Lankenau Medical Center to celebrate expansion

Lankenau Medical Center will celebrate the completion of its 96-bed Heart Pavilion on Thursday, capping a three-year, $465 million effort to remake its Wynnewood campus.

But unlike other community hospitals in the region that have built major facilities in recent years, Lankenau was able to do it while taking on very little debt, illustrating the financial might of its owner, Main Line Health.

"I thank the founders of this place every day and the Main Line Health people for creating such a healthy situation, because normally you go into debt up to your eyeballs for these things," Lankenau president Phil Robinson said in an interview Tuesday.

To complete the master plan projects at Lankenau, just $30 million in debt was needed to supplement $335 million from the coffers of Main Line Health, $79 million from the Lankenau Hospital Foundation, and $21 million in donations.

The contrast to other recent major projects is stark:

Einstein Health took on $315 million in debt to pay for the $350 million Einstein Medical Center Montgomery, which opened last September in East Norriton Township.

Virtua borrowed $560 million to pay for its new $463 million hospital that opened in Voorhees in May 2011, increasing its long-term debt to more than $700 million. Virtua paid the long-term debt down to $677 million by the end of last year.

Capital Health, which is based in Trenton but competes for patients in Pennsylvania and South Jersey, borrowed $756 million to consolidate older debt and build a $530 million hospital in Hopewell Township. It opened in July 2011.

How does Main Line Health, which employs 10,075 people, including 2,085 at Lankenau, do it? It is highly profitable, thanks in large part to its location in Philadelphia's relatively wealthy western suburbs, and it is also well-managed, experts say.

Lankenau, Paoli Hospital, and Bryn Mawr Hospital, the three original components of Main Line Health, were the three most profitable tax-exempt hospitals in Southeastern Pennsylvania in the year ended June 30, 2012, according to data from the Pennsylvania Health Care Cost Containment Council.

Their operating profit margins ranged from 12.39 percent at Lankenau to 19.51 percent at Paoli. The median for not-for-profit hospitals in the five-county Philadelphia region - meaning half did better and half did worse - was 2.56 percent.

The industry benchmark calls for operating profits in the range of 3 percent to 6 percent to ensure that a hospital can keep its facilities up to date, said Daniel M. Grauman, president and chief executive of DGA Partners, a health-care consulting firm in Bala Cynwyd.

"Anyone who is doing better than that is pretty good and begins to stand out above industry norms and medians," he said.

Main Line Health chief executive Jack Lynch said the changes at Lankenau - which also included the construction of a cardiovascular imaging center, a new parking garage, and a new central utility plant, as well as cafeteria and kitchen renovations - had been in planning for years before work began.

"We knew we had to make the investment at some point," Lynch said. "These weren't luxuries that we felt like we could put off and not do ever. We felt like we owed it to the community to make the investment in Lankenau."

But there's more to do at Main Line Health, Lynch said, referring specifically to Bryn Mawr Hospital, Bryn Mawr Rehab Hospital, and Riddle Hospital, which have not received the same level of attention as Lankenau and Paoli. "We know we've got additional capital needs across the system at those three facilities," he said.

Starting next week, assuming all inspections are passed, Lankenau heart patients will have a different experience. Cardiologists will be consolidated from seven locations to a suite of offices in the Heart Pavilion.

"We're trying to make it totally easy for the patients," said Timothy Shapiro, campus chief for interventional cardiology at Lankenau. Patients will no longer have to wend their way through a maze to find doctors, he said.

"It's convenient for the doctors as well, because we have access to each other. We have access to the expertise of our associates," Shapiro said.