By Mark Taylor, Post-Tribune correspondent
Two years ago Porter County felt a surge of financial adrenaline as four large hospital systems announced plans to build new medical centers in Chesterton and Valparaiso to compete with the county's only existing acute-care facility, the former Porter Memorial Hospital.
But ground has not yet been broken on the two remaining hospital projects and one of those systems confirmed its plans are frozen by the current economic turmoil.
In April 2007, Brentwood, Tenn.-based Community Health Systems, a publicly traded for-profit hospital chain, purchased Porter Memorial Hospital, now called Porter Health.
As part of the purchase agreement, CHS promised to build a new acute-care hospital in Porter County and bought property in Liberty Township at U.S. 6 and Indiana 49 to relocate the hospital.
Competition on the horizon
But it didn't seem like Porter Health would have a local monopoly for long.
A California gold rush mentality seemed to grip competing health systems after the Porter hospital sale.
With hundreds of millions of dollars in new construction, equipment purchases and new jobs at stake, Porter County appeared poised to become Northern Indiana's newest medical mecca.
Mishawaka-based Sisters of St. Francis Health Services, which owns five hospitals in Lake County, announced it would partner with an orthopedic physicians group to build at a Chesterton site.
Soon after Indianapolis-based Clarian Health, like SSFHS, a not-for-profit system whose nearest hospital is in LaPorte, made a similar announcement.
But the most unusual twist came in July 2007 when Memorial Health System, the not-for-profit parent company of Memorial Hospital & Health System of South Bend, said it also bought property in Valparaiso and planned to build a 100-bed hospital with the capacity to expand to 200 beds.
Memorial is about 50 miles from Valparaiso and has no local hospital, clinics or physician affiliations. Each of the three systems said it would partner with physicians to build for-profit hospitals.
But SSFHS and Clarian abandoned plans to build new hospitals in Porter County long before August 2009.
Porter Health signed a syndication ownership agreement with the orthopedic physicians group its rivals coveted, making it more difficult for them to secure a patient referral stream.
After failing to secure enough local physicians to partner with them, Porter Memorial shelved its plan for a for- profit hospital, deciding on a not-for-profit model.
Economy hurts Memorial
Its plans have since been put on indefinite hold by the weak economy, Memorial spokeswoman Ruth Lister confirmed.
"It's not canceled, but it's not moving forward as we had hoped it would," Lister said. "We still own the property and hope to build something down the road. But construction has not yet begun at this point and we have set no new timelines."
Diane Stover, vice president for marketing and innovation strategies, said Memorial has invested $6 million in land and preperation work and still views Valparaiso as an attractive project.
"But the market conditions for financing are not attractive at the moment and that's why it's frozen," Stover said. "We still have plans and drawings and materials and will wait for financial conditions to improve. We still think there is a strong medical need in the community."
Stover said Memorial has no plans to sell the land or partner with another system.
She said the nation's credit crunch and fallen bond market make borrowing money or packaging a bond project too costly and difficult now.
"Luckily, we're still operating in the black and holding on and hope we'll get through this soon," she said. The tough economy compelled Memorial to cancel plans for a free-standing emergency room project for nearby Granger, but it did complete an $80 million expansion of the hospital's new surgical suites.
"Right now we're taking a wait-and-see approach," she said.
Porter eyes 2011
Porter Health CEO Jonathan Nalli said Porter is on target for building a new hospital at U.S. 6 and Indiana 49.
"But we're still committed to a 2011 completion date. The size and scope of the project have not changed," Nalli said.
Porter County Commissioner Robert Harper doesn't believe Memorial Hospital will build a new hospital in Porter County.
"There are only so many hospital groups that have the funds to build a new hospital. We're talking about a $250 million project. Memorial thought it could leverage funds by getting physicians to buy into the project. But when they got to town, they found local physicians were already committed to Porter," he said.
Harper said a zoning lawsuit impacting the CHS acquisition of Porter Memorial has delayed the hospital construction project.
"In the end, I don't think Porter will be much off target from its original plan. This is going to be one of the biggest projects in Northwest Indiana history during a time of dire need for construction jobs," Harper said. "It's going to give a new, modern hospital for the people of Porter County."
Porter County Attorney Gwenn Rinkenberger said the original purchase contract requires CHS to build a 225-bed acute care hospital by the end of 2011.
"There is a caveat, however," Rinkenberger said. "If something occurs outside of their (CHS's) control to delay the project, that time frame would be extended without penalty."
She said the zoning dispute lawsuit challenging the sale would qualify for an extension to the completion date.
"But if they don't build it, the county could demand specific performance damages and have a judge order them to build it, or sue them for damages," she said.
Valparaiso Mayor Jon Costas said he met with Memorial officials recently and learned of the plan's postponement.
"It's a great project and all their data said it will be a successful project for them, but the advent of the recession put it on hold," Costas said.
Costas said the construction of either hospital would be the single biggest economic development event in recent Porter County history and would spark significant economic impact throughout the county.
"There will be some commercial activity lost when Porter hospital leaves. The loss won't be in tax revenues, but in direct economic activity from employees and visitors coming to the hospital," Costas said
"But the hospital will be built six miles down the road and will do much more business with a larger, more modern facility. And many of those people will live and shop in Valparaiso."