With the signing today of a Development Rights and Responsibilities Agreement (DRRA) with the Talbot County Council and the Easton Town Council, University of Maryland Shore Regional Health reaffirmed its intention to build, at some future date, a new regional medical center on a 200-acre site adjacent to the Talbot County Community Center north of Easton.
The DRRA signing took place at the regular session of the Talbot County Council, with Easton’s Mayor and Council members joining UM Shore Regional Health CEO Ken Kozel and the County Council members in the signing.
“Today’s action by University of Maryland Shore Regional Health signals our commitment that this site near the community center is the right location for our future replacement hospital,” said Kenneth Kozel, CEO of the health system. “We are confirming our intention to build on this site, even though when we build and what we build still remain to be answered.”
The signing of the agreement was a necessary and final step before the health system also purchases the Talbot County-owned land. Along with the DRRA signing, Shore Regional Health today signed a letter of intent to purchase the land. The purchase, which is expected to be finalized within the next several months, will enable the county to commence construction of water and sewer infrastructure to serve demand in the area around the Talbot County Community Center, including the future medical facility. Under terms of the agreement, the county will bring sewer and water up to the property line of the proposed new medical center.
Even with the signing of the DRRA, the timetable for development of the new facility to replace the current UM Shore Medical Center at Easton at 219 S. Washington Street remains undecided. A number of external factors are contributing to the uncertain timetable. The Certificate of Need application to the Maryland Health Care Commission, which was submitted in September 2012, remains under review. Additionally, the State of Maryland Health Services Cost Review Commission, which earlier this year instituted a new reimbursement system for all Maryland hospitals, has yet to finalize a new policy on how hospitals are to address their future facility capital planning needs.
The timetable for a new medical center is also subject to factors that are creating unsettled financial prospects for hospitals and health systems nationwide, Kozel stated.
Hospitals, he noted, continue to feel the fallout of the recent recession in the form of reduced patient utilization, which has reduced revenue faster and greater than many hospitals have been able to reduce fixed costs. Hospitals have had to absorb the full impact of multiple, significant cuts in Medicare funding, he added, and rate adjustments to Maryland hospitals have lagged the pace of inflation for everything needed to provide health care. Finally, Kozel noted that the State of Maryland’s decision to overhaul the existing hospital rate-setting mechanism presents numerous financial unknowns that make financial planning difficult. For example, Maryland hospitals in the past generated revenue based on the volume of patient care they provide, while the State’s new funding model rewards hospitals for reducing unnecessary hospital and emergency department utilization.
University of Maryland Shore Regional Health’s board has required that the system achieve a number of its own internal benchmarks before construction can proceed. These include demonstrating the financial strength to undertake the expensive capital project. This requires that both University of Maryland Shore Regional Health and the University of Maryland Medical System consistently produce strong financial results with avoidance of operating deficits.
Despite the uncertain start date for construction, the new regional medical center remains a part of the 5-year strategic plan of the University of Maryland Medical System.
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