May 23, 2008
Hospitals snatch up Dallas-area land to pave the way for medical systems of the future
Nonprofits investing now with no immediate building plans
By Jason Robertson
The Dallas Morning News
While patients complain about the high cost of a hospital stay, local hospitals are using millions of the money they take in to snap up hundreds of acres of undeveloped land.
In fact, the two largest hospital systems in the area – Baylor Health Care System and Texas Health Resources – own more than 460 undeveloped acres in North Texas, according to property records. For most of that land, there are no immediate construction plans.
It takes 35 acres, on average, to build a hospital. At that size, Baylor and THR (owner of Presbyterian Hospital of Dallas) could build 13 hospitals on their vacant acres.
All the land wealth may seem unnerving to patients who've heard stories of $5 aspirins and $5,000 one-night hospital stays.
But executives at Dallas' Baylor and Arlington's THR say buying now will save them money later, letting them acquire raw land before it is developed and jumps in price or is bought by a competitor.
These parcels will also mean more accessible health care one day for the people moving in droves to northern and eastern Dallas suburbs and the area west of Fort Worth, they say.
"One of the things hospitals are always looking for is more property," said Steve Hanson, executive vice president of operations for THR.
"And if the projects turn out to be wrong, we can turn around and sell the property," he said.
The hospitals' holdings, though they sound hefty, are minuscule when compared with those of mega land developers such as Ross Perot. Alliance Airport, the centerpiece of the Perot Group's 17,000-acre Alliance International Center business park, sits on 418 acres.
Of the two types of hospital systems in Dallas – nonprofit and for-profit – nonprofits Baylor and THR have far more undeveloped land here than their for-profit competitors, Nashville-based Hospital Corporation of America and Dallas-based Tenet Healthcare Corp., two of the largest hospital systems in the country. Neither owns any, according to a Dallas Morning News property-records search.
Publicly traded hospital systems answer to shareholders who often demand a quick return on land investments. Meanwhile, THR and Baylor answer to committees of community volunteers.
"We basically need to ask them," Mr. Hanson said of THR's land-buying process. "We make a recommendation to buy a certain parcel. They ask, 'Why do you need it? What kind of price are we talking about? Where is it going to be? How soon might you develop it?' "
THR is in the middle of a 10-year, $1.5 billion expansion plan, getting ready for the predicted influx of 10 million potential patients to the area in less than 20 years. In September 2006, the system's Presbyterian Healthcare Foundation announced a $330 million fundraising campaign. The system's Legacy of Care Campaign is trying to raise $40 million in donations, with the other $290 million to come from hospitals' operational revenue and a bond-financing program.
Luring patients, doctors
Local hospital executives downplay the competitive aspect of their buying. But the competition here is as fierce as it has ever been, said Rod Booze, managing principal at Ascension Group Architects, an Arlington architectural design firm specializing in health-care facilities.
Mr. Booze predicts THR and Baylor will continue to "hopscotch" around D-FW, buying land to gain leverage – with the patients deciding where to go for care.
"It's kind of like kicking sand in the eye of your buddy hitting on your girlfriend at the beach," he said of the rivalry over patients.
In courting patients, hospitals follow home construction, much of which is planned in Denton and Collin counties.
Denton County's population of 600,000 will grow to 1 million by 2030, according to the North Central Texas Council of Governments. Meanwhile, Collin County's 725,000 residents will welcome 442,000 new neighbors by 2030, as the population there climbs to nearly 1.2 million, according to the council.
One motive behind the land grab is the need to lure doctors with state-of-the-art facilities, Mr. Booze said.
It's doctors who bring in the patients. And "doctors are trying to go with the 800-pound gorilla [the largest hospitals] because they think they'll have the best managed-care contracts," he said.
Texas is different from most other states in that its laws allow business partnerships between doctors and hospitals.
When Mr. Booze's firm developed THR's $100 million Presbyterian Hospital of Denton, which opened three years ago, buying extra land to sell to key doctors for office space was part of the plan, he said. The message was: "Here's your kingdom. Build your practice here," he said.
Texas leads the nation in hospitals with partial or full physician ownership, according to HealthLeaders-InterStudy, a Nashville-based health research firm. In the Dallas area, there are 16 such facilities, making up more than 20 percent of the area's total hospital count.
Ten of those 16 physician-owned hospitals are partnered with either THR or Baylor, making the two health systems national leaders in such ventures.
THR bought most of its land, including a 20-acre plot in Frisco, over the past five years. It is now valued at more than $14 million.
Baylor said it paid more than $35 million for its 263 acres – valued for tax purposes at $18.4 million – of undeveloped land in Waxahachie, Terrell, McKinney and Weatherford, buying between April 2006 and November 2007.
Its 69 acres in Weatherford, purchased last year, and 53 acres in Terrell, bought in January, came with no immediate building plans. Baylor said it will take up to a year to study the communities' needs before deciding what type of medical facilities to build.
"The future belongs to those who prepare for it," said Baylor chief executive Joel Allison, paraphrasing the system's former leader, Boone Powell Sr. "We continue in that same tradition: Always be prepared for what the future may hold."
By Mr. Allison's calculations, the D-FW area will grow to 10 million people by 2025. Weatherford's population of 25,000 is expected to grow 13.5 percent, to more than 28,000, by 2011, according to Baylor's estimates.
Terrell Chamber of Commerce President Danny Booth pointed to a Forbes magazine article listing Terrell among the nation's 100 fastest-growing cities.
"We have a lot of retail looking at us," he said, "and we're using this Baylor announcement to attract them."
New neighbor in town
For those living near land slated for future hospitals, the reaction is a bit more complicated.
The land just behind Baylor's new acquisition in Weatherford, the self-styled "Cutting Horse Capital of the World," was at one time used for horse breeding.
That's what attracted Terry and Sally Pool two years ago. There was enough land for their three horses, limited traffic and quiet nights.
Mrs. Pool, a Texas transplant from Cape Girardeau, Mo., now sports diamond-studded horseshoe earrings and a sign on her front door declaring "Howdy, Horse Lovers Welcome."
"Personally, we're sad about it," Mrs. Pool said of the Baylor land purchase a stone's throw away.
"We like that we know the cars and trucks that come through here," she said. She worries about the effect of the hospital's bright lights on her horses, ages 8, 19 and 31.
Baylor paid $14 million for 69 acres belonging to Troy Clanton, a nursing home owner. "They're not going to like it," Mr. Clanton said of those living nearby, "but the community as a whole ... the Chamber of Commerce, they're going to love it."
One neighbor, Alan Whittaker, liked the idea of a Baylor hospital nearby. He had heart surgery 10 years ago at Baylor All Saints Medical Center at Fort Worth, 30 minutes to the east.
"Now I don't have to go so far," he said.
But even Mr. Whittaker has concerns. Although he welcomes a hospital, he'd like a wall to separate it from his property.
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