The remaining phases of Aspen Valley Hospital’s $140 million expansion will only be built if its new foundation can raise roughly $60 million.
The Aspen Valley Hospital Foundation is in the midst of its quiet capital campaign, and is reaching out to potential donors who are capable of committing to seven- and eight-figure amounts, said Deborah Breen, president of the hospital’s fundraising arm.
Breen, who started the job in January, has been busy establishing the structure of the foundation, its gift acceptance policy, and recruiting board members and building the organization from the ground up.
“As we move forward in the next couple of months, we’re taking a systematic approach and the key for donors is to have that in place and let them know who is affiliated with the foundation,” Breen said.
Meanwhile, she has been talking with potential donors. About $15 million has been committed in either pledges or actual dollars.
A more formal push will occur this summer, with a goal to raise $25 million from individuals. That would put the foundation at $40 million by the end of 2013 or in the spring of 2014.
“The top 10 gifts make up 50 percent of the campaign,” Breen said.
The plan for next year is to raise the remaining $20 million through a public capital campaign.
AVH last year created the foundation as its own fundraising entity solely focused on hospital needs, specifically for the expansion. The hospital used to rely on the Aspen Valley Medical Foundation for fundraising but split from the nonprofit, whose mission had expanded into other charitable giving.
“It was a turning point for AVH last June to figure out how to pay for the expansion,” Breen said. “Most hospitals have their own foundations.”
John Sarpa, president of the AVH board, said after the foundation was set up, the pause button was pushed while the hospital did a national search for a president.
Breen, who served as president of a hospital foundation in Rhinebeck, N.Y. for the past 13 years was offered the job in November.
“I could see that it was a similar community and an exciting opportunity,” she said. “It was a similar situation [in Rhinebeck] with a woefully undersized facility.”
AVH is in the middle of building phase II of its four-phase expansion, which would triple the size of the existing facility. AVH administrators say that the 35-year-old hospital is aging and is significantly undersized to provide acceptable health care.
Aspen City Council, which conceptually approved the project in 2009, is being asked to give final approval for the third and fourth phases, which will add another 82,000 square feet to the campus.
Critics, who say the project is too large and too expensive, have become more vocal since the project has gone to final review. In response, AVH officials are ramping up their messaging to the community and are finding themselves having to defend their reasoning behind the expansion.
Some opponents have latched onto AVH’s finances and the project’s price tag in their effort to convince council to deny final approval, and stop the expansion in its tracks.
The first part of the expansion received final approval in 2010, and voters approved $50 million in bonds to partially finance the project through a property tax increase. At a 3.5 percent interest rate, the total pay back of the 20-year general obligation bond is $70 million, according to Terry Collins, chief financial officer of the hospital.
Phase II is expected to cost $80 million. In addition to the bonds, AVH is spending $30 million it has amassed over the years as part of its reserves, said AVH Chief Operating Officer Dave Ressler.
Phase I, which was a much smaller project, cost $6.4 million and was paid for by a bond issued in 2003.
Ressler made what some consider a bold statement to council last week during a public hearing — that operational costs, and in turn, patient fees — will not go up as a result of tripling the size of the facility.
“It’s simply not true” that costs will increase as a result if the expansion, he told the Aspen Daily News last week.
With the exception of a couple of housekeepers and maintenance workers, additional staff will not be required in the expanded facility. That’s because current hospital workers already are working on top of each other in cramped spaces.
“We don’t expect an increase in patient volume and the staffing budget is flat in future years,” Ressler said.
The buildings will operate more efficiently than the existing facility, which requires more repairs and workers now than the new structures will, said AVH spokeswoman Ginny Dyche.
Ressler, Sarpa and Collins all point to AVH’s solid financial footing, which has earned the health care facility a baa2 bond rating from Moody’s, meaning it has a moderate credit risk. The credit rating agency recently upgraded AVH from a baa3 rating.
“It’s unusual to have an investment upgrade for a small hospital,” Sarpa said of the 25-bed facility.
The vote of confidence is partly based on the hospital’s weathering the recession and recent bad snow years. Like most businesses in this seasonal community, the hospital is dependent on tourists using the facility.
The rating also is based on AVH’s liquidity, or its healthy cash reserves, and its strong management and stable board of directors, Ressler said.
Collins said there is currently $54 million in AVH’s reserves. After phase II has been paid for, there will be $29 million.
But possibly even more important for AVH administrators is that Moody’s — which partially bases its ratings on an accounting method that factors in the average age of the facility — recognizes that the expansion is necessary.
It’s not a “build it and they will come” scenario, Sarpa said.
“We had to sell them on the project and they were comfortable that our expansion would work,” he said.
Breen said it was realized that the foundation needed to accelerate fundraising to align with construction timelines.
She said she is confident that the hospital can reach its goal, despite that there are numerous multimillion-dollar capital campaigns happening simultaneously in the community.
“There is a lot of competition for those philanthropic dollars,” she said, noting that nationally, donors first pledge money to religious endeavors, then education and thirdly to health care.
Breen said the project’s opponents and the community in general need to understand that the aging hospital cannot serve the population in the future, especially with changes in the health care industry.
“I wouldn’t have come here if I didn’t believe in this campaign,” she said.