Credit crunch forces Illinois hospital with 'A' bond rating to delay expansion

Just over a year ago, the two-hospital BroMenn Healthcare System in Normal, Ill., was moving along with plans to construct a new, 79,000-square-foot patient tower at its main BroMenn Regional Medical Center campus. BroMenn boasted $185 million in annual revenues and a 62 percent market share in the Bloomington-Normal area of central Illinois, plus "A" bond ratings from Moody's and Standard & Poor's. Yet, when the global credit crisis hit and the capital markets seized up, even a low-risk would-be borrower like BroMenn couldn't get construction loans.

"In September [2008], we were ready to go to the party, and there was no party," President and CEO Roger Hunt recalled last week at the 22nd annual Healthcare Facilities Symposium and Expo at Chicago's Navy Pier. "As of today, the party is yet to start." Around the same time as the credit fallout, BroMenn started merger talks with Oak Brook, Ill.-based Advocate Health Care, the largest provider organization in the state. That deal is on track to close at the end of 2009, but even with the greater access to capital such a merger promises, BroMenn still hasn't broken ground on its major project.

That's caused the system to change its strategy somewhat, and Hunt advises other organizations to take a similar, incremental approach to big construction plans. "Are there pieces of the project you can move forward on?" Hunt asked, somewhat rhetorically. Construction costs have dropped as builders compete for pieces of a shrinking pie. "There's opportunity to get good contracts on some of the early jobs and prep work," Hunt says. So, Illinois certificate of need in hand,  BroMenn moved ahead with a modest expansion of an ambulatory surgery center while waiting for the credit markets to recover and the Advocate merger to go through.

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