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CT Construction Digest Tuesday May 16, 2023

CT Children’s new $280M patient tower a linchpin in broader financial turnaround, expansion

Harriet Jones

Superhero day has been an annual tradition for the last decade at Connecticut Children’s medical center, and this April, the hospital was able to combine it with a groundbreaking for the most significant expansion in the hospital’s 27-year history.

CEO Jim Shmerling got in on the act, donning a red superhero cape for the accompanying press conference.

The $280 million new tower, adjacent to the hospital’s current Hartford premises, has been in the works for several years. It will house several ambitious new programs, including a fetal surgery center that is expected to make Hartford a national leader in the discipline, a NICU unit with 50 private rooms, and state-of-the-art facilities for bone marrow transplant work and gene therapy.

“There’s so much demand for our services that we’re turning patients away, so we need to expand,” Shmerling said in a recent interview.

The new patient tower is the highest-profile piece of a broader turnaround effort that’s been underway at Connecticut Children’s since Shmerling, a Tennessee native, arrived eight years ago.

At that time, the picture was different than it is today. The hospital had run multimillion-dollar deficits in two of the previous three years.

“The board had approved a deficit. I’ve never seen that before,” Shmerling said of his arrival in October 2015. “The budget when I got here was to lose $8 million, and that was a huge improvement over the previous year. In fact, the board felt like that might be a stretch.”

The legacy financial issues revolved around the hospital’s size and core patient population, he said.

“We’re comparatively small … to other children’s hospitals, so we don’t have the same kind of scale,” said Shmerling. “We have a lot of children who are enrolled in the Medicaid program, and Medicaid does not pay the cost for the care.”

Infrastructure build-out

His approach to fixing those two problems continued a trend begun by his predecessor, Martin Gavin — supporting the hospital’s mission in underserved communities by expanding its overall reach, and thereby tilting its revenue mix toward more sustainable private insurance payments. This strategy was partly achieved by building more outpatient facilities.

“We really didn’t have that many satellites,” he said. “So, we spent a lot of time investing and building out that network across the region.”

Where previously the hospital counted 750,000 children in Connecticut as its core patient population, it has now extended into western Massachusetts and eastern New York, encompassing a potential patient population of 1.2 million children.

And, as it has moved south in Connecticut toward communities in Fairfield County, it has begun to serve more families with access to private insurance, improving the payer mix. The southern Connecticut expansion, not incidentally, also builds Connecticut Children’s brand in part of the state with potential wealthy donors.

Counting affiliate programs as well as its own standalone locations, Connecticut Children’s now operates about 40 satellite facilities in communities that range from Putnam to Poughkeepsie, New York, and South Hadley, Massachusetts to Stamford.

Yale operates the state’s only other children’s hospital.

“He’s had a huge and positive impact on Connecticut Children’s,” said David Roth, who was on the hospital’s board when Shmerling joined, and became board chair shortly thereafter.

“We opened a Danbury specialty care unit, a Westport specialty care center, a Farmington infusion center, an urgent care center in Farmington,” said Roth. “He helped create a clinically integrated network that engages pediatricians from all over the state, which connects us to these doctors and gives them a better understanding of what we can do. And they now refer a lot of their patients to us.”

In addition to the physical infrastructure build-out and new relationships around the state, Shmerling also partnered with peer institutions. Connecticut Children’s now runs the neonatal intensive care units at eight other hospitals in the region, and for some, their pediatric units as well.

As hospital consolidation only gains pace in Connecticut, Shmerling said he sees this as a way of thriving in a changing landscape.

“What we’ve tried to do is be Switzerland,” he smiles. “Children should have access to care regardless of what health system they go to. How do we have access, then, to those systems so that those children have access to our specialists?”

COVID challenges

Connecticut Children’s financial turnaround pre-pandemic was apparent in both top- and bottom-line growth. The medical center saw its operating revenues climb consistently from fiscal years 2015 to 2020, from $311 million in fiscal 2015 to $399 million in fiscal 2020, a 28% increase.

It reported an operating surplus in each of those years, growing from $23.6 million in fiscal 2015 to $27.1 million in fiscal 2020, making it one of the best-performing hospitals in the state.

“This is like a flywheel,” Shmerling said of the hospital’s financial progress. “You’re trying to get that flywheel moving, and that initial point where there’s a lot of inertia takes a lot more effort. But once it starts moving, you start generating revenue and margin, which then we can take and reinvest in additional expansion.”

For the first four years of his tenure, momentum had begun to build, and by 2019, he was presenting plans to the board for the ambitious new patient tower.

It was far from the first time Shmerling had driven forward a major hospital expansion program. He was recruited to Colorado Children’s Hospital in 2006, tasked with planning a relocation of the entire hospital from the downtown Denver building where it had been for 100 years, to a spacious new suburban campus.

