TO MEMBERS OF THE COMMITTEE ON GROUNDS AND BUILDINGS: ACTION ITEM AMENDMENT OF THE BUDGET AND SCOPE, JACOBS MEDICAL CENTER, SAN DIEGO CAMPUS
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1 Office of the President GB4 TO MEMBERS OF THE COMMITTEE ON GROUNDS AND BUILDINGS: For Meeting of July 17, 2014 ACTION ITEM AMENDMENT OF THE BUDGET AND SCOPE, JACOBS MEDICAL CENTER, SAN DIEGO CAMPUS EXECUTIVE SUMMARY This project is for expansion of hospital facilities for UC San Diego Health System, licensed as UCSD Medical Center, on the Health System La Jolla campus. The East Campus Bed Tower, now referred to as the Jacobs Medical Center (JMC), began to be constructed in January 2012 and will be contiguous to Thornton Hospital. It will include new inpatient beds for general medical-surgical units, intermediate medical units, intensive care units, obstetric and neonatal care units, and new operating rooms. The project scope includes partial renovation of Thornton Hospital to expand and integrate ancillary departments, construction of a new central utility plant to serve exclusively the fully developed hospital complex, and construction of a helistop on the roof of the new JMC tower necessary to position the Health System La Jolla campus as a major regional referral center. As currently approved, the scope of this project includes constructing approximately 19,200 assignable square feet (ASF) of un-programmed shelled space to be built out in the future. The campus now proposes to build out approximately 8,220 ASF of this shelled space in the JMC tower for three programs: 1) an Anatomic Pathology Laboratory to support JMC as well as other medical facilities on the Health System La Jolla campus, including the future Outpatient Pavilion, 2) a new Cardiac Rehabilitation program, which will be key to extending care for cardiovascular patients treated at the Sulpizio Cardiovascular Center located adjacent to JMC, and 3) additional nursing administration space to centralize staff. Other proposed changes include minor modification to pharmacy space in the JMC tower and an increase in the renovated space in existing Thornton Hospital by 1,700 ASF to accommodate the Frozen Section department of the Anatomic Pathology Laboratory. The Regents are being asked to: 1) approve an augmentation of $20 million to be funded from hospital reserves, for a revised project budget of $ million; 2) approve additional scope to build out approximately 8,220 ASF of shelled space in the new bed tower, and increase the renovated space in the existing Thornton Hospital by approximately 1,700 ASF.
2 COMMITTEE ON -2- GB4 GROUNDS AND BUILDINGS July 17, 2014 RECOMMENDATION The President of the University recommends that the Committee on Grounds and Buildings recommend to the Regents that: 1. The Budget for Capital Improvements and the Capital Improvement Program be amended as follows: From: To: San Diego: UCSD East Campus Bed Tower preliminary plans, working drawings, construction and equipment $ million to be funded from external financing ($500 million), gifts ($131 million), hospital reserves ($ million), Children s Hospital bonds ($69 million), and capitalized leases ($35 million). San Diego: UCSD Jacobs Medical Center preliminary plans, working drawings, construction and equipment $ million to be funded from external financing ($500 million), gifts ($131 million), hospital reserves ($ million), Children s Hospital bonds ($69 million), and capitalized leases ($35 million). 2. The additional scope of the UCSD Jacobs Medical Center project augmentation shall include building out approximately 8,220 assignable square feet (ASF) of shelled space in the new bed tower and renovating approximately 1,700 ASF of space in the existing Thornton Hospital. 3. The President be authorized to execute all documents necessary in connection with the above. BACKGROUND The Jacobs Medical Center (JMC) project consists of three separate components: a new bed tower, selective departmental renovation of the existing Thornton Hospital, and a new standalone central plant. The full program as currently approved includes 245 new inpatient beds for general medical-surgical units, intermediate medical units, intensive care units, the obstetric and neonatal care units, and fourteen operating rooms. Additional functions include diagnostic and treatment services, support services, and administrative services. In July 2013, the Regents approved an increase to the budget and increase in external financing to complete all of the programmed patient services space prior to occupancy, address changes associated with unanticipated agency mandates, and address market escalation and higher than estimated costs. With this action, there remained approximately 19,200 assignable square feet (ASF) of shelled space. For an overview of previous actions, please see Attachment 2. The proposed amendment of the budget and scope would allow the campus to build out approximately 8,220 ASF of shelled space in the new bed tower to accommodate an Anatomic Pathology Laboratory, a new Cardiac Rehabilitation program, and nursing administration space,
