Rabner: Future of Princeton Hospital About More Than Real Estate Dealings

Matthew Hersh

Around two-and-a-half years ago, when Princeton HealthCare System (PHCS) set out to establish its future goals and objectives, facility replacement was only one goal out of about 65, according to Barry Rabner, president and CEO of PHCS. Mr. Rabner outlined this planning strategy Thursday at a Princeton Regional Chamber of Commerce luncheon at the Doral Forrestal. Subsequently, those goals were boiled down into three groups: necessary; desirable; and possible.

With the debate heating up around the issue of relocation efforts by the University Medical Center at Princeton (UMCP), hospital officials have tried to point out that those efforts involve more than just real estate transactions and that the fundamental reasons for trying to relocate the 85-year in-town institution stem from the need to overhaul facilities and think about health care 20, 50, and 100 years down the road.

On January 24, when the trustees of PHCS, the flagship entity of the hospital, announced that they were considering relocation over onsite expansion efforts, the message was received by the public in terms of land and future development. The forums held by the independent municipal task force assembled to study the PHCS strategic plan also focused largely on real estate and possible future occupants of the 11.76-acre Witherspoon Street site and the nine-acre Merwick Rehab site on Bayard Lane.

The first group of target areas, deemed as "necessary" objectives, featured 12 of the aforementioned 65 goals, the most notable of which was, of course, the prospect of onsite expansion or relocation. Because of this pivotal objective in the hospital's strategic plan, Princeton Borough and Township are faced with the prodigious job of rezoning the property for future development, which is likely to be housing (Princeton University graduate, senior, affordable or otherwise), or some sort of mixed housing/retail complex. At the same time, the municipalities must prepare for the not-yet-out-of-the-question scenario of the hospital expanding onsite if it is unsuccessful in its attempt to relocate. The task force, composed of municipal planning, zoning, and elected officials, released its report last month with recommendations that neither encourage or discourage relocation, but recommend how to rezone for either scenario.

That said, Mr. Rabner understands the intricate and oft-confounding task at hand, but as the executive of a facility that is not only a regional health care provider, but also a business, he said the remaining "necessary" goals should not be eclipsed by the prospect of relocation.

"We had to figure out where we should be in terms of providing services and how we should organize them," he said.

When Mr. Rabner took over the executive position at PHCS in 2002, he succeeded a Dennis Doody administration whose relationship with the immediate neighborhood was considered to be strained partly because of the hospital's acquisition of four single-family homes on Harris Road. Cognizant of the fact that the hospital had also lost market share for several consecutive years, the Medical Center of Princeton, under Mr. Rabner's lead, changed its name to the University Medical Center of Princeton and launched an intense marketing campaign. Mr. Rabner noted that other regional hospitals had been spending upwards of $2.5 million in marketing in PHCS's service area.

"We didn't do any marketing," he said. "I think of marketing as really educating the public about the services that are offered and the reasons why you might choose to get care here."

The name change was meant to underscore the hospital's teaching status – one that it has held for 35 years.

From the business perspective, Mr. Rabner and the PHCS trustees also set out to improve the hospital's financial performance. Having suffered a loss of $6 million four years ago, PHCS had a profit of $11 million in operations for fiscal 2004, a figure that puts UMCP in the top five hospitals in the state. "We feel good about the financial performance," he said.

Flash forward to the present day, when hospital trustees feel that after rebounding from near financial crisis, UMCP needs to expand to keep up with the growth of nearby hospitals. As Marvin Reed, former Borough mayor and chairman of the aforementioned municipal task force, has said repeatedly as he tours with the task force to report to various municipal bodies, virtually every major hospital within a 30-mile radius is looking to grow in a manner that is commensurate with the health care demand in their primary service areas. The Trenton-based Capital Health System, for example, the parent company of a couple of one-hundred-year-old hospitals in downtown Trenton, announced plans in January to build a 300-bed facility on a 31-acre tract on Princess Road in Lawrence Township. The move was widely seen to compete with more regional suburban hospitals like UMCP and Robert Wood Johnson (RWJ) University Hospital in Hamilton Township.

The RWJ University Hospital in New Brunswick has spent several years expanding their urban campus in downtown New Brunswick. In January, the Bristol-Myers Squibb Children's Hospital at RWJ opened, marking the completion of a $5.9 million project that increased the unit to approximately 8,000 square feet, up from 1,000. That type of expansion is indicative of plans put forth by several regional hospitals.

In light of the hospital's intention to move within six years, the task force has recommended that zoning allow for an immediate expansion of 35,000 square feet simply for improvements. Hospital officials have offered no indication that UMCP would use all or any of an allowed 35,000 square feet, but their strategic plan is clear in that certain changes and upgrades need to be implemented sooner, rather than later.

When it came to exploring the possibilities of onsite expansion, the hospital ran into some unavoidable issues that are assumed to have influenced the trustees' vote in favor of building a new facility between two and six miles from the current Witherspoon Street campus.

Onsite, the hospital would have to replace various infrastructural amenities like heating, cooling, plumbing, and electrical systems that represent "a bigger problem than you might think," Mr. Rabner pointed out, adding that in a newer hospital, those systems account for about 40 percent of operational costs.

"When you start fooling with those systems, you have to bring all of the space that they go into up to current code." Mr. Rabner said that if the hospital were to do that onsite, it would have to add about 250,000 square feet–more than seven times the space the task force has recommended to address immediate needs.

The current UMCP Witherspoon campus has 510,000 square feet. The suggested increase would have only gone a small way toward doing what the hospital's strategic plan says it needs to do to stay "competitive." Mr. Rabner has speculated that a new campus would require no less than 50 acres. The hospital's strategic plan forecasts the turning over of about $15 million for the acquisition of new land and between $220-230 million for a new hospital, parking, and ambulatory care center. Mr. Rabner observed that UMCP's service area is expected to grow by about 20 percent by 2025. Currently, 16 percent of UMCP patients are from Princeton Borough and Township, with the majority of patients coming in from East Windsor Township, West Windsor Township, Monroe Township, Plainsboro Township, Cranbury Township, and Hightstown Borough. "When I talk to those folks, they hate crossing Route 1, so that's an issue that we have to address as well, and that's a tough one."

Looking down the road beyond 2025, Mr. Rabner said that the hospital would need a "minimum" of 1.2 million square feet – more than double the size of the current campus. In fact, the task force's Mr. Reed has said that he hesitated at public forums to illustrate projections that focused on an onsite expansion of that magnitude because of the anticipated public outcry.

Mr. Rabner also noted the possibility of getting tied up in "significant litigation" that would certainly slow any onsite development if the hospital were allowed to expand onto surrounding streets.

"We decided that the odds of accomplishing all that [onsite] in a reasonable period of time were less than zero."