FISCAL NOTE

Date Requested: January 10, 2020
Time Requested: 03:44 PM
Agency: Health and Human Resources, WV Department of
CBD Number: Version: Bill Number: Resolution Number:
1081 Introduced SB37
CBD Subject: Health


FUND(S):

0525 - Consolidated Medical Services Fund

Sources of Revenue:

General Fund

Legislation creates:

Increases Existing Expenses



Fiscal Note Summary


Effect this measure will have on costs and revenues of state government.


    The purpose of this bill is to require the Secretary of the Department of Health and Human Resources to modernize or construct new facilities at Hopemont and Jackie Withrow Hospitals to provide long-term care and substance abuse treatment to address critical needs of the citizens of this state.
    The Office of Health Facilities estimates the cost of this bill to include both one time construction costs and ongoing operational costs. The estimated cost to construct a 200 bed facility (100 LTC and 100 substance abuse) at Hopemont is $37,793,280. The estimated cost to construct a 300 bed facility (200 LTC and 100 substance abuse) at Withrow is $52,540,320. The total estimated one-time construction cost for both facilities required by the bill would be $90,333,600.
    The total estimated additional cost to operate a 200 bed facility at Hopemont and 300 bed facility at Withrow is $87,564,343.33 annually (Hopemont: $38,028,469.04 and Withrow: $49,535,874.29). This is taking into account the current operational costs of the facilities for FY2019. Any revenue recognized from the facilities for qualified Medicaid services would be offset by increased expenditures to Medicaid; therefore not reflected in fiscal note.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2020
Increase/Decrease
(use"-")
2021
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 90,333,600 87,564,343
Personal Services 0 0 0
Current Expenses 0 0 87,564,343
Repairs and Alterations 0 0 0
Assets 0 90,333,600 0
Other 0 0 0
2. Estimated Total Revenues 0 0 0


Explanation of above estimates (including long-range effect):


    The cost to the Office of Health Facilities is comprised of one-time construction costs of $90,333,600 and on-going operational costs $87,564,343.33. The construction costs were developed based upon a June 2011 report submitted by ZDS Design/Consulting Services in which they evaluated the cost of renovation of Withrow Hospital compared to constructing a new facility on the property and determined that new construction was cheaper. The original construction estimates for a new facility at Jackie Withrow were based upon a new 119 bed facility. The Office used the same formula used by ZDS for their estimate and updated it for use in both Hopemont (using 200 beds) and Withrow (using 300 beds) to estimate the cost of construction. The updated calculations used a 3% cost escalation for 11 years - 9 years to bring the costs up to date and an additional 2 years to allow for construction to be completed.
    The ongoing costs were calculated separately for the long term care bed portion and the inpatient substance abuse bed. The long term care portion was based upon the calculated cost per day pulled from the FY2019 cost report for Lakin Hospital, a 114-bed long term care facility. For Hopemont, $362/day * 100 beds * 365 days = $13,213,000 less the FY2019 operational cost of $7,742,530.96. For Withrow, $362/day * 200 beds * 365 days = $26,426,000 less the FY2019 operational cost of $9,448,125.71. The inpatient substance abuse portion was based upon the average calculated cost per day pulled from the FY2018 cost report for Sharpe and the FY2019 cost report for Bateman. For both Hopemont and Withrow the calculation was as follows: $892/day * 100 beds * 365 days = $32,558,000 each.
    Because the state of West Virginia does not currently permit 100-bed inpatient substance abuse programs, the Office chose to use the average calculated cost per day from Sharpe and Bateman because, in addition to treating patients with psychiatric diagnoses, they also treat patients with substance abuse diagnoses.
    Due to the use of cost per day in our calculation of on-going operational costs, we are unable to split the costs between Personal Services, Current Expense, Repairs and Alterations, etc. and therefore placed all operational costs under Current Expense.



Memorandum


    For their January vacancy report, Hopemont reported a 41.04% rate and Jackie Withrow reported a 28.00% rate for State Funded FTE positions. With the proposed increase in capacity and the associated staffing needs, it is likely that the facilities will need to utilize contract staffing at a higher rate than current costs used in preparing this fiscal note.
    The Office does not currently administer substance abuse treatment services in coordination with Long Term Care Services as provided for in the bill. It is possible that further development of construction and/or staffing needs would require the separation of those services into separate structures requiring construction of two smaller facilities at each location.



    Person submitting Fiscal Note: Bill J. Crouch
    Email Address: dhhrbudgetoffice@wv.gov