. The applicants have also certified that they have not had any adverse actions within the past three years. It would appear that the applicants are fit, willing and able and have the qualifications, background and character to adequately provide a proper standard of healthcare service for the community. C. Criterion c., Alternatives The applicant must document that the proposed project is the most effective or least costly alternative. The applicants considered three alternatives: 1. Do Nothing This alternative was rejected, because according to the applicants, it detracted from access, continuity and quality of care. 2. Lease a Mobile PET Scanner This alternative was rejected according to the applicants, because it would not have the same availability as a fixed site scanner and leasing a scanner would cost more than owning and operating a fixed scanner. 3. Wait Until PET-CT is available This alternative was rejected because it is very new technology, has not been approved for general use in the United States, is not reimbursed by third party payors and will not be available for clinical use for several years. It appears that the alternative to acquire and operate a fixed site PET scanning equipment is the least costly and most effective alternative to meet the needs of the service and planning area.

11 Page 10 D. Criterion d., Need for the Project The applicants must document that the project is needed. According to the methodology developed by the State Agency, there is a need for additional PET scanners in HSA VIII. E. Criterion e., Size of the Project Size criteria and utilization targets have not been established for this category of service. The applicants are projecting 1,000 PET scans within two years of operation. The assumptions used for this utilization projection appear reasonable. The size of the other departments involved in this project appear to be consistent with State Norms and other approved projects. IX. Financial Feasibility A. Criterion a., Financial Viability B. Criterion b., Availability of Funds C. Criterion c., Operating Start Up Costs X. Economic Feasibility Evanston Northwestern Healthcare has documented that they have a bond rating of A or better. Therefore, these criteria are not applicable. A. Criterion a., Reasonableness of Financing Arrangements B. Criterion b., Conditions of Debt Financing These criteria are not applicable. C. Criterion c., Reasonableness of Project and Related Costs Preplanning costs: These costs total $25,000 which is less than 1% of construction ($173,000), modernization ($812,000) contingencies ($121,995) and equipment ($2,205,000) of $3,311,995. These costs are for plans and materials for zoning.

12 Page 11 Site Survey and Soil Investigation: These costs total $14,000. These costs include survey of $10,000 and soil borings of $4,000. Site Preparation: These costs total $32,000 and when included with site survey and soil investigation is 4.2% of construction ($173,000), modernization ($812,000) and contingency costs ($121,995) of $1,106,995. This appears reasonable compared to the State Agency guideline of 5%. Site preparation includes utility relocations of $12,000, landscaping of $5,000, and demolition of $15,000. New Construction Contracts of $173,000 and a proportionate share of Contingencies of $16,435: These costs total $189,435, which is $ per GSF. There are no State Agency guidelines for PET services. Modernization Contracts of $812,000 and a proportionate share of contingencies of $105,580 total $917,580, which is $ per GSF. There are no State Agency guidelines for PET services. Contingencies: These costs total $121,995, which is 12.4% of new construction ($173,000) and modernization contracts ($812,000) of $985,000. This is reasonable when compared to the State Agency standard of 10-15%. A&E Fees: These costs total $102,750, which is 9.3% of new construction ($173,000), modernization ($812,000) and contingencies ($121,995) of $1,106,995. This is reasonable when compared to the State Agency standard of 9.3%. Consulting and Other Fees: These costs total $66,000 which is 6% of new construction, modernization and contingencies of $1,106,995 and include CON support of $20,000, legal fees of $10,000, CON filing fees of $8,000, construction and testing fees of $5,000, IDPH fees of $8,000, Highland Park Permit Fees of $3,000, and miscellaneous fees of $12,000. Movable or Other Equipment: These costs total $2,205,000. The State Agency does not have standards for this category of service. Other Costs to be Capitalized: These costs total $53,000. The State Agency does not have standards for this category.

13 Page 12 D. Criterion d., Projected Operating Costs Projected operating costs per equivalent patient day is $1, for Evanston Northwestern Healthcare. E. Criterion e., Total Effect on the Project Capital Costs Projected capital costs per equivalent patient day for Evanston Northwestern Healthcare total $ F. Criterion f., Non-patient Related Services This criterion is not applicable.

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