He followed that up with a further expansion in 2010: A $230-million, 10-story, 350,000-square-foot addition, to bring the total number of beds at the hospital to 500. That expansion achieved its projected 2012 opening.

In Connecticut, Shmerling’s expansion plans didn’t go as smoothly — they were interrupted by the pandemic.

“As we were hitting our stride, COVID hit, which put us in a tailspin for a brief period of time,” Shmerling said.

Connecticut Children’s furloughed 600 staff during the pandemic lockdowns, and put retirement contributions on hold. Financially, it survived thanks to support from the state of Connecticut and federal government. But, as with most businesses, some work practices were permanently altered.

Telemedicine, which had previously been a negligible part of its business, supported 40% of outpatient consultations through the pandemic. While that percentage has lessened, Shmerling estimates a fifth of visits are still done remotely, and telemedicine has become another arm of the mission to extend the hospital’s geographical reach.

Expansion plan reborn

By June 2022, Shmerling and his team were back at work on the expansion project, submitting the proposal for state and city approvals. At the same time, Connecticut Children’s began to build the clinical programs that will eventually be housed in the new tower.

Shmerling last year recruited one of the nation’s top fetal surgeons, Dr. Timothy M. Crombleholme, to come to Connecticut from Dallas, promising to build a fetal surgery program around him that could potentially attract patients from across the nation to Hartford.

“There may be seven or eight children’s hospitals across the country (that) can do fetal surgery in utero, (that) have a comprehensive program,” said Shmerling. “The closest place to Connecticut is in Philadelphia.”

That focus on the youngest of patients will be continued in the new NICU, which will provide a level of care that’s not currently available at the hospital, including private accommodations for families.

The improvements will also extend to cancer treatment rooms with improved airflow and isolation, and a gene therapy unit. Shmerling said that will mean Connecticut sends fewer really sick patients to Boston for treatment.

It’s a case that has impressed many, including Wall Street investors. New York ratings agency Fitch Ratings recently called Connecticut Children’s planned expansion a “once in a generation transformational project.”

Fitch opined because the hospital is taking on about $112.4 million in bonded debt to help finance the expansion. This marks the first time Connecticut Children’s has gone to market for bond funding.

It received an A+ rating from Fitch and an A3 rating from Moody’s.

“The ‘A+’ rating reflects CT Children’s excellent market position as the only independent children’s hospital in the state of Connecticut, with a 90% market share in its primary service area, which includes Hartford and the surrounding counties, and a growing market share in its secondary service area,” Fitch said.

Board chair Roth said Shmerling has a lot to do with the positive ratings.

“I think a lot of the fact that we got the outstanding bond ratings we just received are based on what he’s done and the confidence that he’s created in our organization,” Roth said.

Connecticut Water Co. investing $60 million in infrastructure improvements this year

Luther Turmelle

The Connecticut Water Co. will invest $60 million this year on more than 100 infrastructure upgrades and improvement projects, officials with the Clinton-based utility have announced.

Connecticut Water, which serves more than 350,000 people in 60 communities in the state, will be replacing components of its distribution network that are between 40-and-100-years old. One of the larger projects is a new $12 million water treatment facility being built in East Windsor to serve customers in north central Connecticut, according to Dan Meaney, a spokesman for the utility

"That's our largest system and the new work is replacing something that went on line in the late 1960s or early 1970s," Meaney said. Work on replacing the water treatment system started last year and will be completed by the end of the summer, he said.

David Peeling, Connecticut Water's vice president if engineering, making investments in the company's distribution network "is costly to ... install, maintain and replace."

"But it is imperative for us to continually make investments in our water systems so that customers and communities served by Connecticut Water can count on high-quality drinking water and reliable service for generations to come," Peeling said. "Aside from maintaining a safe water supply, replacing water mains, treatment systems and storage facilities in a planned and systematic manner costs less than emergency repairs.”

Other improvements being made to the company's distribution network include more than 30 water main replacement projects across the state involving 1,850 miles of piping as well as upgrades to hundreds of other facilities such as pump stations, water treatment and storage tanks. One of those new water main projects got started this week in Chester, where nearly half a mile of new piping will be installed along the Kings Highway at a cost of $1.4 million. 

The new main in Chester will replace existing pipe that was installed in 1969. Three fire hydrants will also be replaced as part of the project, which will be completed by the end of August.

It will take the efforts of about 260 construction workers to complete this year's improvement projects.  A majority of the improvements are being done by outside contractors hired by Connecticut Water, Meaney said.

Connecticut Water is also installing a 275 kilowatt array of solar panels in Clinton to offset the power needs of the company’s Clinton office, as well as the southern region work center and two electric vehicle charging stations, which are need because the utility is electrifying part of its fleet. Work on the solar array got underway last month and will be completed by the end of June.