3 COMMITTEE ON -3- GB4 GROUNDS AND BUILDINGS July 17, 2014 all necessary to support the new hospital and other medical facilities at the Health System La Jolla campus. Also, to accommodate the Anatomic Pathology Laboratory program in the new bed tower, the Frozen Section would be relocated to Thornton and would require renovation of and additional approximately 1,700 ASF of space. The Anatomic Pathology Laboratory is required to be operational when the JMC opens (previously planned to be in leased space that is no longer available). Nursing Administration is another key program element necessary to be fully operational upon occupancy of JMC. Cardiac Rehabilitation is an important new program serving cardiovascular patients who currently use another provider for this service because it is not offered at UCSD. The 10,980 ASF that will remain shelled is all located in non-patient areas of the JMC and will be built out once specific programs are identified and as funds allow, including fundraising opportunities. Each program element associated with the augmentation is described below. ADDITIONAL PROJECT SCOPE Anatomic Pathology Laboratory in JMC and Thornton ($16,441,000) Anatomic Pathology is a medical specialty that is concerned with the diagnosis of disease, based on the macroscopic, microscopic, biochemical, immunologic, and molecular examination of organs and tissues. Anatomic Pathology services at UC San Diego Health System encompass surgical pathology, cytopathology, and autopsy pathology. All diagnostic pathology material (including approximately 17,000 surgicals and 25,000 cytologies per year) received from UC San Diego s two major teaching hospitals (Hillcrest Hospital and Thornton Hospital) is triaged to five specialty-oriented benches organized by organ system. These centers of excellence include: 1) breast pathology, 2) obstetrics and gynecologic pathology, 3) liver and gastrointestinal pathology, 4) renal pathology, and 5) general surgical pathology. The clinical practice of Anatomic Pathology at UC San Diego is supported by several core laboratories based at Hillcrest Hospital, including the immunohistochemistry, electron microscopy, and the fluorescence in situ hybridization. With a total of eleven operating rooms now at the UC San Diego Health System La Jolla and fourteen new operating rooms to be added when JMC opens, the hub for Anatomic Pathology will move from Hillcrest to La Jolla in 2016; however, some Anatomic Pathology services will remain to support Hillcrest programs. The Anatomic Pathology (AP) Laboratory would support operating rooms and procedure spaces in JMC as well as Sulpizio Cardiovascular Center and the future Outpatient Pavilion. Originally, the project included space for the full AP Laboratory program. Subsequently, offcampus leased space near JMC became available that would have allowed for consolidation of the AP Laboratory with an off-site core laboratory (Center for Advanced Laboratory Medicine), allowing for staffing and operational efficiencies. The Frozen Section department and its required laboratory support spaces, however, must be located near the operating rooms in order for pathology staff to perform rapid microscopic analysis of a specimen and allow the clinical
4 COMMITTEE ON -4- GB4 GROUNDS AND BUILDINGS July 17, 2014 team to consult in real time and in person during a surgical case. Therefore, as part of the project scope approved in July 2013, the AP Laboratory space within JMC was reduced to accommodate only the Frozen Section laboratory, with the majority of other laboratory and office space to be accommodated in the nearby leased space. Unfortunately, the lease opportunity is no longer available and, as a result, the AP Laboratory must be accommodated in the JMC project. As now proposed, the AP Laboratory would comprise 6,730 ASF of space in the lower level of the JMC tower, including build out of 3,830 ASF of shelled space and redesign of the 2,900 ASF of space currently programmed for the AP Laboratory. To accommodate the Frozen Section department, 1,700 ASF of additional space would be renovated on the second floor of Thornton Hospital (the cost of which is included in the $16,441,000 augmentation portion). This is the best solution to meet programmatic requirements, given that the leased space for the AP Laboratory is no longer available. The AP Laboratory will include space for histology, immunohistochemistry, cytology, a tissue processing area, and an electron microscopy/dark