The Lakeway Regional Medical Center project cleared a major hurdle when the U.S. Department of Housing and Urban Devel-opment insured its estimated $179 million loan March 17.

The guarantee removes shackles that had halted construction since last summer for the full-service, physician-owned hospital at RR 620 and Flintrock Trace.
Sam DeMaio, board chairman of Lakeway Regional Medical Center, said March 18 that he expects site grading to resume in two weeks and take four months to complete. Then, Hoar Construction will pour the foundation for the eight-story building to take shape. Vertical construction is expected to start in three months and take 23 months to complete with the hospital opening in April 2012.
Investors could have pursued a loan without the HUD guarantee, but DeMaio said their rates would have been significantly higher.
“We have now financing complete for the entire project,” he said.
Construction on the full-service hospital began in 2008, but later that year, the U.S. economy started to falter and financial institutions grew increasingly cautious.
“Initially in September 2008 we had our financing in place completely, and then the market took a downturn and … our health-care REIT pulled the financing. So we have been working on financing ever since then,” DeMaio explained.
Early in 2009, the hospital project was fighting a two-front war to both secure financing and lobby Congress to vote against a bill that would prohibit physician-owned hospitals from receiving Medicare licenses, which are essential to operating a health-care facility.
Investors began talking with HUD officials in June 2009 about applying for a loan guarantee. That month, Lakeway Mayor Dave DeOme and Steve Jones traveled to Washington, D.C., for discussions with agency officials to describe health-care needs in the Lakeway area.
DeOme said he, his predecessor Steve Swan and the city have worked for years with DeMaio and the medical center to see this project to fruition because Lakeway residents have been under-served when seeking medical treatment that only hospitals can provide.
“I think that this [hospital] is a huge plus for the people of the City of Lakeway,” DeOme said. “Lakeway is a beautiful place, but if you were to talk about what has been missing, a medical facility, I think, is something that has clearly been needed.”
Respondents have noted their desire for such a hospital for several years on city-sponsored surveys. During their Washington trip, DeOme and Jones attempted to express the pent-up demand and 25-mile driving distance to the nearest hospital to HUD officials.
“If we have a sickness or injury, it’s a long way from Lakeway to get to a primary hospital,” DeOme said.
The facility would draw patients from Lakeway and surrounding areas who have been traveling up to an hour during peak driving times if they need to receive treatment at a hospital, DeMaio said.
“Right now, getting downtown for medical care from the Lakeway area and the west is difficult,” he said. “We’re going to serve a number of different ZIP codes.”
However, as the health-care reform debate flared up in Congress, the process bogged down as HUD’s credit and risk management committees evaluated the loan and waited for the result.
“It got held up for a large part because of the health-care debate in Congress and a big part of that was physician ownership of hospitals,” DeMaio said. “For us, it was the perfect storm. It happened at exactly the wrong time.”
Additionally, HUD loan-guarantee applicants also must stop all construction on their sites, DeMaio said, noting Hoar Construction was within 18 inches of final grading on the site when it had to cease work.
Rather than start over again and seek other financing, the hospital board created a flexible plan to anticipate several outcomes of the health-care debate.
“It’s still a majority physician-owned hospital, but ownership will change depending on what Congress does,” DeMaio said. “We’re going to always fit within the law and whatever Congress decides to do, and working that out took a long time.”
During that time, DeMaio said two doctors withdrew from the investment group. After the application carried over into 2010, he said investors grew increasingly nervous, but kept faith.
The wait was worth it. On March 17, HUD Secretary Shaun Donovan approved the loan guarantee.
“Everyone else stuck in there with us and were rewarded with this news,” DeMaio said.
The guarantee will enable hospital investors to secure the loan at a much lower interest rate, which will save them millions of dollars over its duration. DeMaio declined to release further investment details that, if publicized, could open the door to new impediments.
“We don’t want our competition to start lobbying our congressmen to start pushing one way or the other on how doctors can own hospitals,” he said.
Plans call for the first phase of the hospital to open in a 270,000-square-foot space with 179 beds.
Services would include: cardiology/cardiothoracic; radiation oncology; emergency department; surgery; gastrointestinal services; women’s health services including obstetrics; infusion therapy; radiology; and nuclear medicine. It also will offer respiratory services; physical therapy/sports medicine; occupational therapy; speech-language pathology; and pain management. The facility will boast a Level 3 trauma center with a helipad and ambulance bays next to its emergency room.
The hospital board has plans for two additional building phases that would add about 200 beds without disrupting existing operations during construction. DeMaio said the site and utility infrastructure would accommodate all potential building phases.
DeOme said he is eagerly anticipating the economic boost that would likely come with the hospital’s opening.
The for-profit hospital would add an estimated 1,500 temporary construction jobs and then 1,000 health care positions.
The mayor also said he believed the hospital would stimulate the housing market and restaurant industries in the city and change the only the architectural landscape of the city but also its business profile.
“I think the project is going to change Lakeway from a bedroom community to one with a large employer,” he said. “It makes the city a complete community.”
“It’s a big boon to the area,” DeMaio said.