No one is used to the Medical University of South Carolina growing so quickly.
But there's no denying the pace of their expansion now. The hospital system has about $1 billion in projects slated to be completed over the next few years.
MUSC Health CEO Dr. Pat Cawley said it's likely the most explosive growth the organization has ever experienced. Still, Cawley isn't sweating the substantial cost of this growth and development.
In fact, MUSC could borrow even more if it wanted to, Cawley said.
As the state-affiliated nonprofit hospital system, MUSC's financial health is more of a public concern than other hospital chains in the region. But MUSC's leaders argue the hospital's growth is necessary in order for it to compete in a rapidly changing health care industry.
Cawley and MUSC Health Chief Financial Officer Lisa Goodlett explained the hospital system has borrowed about 50 percent of their debt capacity. MUSC's debt today stands at about $400 million, Goodlett said.
They said MUSC's purchases are heavily regulated both at the state and federal level. The highest regulators would allow them to go would be 90 percent of their debt capacity.
Here are the projects it has taken on:
- The purchase of four community hospitals, one each in Lancaster, Chester, Marion and Florence counties, for $137 million. The purchase will be finalized in the spring.
- A new children’s hospital constructed in downtown Charleston for $388.7 million, scheduled to open in October.
- A children’s health medical pavilion in North Charleston, named for Mayor Keith Summey, for $57.7 million. The pavilion is slated to open in the first part of 2019.
- A campus at Citadel Mall in a former J.C. Penney, focused on musculoskeletal care, ophthalmology and ambulatory surgery, for $16.4 million. It is scheduled to open late this year.
- A "consolidated service center," or a supply chain warehouse, for $28 million. It is expected to be operational by the end of 2019.
- A brand new hospital in Berkeley County for $325 million, planned to open in 2022.
- The expansion of the pharmacy school for an estimated $53 million. A timeline for the expansion wasn't available as of Friday.
These figures don't account for a grand plan to replace the main hospital complex on Ashley Avenue. Hospital leaders told The Post and Courier they foresee building new construction somewhere west of Courtenay Drive, and expect it to be even bigger than the new children's hospital and Ashley River Tower.
Another clue into its rapid growth: Once these projects and acquisitions are complete, MUSC's number of patient beds will more than double, from the roughly 700 it has in downtown Charleston today to 1,900 across the state.
Because of what it is, MUSC receives some money other health care systems like it can't count on.
MUSC's hospital authority, for instance, received $42 million from the state government in the 2018 fiscal year, though the funds were earmarked for different projects, like the telemedicine program and a burn unit.
It also received $139.1 million in donations for the new children's hospital, MUSC's largest project in recent memory.
Generally speaking, MUSC has been financing their expansion through loans, in part through the U.S. Department of Housing and Urban Development.
Thad Calabrese, a researcher at New York University who studies nonprofit finance, said hospitals often use this tactic to fund their expansions.
He was not surprised to hear about MUSC's growth as such changes have become common as more profitable hospital chains have gobbled up others.
"The health care industry has been over the last few years in a merger and acquisition frenzy," Calabrese said.
Calabrese said it is less common to see health care systems with public ties growing so quickly, however.
The way MUSC is financing is par for the course, though, he said. MUSC and other nonprofit hospitals must issue debt to spend on growth, Calabrese said, while private corporations would have different doors open to them.
Dennis Gephardt, a senior credit officer at Moody's Investors Service, said Moody's has kept its confidence in MUSC's finances. They mark its revenue bonds as A1, their fifth highest rating.
Generally speaking, Gephardt said it can be risky to buy a community hospital. MUSC is buying four hospitals in South Carolina for as much as $137 million, the system announced late last year. Many other major medical centers opt to form an affiliation, which allows them to keep patients flowing from the community hospital to the center, with less financial risk.
But the acquisitions would be more concerning if MUSC had bought the hospitals at a higher price. The four county hospitals are costing them on average $35 million apiece — cheap in the world of hospitals.
"The purchase price realistically acknowledges the fundamental challenges," Gephardt said.
When MUSC approached 11 banks to ask for permanent financing of the purchase, four responded with proposals. Regulators have not voiced concerns about the level of debt, Cawley said.
"They’ve all said the same thing," he said. "MUSC is fine."