room. The space would be designed with an open plan layout for future adaptability and maximum flexibility. The majority of offices associated with the laboratory would be located in the existing and adjacent East Campus Office Building; however, a portion of the office space, as described above, is required to be incorporated with the laboratory functions. The budget increase associated with the AP Laboratory includes the cost of moveable equipment ($5,141,000) for the laboratory and Frozen Section department. Cardiac Rehabilitation Program ($2,151,000) Cardiac Rehabilitation (Rehab) is a professionally supervised exercise and education program for patients recovering from a cardiac event. Patients meet with a trained professional two or three times per week for up to twelve weeks in an outpatient setting. UC San Diego Health System currently does not have a Cardiac Rehab program; patients treated at the Sulpizio Cardiovascular Center (located adjacent to the future Jacobs Medical Center) are referred to a non-ucsd location that is not fully integrated into UCSD s system of care and does not have the breadth of care modalities planned for JMC. Offering a Cardiac Rehab Program at UC San Diego Health System would improve continuity and coordination of care for patients treated at Sulpizio Cardiovascular Center. The Program is expected to result in an increased number of patients who would remain within the UC San Diego Health System for all of their cardiovascular care needs rather than seek care from a different provider. Accommodating the Cardiac Rehab program in the JMC would include build out of 2,720 ASF of shelled space on the first floor of the JMC tower; this completed space would include inpatient physical therapy space (1,690 ASF) and office, staff, and support space (1,030 ASF). The inpatient physical therapy space would be designed as an open area with sufficient space for use
5 COMMITTEE ON -5- GB4 GROUNDS AND BUILDINGS July 17, 2014 of exercise equipment and monitoring of rehab patients. The budget increase associated with the Cardiac Rehab program includes the cost of moveable equipment. The Health System is pursuing gift funds for the Cardiac Rehab program; however, at this time hospital reserves would be committed. Discharge Pharmacy ($597,000) The California Board of Pharmacy now requires the Discharge Pharmacy to be within Office of Statewide Health Planning and Development-licensed space rather than in outpatient clinic space, where it was previously planned. This also allows for more beneficial reimbursement. The Inpatient Pharmacy and Discharge Pharmacy, both now planned to be in JMC, have separate pharmacy licenses, and the California Board of Pharmacy requires that both licensed pharmacies by physically divided to separate operations and inventories. To achieve this, the Inpatient Pharmacy area (lower level of JMC) would require minor modification to the walls and layout of the space to accommodate the Discharge Pharmacy, though there would be no change in the amount of space for the expanded program. The area would include a public interaction/service counter, storage, compounding area with required ventilation, and general workstations. Nursing Administration ($811,000) Space for the Chief Nursing Officer was included in the project as approved in July 2013, however, it was later determined that it would be best to centralize the space for both the nurse supervisors and the Chief Nursing Officer. This would improve communication and efficiency for the staff caring for patients in the 245 beds. The additional Nursing Administration program would be accommodated in the build out of 1,670 ASF on the first level of JMC. The area would include nurses offices and administrative support spaces. The budget increase associated with Nursing Administration includes the cost of furniture for the space. PROJECT STATUS AND SCHEDULE Construction of the bed tower component began in January 2012 and is approximately 54 percent complete. Notable progress includes completion of structural steel (columns and beams), installation of roughly 70 percent of the curtain wall exterior, and the ongoing interior wall framing up to Level 4. The occupancy date for the tower and completion of the helistop is still on target for July 2016 and would not be affected by the proposed changes. Construction of the Central Utility Plant (CUP) structure also began in January 2012, and is approximately 87 percent complete. Notable progress includes installation and startup of major mechanical and electrical equipment, completion of the exterior building skin, and the completion of approximately 90 percent of the interior build out. The CUP s estimated occupancy date of August 2014 is still on target and would not be affected by the proposed changes.
