A hospital that health officials once said was urgently needed in western Montgomery County is now preparing to open with an expected occupancy rate of about 50 percent and a possible deficit of $5 million for its first two years of operation.
The situation at Shady Grove Adventist Hospital in Gaithersburg is the latest example of the recent pattern in Maryland in which hospitals have been built or expanded only to encounter a glut of empty beds. In evitably these hospitals have scrambled for government funding or higher patient rates to make up for the financial losses.
In the case of Shady Grove, Maryland health officials sharply disagree on what went wrong in the state's complicated hospital planning mechanism to cause the new facilityhs current predicament.
The Maryland Hospital Cost Review Commission, which sets rates for all state hospitals, has criticized Shady Grove officials for forging ahead with construction before they had secured permanent financing for the project. The commission also said the hospital was at fault for failing to take certain measures to cut costs as they had promised to do when they applied for state approval in 1974.
In a mild slap at health planners in another state agency, Dennis Phelps, a cost review commission rate analyst said: "What (Shady Grove) wanted to do and what was needed were never put up against one another to see if they were one and the same."
Phelps and other cost review panel members charged that the state's health planners have in the past merely rubber-stamped any applications for hospital construction.
The cost review commission now finds itself entangled in a tug-of-war with Shady Grove officials over the hospital's rate structure. To break even for the first year, Shady Grove officials say, they will need a patient care rate of about $130 a day. The commission thinks the rate for room and board should be around $116.
Hospital officials say if they are forced to charge the lower rate they will come out with a $5 million deficit in the first two years of operation, unless they can persuade the county government to subsidize part of the hospital's costs.
This is precisely the arrangement that had to be worked out at the Greater Laurel-Beltsville Hospital in Prince George's County, where the ocupancy rate has been 30 percent - the lowest in the state.
When Shady Grove was seeking state approval, it encountered stiff competition from a group of investors who proposed building a similar hospital, called the Gaithersburg Community Hospital, on the same site where the Adventist Hospital now stands.
Shady Grove eventually forced Gaithersburg Community out of the running by paying its backers $120,000 to withdraw their application for state approval.
But Shady Grove officials also assured state planners that they could build their hospital more cheaply and run it more efficiently than Gaithersburg Community because Shady Grove would be sharing some services with the Washington Adventist Hospital in Takoma Park, according to Harold Cohen, executive director of the cost review commission.
Shady Grove officials estimated at that time that their hospital and Washington Adventist stood to save a total of $1.7 million annually by sharing services. But now Shady Grove says it is unable to share those services, such as kitchen, laundry, and medical library, with Washington Adventist and that the annual $1.7 million savings is no longer possible.
Bryan Breckenridge, executive director of Shady Grove, said that if the commission does not go up on the rates, and the county refuses to provide financial support "the bottom line" would be that Shady Grove - a four-story, fully constructed, partially equipped hospital - will never open.
Breckenridge and those state health officials responsible for planning Shady Grove say the hospital has been, to a large degree, a victim of circumstance.
Shady Grove was approved in 1974, when growth projections indicated the population in Montgomery County would increase to 747,000 by 1983. In fact, the county's population has yet to go above 600,000.
The belief that the county's population would grow by leaps and bounds also led the state's primary health planning unit, the Health Services Planning and Development Agency, to authorize expansions of 115 beds at Suburban Hospital in Rockville and 112 beds at Holy Cross.
A flaw in the planning process, said William Opfer, chief of the certification for the health planning agency, is that once a hospital expansion or construction project is approved, there is "no turning back."
"We're suffering form decisions mad in 1974. Some of those decisions were not good, but we're stuck with them," Opfer said. The state would leave itself open to legal action if it tried to "decertify" a hospital project once it was approved, he noted.
Another problem Shady Grove had was that it was tied up in a protracted legal battle with Montgomery General Hospital in Olney, which challenged the need for another hospital in the western part of the county. Montgomery General charged that it would suffer severe financial losses if Shady Grove opened.
The result of that suit was a settlement in which Shady Grove agreed not to open its 16-bed obstetrics unit for three years.
Shady Grove built its obstretics unit at a time when there were optimistic projections that the birth rate in the Gaithersburg area would be higher than in the rest of the county because of the large number of young couples living there. That, however, has never materialized.
Breckenridge blamed the legal battle with Montgomery General for preventing Shady Grove from securing permanent financing sooner.He said banks were reluctant to finance a facility in danger of never opening.
Construction and equipment costs went up $5 million in the five-year period the hospital was being built. Legal fees totaled over $500,000, Breckenridge said.
"The patients," he said, "will pay for every dime of legal fees, I'm sorry to say."