Stanford Report, June 17, 2009

Medical center renewal project to provide $142 million to city

Christopher Dawes

Martha Marsh

Lucile Packard Children's Hospital and Stanford Hospital & Clinics announced today that they have submitted a comprehensive proposal to the City of Palo Alto that addresses fees and additional community benefits to be provided by the Hospitals in relation to the Stanford Medical Center Renewal Project. The total financial value of the community benefits portion of the proposal is estimated at $124 million, in addition to $18 million in fees and traffic mitigation measures, for a total of $142 million.

"The primary benefit the hospitals provide to the community is excellent health care. This proposal also demonstrates a substantial commitment to the City of Palo Alto and its residents—a commitment above and beyond our efforts to provide the best patient care," said Christopher Dawes, CEO of Lucile Packard Children's Hospital. "Considering the fact that many communities subsidize their hospitals through local tax assessments, we believe our proposed community benefits contribution of approximately $124 million provides a solid foundation to work towards an agreement with the City of Palo Alto. It is critical that we move forward with the expansion and rebuilding of the hospitals to ensure that our community has improved access to quality health care and the latest advances in medicine right here in Palo Alto."

The proposal was developed in response to extensive input the hospitals received over the past two years of the City of Palo Alto's approval process. The approximately $124 million in community benefits is in addition to normal fees and traffic mitigations for the project, which are approximately $18 million. The proposal was presented to the City of Palo Alto by the Hospitals as part of an ongoing dialogue with the City and the community.

"As the only Level-1 trauma center between San Francisco and San Jose, it is vital for us to create seismically safe, state-of-the-art facilities that will enable us to continue providing high-quality care to local residents," said Stanford Hospital & Clinics CEO Martha Marsh. "The rebuilding of Stanford Hospital is not a luxury but a necessity for the future of health care in this community. We are proud to be able to offer the community such extensive benefits in addition to the construction of new facilities. The proposal underscores our commitment to ensuring that our hospitals are not only of the highest quality, but also immediately available and accessible to local residents when they need us."

In developing the proposal, the hospitals considered the expected impacts and benefits of the renewal project on local residents, city services and city revenues; along with the economic constraints the hospitals face in funding an investment of about $3.5 billion in new facilities at a time of significant economic uncertainty.

Highlights of the proposal include:

  • Traffic Reduction. The hospitals will purchase annual Caltrain Go Passes, which provide unlimited free rides, for all of their existing and new employees who work more than 20 hours per week, at an annual cost to the hospitals of $1.3 million. In addition, to expand the free Stanford Marguerite shuttle service, the hospitals will pay $2 million in capital costs plus $450,000 per year in operating costs. When combined with other programs to mitigate traffic impacts, the total value of the proposed measures the hospitals will provide to reduce vehicle trips over the life of the project is about $90.4 million.
  • Affordable Housing Contribution. Although the hospitals are exempt from the city's housing impact requirements and are not required to pay a related impact fee, the proposal includes a contribution of $23.1 million to the city's fund to support the development of affordable housing in Palo Alto. This amount is equivalent to the fee that would be paid by a commercial developer. This single contribution by the hospitals is believed to be more than double the total amount collected in fees by the City of Palo Alto from commercial developers over the entire history of the program.
  • Community Health Contributions. The hospitals will provide $4 million over 10 years for community health programs within the City of Palo Alto, working with a community advisory board that would be created to select the specific local nonprofits to receive the funds. Examples of potentially eligible recipients include Palo Alto schools, the Mayview Health Clinic, Avenidas, the Opportunity Health Center and other organizations serving children and adults of all ages.

    • The hospitals will also provide $3 million to assist Palo Alto residents who have a self-payment responsibility that is greater than their financial means when they need inpatient or outpatient care at LPCH or SHC. This new, special funding for residents of Palo Alto is in addition to the hospitals' existing charity care, which supports local residents and other patients.

  • Pedestrian, Transit and Bicycle Connections. To further encourage use of Caltrain, bus and other transit services and enhance pedestrian and bicycle connections between downtown Palo Alto and the medical center, the hospitals will provide up to $3.35 million for improvements to roadways, landscaping, pathways, transit stops and related infrastructure in areas linking the University Avenue Transit Center, El Camino Real and Welch and Quarry Roads.

    • In addition to the community benefits offered above, the hospitals will pay other fiscal benefits to the city, including $5.8 million in fees for parks, community centers and libraries; $2 million in citywide transportation fees that help relieve traffic congestion; $8.3 million in general fund revenues related to sales and use taxes resulting from construction spending; and more than $600,000 in fees to be paid to the Palo Alto Unified School District.

    A formal application to the City of Palo Alto for the renewal project was submitted in August 2007. The City of Palo Alto is conducting the required environmental impact report process, which includes extensive opportunities for public comment. A detailed and lengthy review by the California Office of Statewide Health Planning and Development must also be completed. Once the city and OSHPD have approved the project, construction of the hospitals could begin and is expected to take at least five years.

    More information about the Stanford Medical Center Renewal Project is available at www.stanfordpackard.org.