6 COMMITTEE ON -6- GB4 GROUNDS AND BUILDINGS July 17, 2014 Renovations to the existing Thornton Hospital are scheduled to be occupied in July 2018, eight months later than the last reported schedule. The added delay is a result of the shift of the Frozen Section department from the new Tower to the second floor of the existing hospital. The phasing of this effort results in the schedule extension. FINANCIAL FEASIBILITY The proposed increase in project budget of $20 million would be funded by hospital reserves. The revised total project cost of $ million would be funded from external financing ($500 million), gift funds ($131 million), hospital reserves ($ million), Children s Hospital Bonds ($69 million), and capitalized leases ($35 million). Status of Fundraising As of June 2014, the status of gifts for this project is as follows: In Hand $ 49,744,000 Committed 56,872,000 To be Raised 24,384,000 Total $131,000,000 Gifts committed but not in hand have been back-stopped by hospital reserves ($56,872,000). Remaining gifts to be raised have been back-stopped by campus funds from Short Term Investment Pool (STIP) earnings ($24,384,000). Days Cash on Hand Per the Summary of Financial Feasibility (Attachment 4), UC San Diego Health system projects days cash on hand to remain above the recommended floor of 60 days throughout the projection period. Actual days cash on hand in Fiscal Year 2013 was 72 days. ATTACHMENTS: Attachment 1: Project Budget Attachment 2: Project Budget Approval History and Funding Plan Attachment 3: Comparison of Program by Space Type and Function Attachment 4: Summary of Financial Feasibility
7 ATTACHMENT 1 PROJECT BUDGET UCSD JACOBS MEDICAL CENTER SAN DIEGO CAMPUS CCCI 5943 Approved Budget July 2013 Proposed Budget July 2014 Augmentation % of Cost Category Request Total Site Clearance $146,000 - $146, % Building Construction 540,727,000 10,884, ,611, % Exterior Utilities 1,201,000-1,201, % Site Development 1,305,000-1,305, % A/E Fees 47,580,000 1,995,000 49,575, % Campus Administration 16,996, ,000 17,747, % Surveys, Tests, Plans, Specs 11,892, ,000 12,192, % Special Items (excl. financing) 40,988,000-40,988, % Financing Costs 53,300,000-53,300, % Contingency 37,099, ,000 37,599, % Total P-W-C $751,234,000 $14,430,000 $765,664, % Groups 2 & 3 Equipment 88,126,000 5,570,000 93,696,000 Total Project $839,360,000 $20,000,000 $859,360,000 Project Statistics: Approved Proposed New Construction: Tower and CUP July 2013 July 2014 GSF 551, ,815 ASF (excludes shell space) 379, ,967 Efficiency Ratio: ASF/GSF 69% 70% Building Cost/GSF $895 $911 Renovation GSF 65,417 67,122 ASF 65,417 67,122 Building Cost/GSF $719 $729 Funding Schedule: Preliminary Plans Working Drawings Construction Equipment Total Project Approved July 2013 $37,000,000 42,927, ,307,000 88,126,000 $839,360,000 Proposed July 2014 $37,000,000 44,917, ,747,000 93,696,000 $859,360,000
8 UCSD Jacobs Medical Center ATTACHMENT 2 PROJECT BUDGET APPROVAL HISTORY AND FUNDING PLAN APPROVAL External Hospital Children's Capitalized Gifts Financing Reserves Hospital Bonds Leases TOTAL May 2007: Preliminary Plans Regents Approval Action $ $ $ 12,000,000 $ $ $ 12,000,000 Approved Budget $ $ $ 12,000,000 $ $ $ 12,000,000 March 2010: Budget Approval (PWCE) Regents Approval Action $ 356,800,000 $ 131,000,000 $ 60,000,000 $ 69,000,000 $ 35,000,000 $ 651,800,000 Approved Budget $ 356,800,000 $ 131,000,000 $ 72,000,000 $ 69,000,000 $ 35,000,000 $ 663,800,000 Number of Completed Beds: 185 February 2012: Budget Amendment Administrative Item Action $ $ $ 34,100,000 $ $ $ 34,100,000 Approved Budget $ 356,800,000 $ 131,000,000 $ 106,100,000 $ 69,000,000 $ 35,000,000 $ 697,900,000 Number of Completed Beds: 185 July 2013: Budget Amendment and Increase in External Financing Regents Approval Action $ 143,200,000 $ $ (1,740,000) $ $ $ 141,460,000 Approved Budget $ 500,000,000 $ 131,000,000 $ 104,360,000 $ 69,000,000 $ 35,000,000 $ 839,360,000 Number of Completed Beds: 245 July 2014: Proposed Budget Amendment Regents Approval Proposed Action $ $ $ 20,000,000 $ $ $ 20,000,000 Proposed Budget $ 500,000,000 $ 131,000,000 $ 124,360,000 $ 69,000,000 $ 35,000,000 $ 859,360,000 Number of Completed Beds: 245 BUDGET REQUEST * Increase in Hospital Reserves to build out more shell space
