CHICAGO - Two Midwestern hospitals have postponed plans for high-profile cancer treatment centers - of which only five now exist nationally - citing a weak bond market for health care projects.
Northern Illinois University, which won approval from state regulators last year and was planning on issuing up to $200 million to finance a proton therapy treatment center outside Chicago, has decided to delay the sale until at least the spring. William Beaumont Hospital outside Detroit, which recently suffered a string of downgrades, said it would delay its plan to build a proton therapy treatment center until it interest rates improve.
The delay comes after years of planning for both projects and at a time when many hospitals are making plans to build similar treatment centers in the Midwest. With only five proton treatment centers in the country, and none in Illinois or Michigan, hospitals could see strong profits from the cutting-edge therapy. In both states, other hospitals are in the process of securing state approval to build their own proton treatment centers.
Unlike radiation therapy, where the dosage is complicated by a need to kill cancer cells without damaging healthy tissue, proton therapy uses protons generated through an acceleration process with magnets steering the proton beam to allow for a more precise targeting of cancer cells.
The Northern Illinois Proton and Research Center LLC, or NIPRC, the group at Northern Illinois University that is building and will operate the center, decided in late December to delay issuing bonds until after the first of the year, said NIPRC spokesman Gary Mack. More recently the group decided to postpone the sale until the spring, hoping to enter a stronger bond market at that point, he said.
"NIU and NIPRC are in the same boat as everyone else is with the financial meltdown," Mack said. "There are countless episodes of health care projects across Illinois that are being delayed for various reasons, many of them having to do with bonding."
JPMorgan is underwriter on the project.
The delay comes after NIPRC won approval last year for the project from the Illinois Health Facilities Planning Board and presented its plans to the Illinois Finance Authority, which would serve as the conduit issuer for the transaction. NIPRC estimated the project would cost $160 million, and construction began last June. The delayed bond sale is not expected to significantly impact the construction time line, which has a completion goal of 2010, Mack said.
Under the deal approved by the IFA, NIU would sell unrated debt without insurance to finance the project. Structural details are preliminary but officials were looking at issuing taxable or tax-exempt bonds that may use a variable-rate demand structure with a direct-pay letter of credit.
Meanwhile, after years of planning and a show-down with the state's Commission of Need board last year, Michigan's William Beaumont Hospital has also put on hold plans to build its proton treatment center. The hospital said in a statement released to local media last week that it hoped to move forward with the $160 million project at some point this year "contingent upon our success in the bond market."
Beaumont planned to issue about $35 million of bonds for the deal with the bulk of the remaining cost coming from its private partner, ProCure Treatment Centers of Bloomington, Ind.
While holding off on the new-money bond sale, Beaumont last week moved forward with a plan to refund nearly $400 million of outstanding revenue bonds. It was the first time the hospital has entered the market since it suffered downgrades from all three rating agencies last fall.