Credit crunch delays new U-Fairview care center

  • Article by: CHEN MAY YEE , Star Tribune
  • Updated: December 16, 2008 - 9:06 PM

The decision is the latest delay in Twin Cities-area hospital expansions.

The nation's credit crunch is forcing the University of Minnesota Medical Center to delay construction of a $200 million building for outpatient care.

The Ambulatory Care Center is the biggest local medical-construction project so far to fall victim to the economy. The joint project by Fairview Health Services and the University of Minnesota Physicians called for a five-story structure with 300,000 square feet on what now is a surface parking lot on the university campus.

The building was to have housed clinics, outpatient surgery, outpatient chemotherapy, labs, imaging and a pharmacy. The project partners now say they will not start construction in spring as planned. Instead, they hope to revisit the idea in fall and start building in spring 2010.

"The plan is still in place," said Fairview spokesperson Ryan Davenport.

In an internal memo, leaders of the partner organizations blamed "a rapidly weakening economy, restricted access to capital, investment losses and the significant increase in the cost of debt."

Fairview, like other health systems, has experienced rapid growth in outpatient activity as new technology makes day surgeries routine for some eye, orthopedic and gynecological procedures.

Deferring the new building will mean devising stopgap measures. Fairview had intended to move some adult medical services into the new building from its Riverside campus, where it is building a new $175 million children's hospital. It also intended to move some clinics now in the Phillips Wangensteen Building on the university campus.

"We have directed our leadership teams to evaluate alternative short-term plans and actions to accommodate this change," said the memo from Frank Cerra, senior vice president of health sciences at the University of Minnesota, Fairview chief executive Mark Eustis and Roby Thompson, chief executive of University of Minnesota Physicians.

Hospitals depend heavily on the bond market to raise money for new construction and equipment, and Fairview isn't the only one hurting from the credit crunch.

Last month, Healtheast said it would delay spending $68 million to expand St. John's Hospital in Maplewood. It also delayed spending more than $100 million to expand Woodwinds Health Campus in Woodbury.

In addition, four of the Twin Cities' major hospital groups -- Allina, Fairview, North Memorial and Park Nicollet -- have cut a total of more than 1,000 jobs in recent months because of the weak economy.

Chen May Yee • 612- 673-7434

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