9 ATTACHMENT 3 UCSD JACOBS MEDICAL CENTER COMPARISON OF PROGRAM, BY SPACE TYPE AND FUNCTION (ASF) (includes space in the Bed Tower and Thornton) Approved Proposed Change Space Type Function (as proposed) Jul-13 Jul-14 Jul-13 to Jul-14 Inpatient Beds Medical Surgical and Intermediate Medical Unit, 108 beds 126, ,800 - (excluding Women & Infants) Intensive Care Unit, 36 beds Women & Infants Neonatal Intensive Care Unit, 52 bassinets 79,800 79,800 - Inpatient Beds Labor, Delivery, Recovery, Postpartum, 11 beds Ante-Partum, 6 beds Post-Partum, 32 beds Diagnostic & Treatment (1) Acute Dialysis, Imaging, Laboratory (including AP Lab and Frozen Section), 119, ,050 8,250 Patient Intake Center, Pharmacy, Respiratory Therapy, Surgery, Post Anesthesia Care Unit/Invasive Hub, Cardiac Rehabilitation Program Support Services Biomedical Engineering, Food Service/Dining, Kitchen, 64,100 64,100 - Housekeeping/ Environmental Services, Materials Management, Patient Transportation, Sterile Processing Department/Central Supply Administrative Services Administration, Care Coordination, Information Technology, 31,000 32,670 1,670 Medical Education, On-Call, Security, Spiritual Care Lobby Gift Shop, Lobby 7,700 7,700 - Total 429, ,120 9,920 (2) New Construction (built out) 363, ,040 8,220 New Construction (shelled) 19,200 10,980 (8,220) Renovation 65,400 67,100 1,700 (1) Cardiac Rehabilitation Program - not part of July 2013; new for July (2) Includes 3,830 ASF of built out space for AP Lab, 2,720 ASF of built out space for Cardiac Rehab, 1,670 built out space for Nurses' Administration, and 1,700 ASF of renovated space for Frozen Section.
10 SUMMARY FINANCIAL FEASIBILITY ANALYSIS Project Title: UCSD Jacobs Medical Center, San Diego Campus ATTACHMENT 4 Total Estimated Project Cost: $859,360,000 Proposed Sources of Funding: External Financing $500,000,000 Gifts $131,000,000 Hospital Reserves $124,360,000 Children s Hospital Bonds $69,000,000 Capitalized Leases $35,000,000 Total $859,360,000 UC San Diego Medical Center Financial Proforma (Dollars in Thousands)*: Actual Projected FY 2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 Income available for debt service: Net income $137,049 $123,094 $105,352 $120,673 $66,075 $84,753 $108,679 Interest 8,964 8,760 8,353 8,238 33,657 33,228 32,763 Capitalized interest 1,963 20,744 27,376 27,376 2,500 2,500 2,500 Depreciation 52,315 56,097 59,820 62,990 93,856 94,613 93,449 Income available for debt service 200, , , , , , ,390 Debt service: Interest 8,964 8,760 8,353 8,238 33,657 33,228 32,763 Capitalized interest 1,963 20,744 27,376 27,376 2,500 2,500 2,500 Principal 15,346 14,612 14,256 16,927 17,208 16,571 17,244 Total debt service $26,273 $44,116 $49,985 $52,541 $53,365 $52,299 $52,507 Debt service coverage Days cash on hand * In June 2012, the GASB issued Statement No. 67, Financial Reporting for Pension Plans, effective for the fiscal year starting July 1, 2013, and Statement No. 68, Accounting and Financial Reporting for Pensions, effective for the fiscal year starting July 1, The University will be implementing both GASB Statement Nos. 67 and 68 for the fiscal year ending June 30, 2014, and will be restating the financial statements for the Medical Centers for the fiscal year ended June 30, Currently, the Medical Centers do not report an obligation to UCRP. However, under GASB No. 68, the Medical Centers will be reporting their proportionate share of the UCRP obligation.
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