Company officials said the solar array will keep the utility from having to purchase power from more traditional sources at prices that are subject to fluctuation. That in turn will help Connecticut Water to stabilize the cost of delivering water to customers.

The company already has two other solar arrays serving parts of its network. One is at the utility's Stewart Water Treatment Plant in Naugatuck and the other is in Colchester at the company's Westchester Village system.

Meaney said Connecticut Water will ultimately seek to recover some the costs associated with the system improvement by going before state utility regulators to  seek a rate increase.

"These are increased costs associated with operating and we do file rate cases periodically," he said. "We have a time frame in mind for the filing, but it's not something we are prepared to share at this point."

Connecticut Water improvements to its distribution network come even as the state's other large water company, Aquarion, is in court appealing a rate hike request that was rejected by utility regulators in March.

At that time, the state's Public Utilities Regulatory Authority denied the Bridgeport-based utility's rate hike request increase that could have increased rates by 27 percent over three years. Instead, PURA ordered that Aquarion customers water rates be reduced by about $67 per year.

 Aquarion filed an appeal of the PURA ruling on March 30 in New Britain Superior Court and was granted a temporary stay of the regulatory decision. A hearing in the case was scheduled for Monday.

Meaney said Connecticut Water is following the Aquarion court challenge as it makes its way through the legal system.

"We're looking to interpret their filing in such way that we can improve our own when the time comes," Meaney said of the Aquarion rate case.

Whole Foods Withdraws Old Saybrook Plan, But Officials Say the Project is Moving Forward

OLD SAYBROOK – Plans for a Whole Foods on Boston Post Road are moving forward despite the developers withdrawing an application for a wetlands permit last week, a town official confirmed.

Town Planner Chris Costa said she met with the developer, Rhode Island-based Carpionato Group’s attorney on Monday to discuss setting up a preliminary meeting with the town’s Architectural Review Board to talk about the project – which involved building a 40,000-square-foot Whole Foods and redeveloping the rest of the plaza that now houses NAPA Auto Parts and Alforno Trattoria.

The developers were scheduled to meet with the Inland Wetland Commission on Thursday, but withdrew their application last week to continue work on their plans, said Costa, and because state law sets a 35-day window for public hearings.

The Carpionato Group could not be reached for comment. 

If approved by the town, the store would be the first Whole Foods along I-95 between Milford and Providence. The closest existing Whole Foods stores to Old Saybrook are about 40 minutes away in Milford and Glastonbury.

Costa said that when the developer resubmits its application for the plaza at the corner of Boston Post and Spencer Plain roads, it will need approval from Inland Wetlands, the Architectural Review Board, and a special permit from the Zoning Commission. That process will also involve a traffic review, and will be reviewed by the Planning Commission and town engineer.

Parking was the major question for the project when David Taglianetti, vice president of development for Carpionato Group, met with the Zoning Commission last October to discuss the development. 

Town regulations require a 25-foot setback between the road and parking lot, which Taglianetti said would not be enough to meet Whole Foods’ strict parking requirements, which demand 240 spaces in the lot. 

At the time, the group planned to apply for an exception from the setback requirements, and for approval to expand the plaza by 12,000 square feet to fit a 40,000 square foot Whole Foods. The developers intend to renovate the remaining 25,000 square feet of the plaza into retail, restaurant and a potential medical office space.

South Windsor warehouse moratorium lifted, regulations adjusted

Hanna Snyder Gambini

A year-long temporary moratorium on warehouses and distribution centers will soon be lifted after the South Windsor Planning and Zoning Commission adopted new regulations related to the facilities.

The moratorium, put in place in April 2022, came at the request of a resident and was enacted by the commission to give officials time to review and adjust zoning regulations.

The new regulations, which will go into effect May 28, help better outline buffers for certain facilities. 

Warehouses more than 40,000 square feet in size and all distribution centers must be a minimum of 500 feet from nearby residential areas. 

Fulfillment centers and all bus and truck storage facilities must be at least 750 feet away from residential areas, and freight terminals must be 1,000 feet away, the new regulations read.

The commission was trying to look at use and intensity, how well a project fits in the community and how it will impact the surrounding community, said South Windsor Director of Planning Michele Lipe.

“These changes help protect the community and the neighborhoods from larger facilities being built right next to them, in hopes of minimizing noise and activity levels,” Lipe said.

“But we also have an industrial corridor that’s developable, so we still need opportunities for projects to occur,” she said. Existing businesses are exempted from the buffers and are able to expand under the new regulations.

The town has numerous large warehouse and distribution facilities, including Home Depot, Coca-Cola, Macy’s, Aldi and a future Amazon Last Mile Facility.

Some applications, in addition to submitting a site plan, may also require a special exception, Lipe said, as “another layer” of review and regulation.

Traffic studies may also be required on future development proposals, and the commission can regulate hours of operation.