UAB Medical West
Adjacent to Stadium Trace Village
Rendering of the proposed Medical West Hospital in Hoover, Alabama. Source: City of Hoover
Message from the developer of Stadium Trace Village
Re: UAB Medical West Hospital
Stadium Trace Village is taking shape as the walkable village envisioned by Hoover city leaders and developer Broad Metro, LLC. Phase two of the development is the UAB Medical West world-class hospital, which will serve as the perfect complement to the existing Hoover education and technological infrastructure. Broad Metro is currently under contract for 125 acres of land which would be home to the UAB hospital site. Broad Metro has offered to assign the contract to UAB Medical West for free! Medical West has already received best in the state ratings for its Hoover free standing emergency department. Logic and an open mind will allow all to conclude that a new UAB Medical West $412 Million hospital would be the finest in the nation.
As the developer of Stadium Trace Village, we wanted to provide perspective on not just why the hospital is a good thing for Hoover, but also point out how Broad Metro’s investment in the site has prepared Hoover for this important opportunity.
Our site is conveniently located at I-459 and Highway 150 with good visibility and easy access. Further, Hoover is the sixth largest city in the state of Alabama and does not have a hospital. While the city does have other good medical facilities, it does not have a modern $412 million hospital with private in-patient care beds and allocations for obstetrical/nursery and pediatric care, acute care, intermediate care, critical care and neonatal intensive care with imaging/diagnostic services, surgical services, emergency services, in-patient treatment and other support functions. The UAB Health/Medical West facility will bring the latest and newest technology and highest quality health care to West Jefferson County and perpetuate a high quality of life in Hoover for generations to come.
Why the site at Stadium Trace Village?
Broad Metro has already invested more than $20 million into the site to make it developable and accessible for the hospital. Our investment includes additional turn lanes and traffic signals at the intersection of Highway 150 and Stadium Trace Parkway. These will create better traffic flow while correcting previously existing traffic issues. We have also built a wider than required road through the heart of the Village to facilitate better access to the proposed hospital site. All of these improvements will be complete later this fall.
We are proud to be a good partner with the City of Hoover and its wonderful residents. Our Director of Development, Will Kadish, is now a resident of Hoover and would personally oversee the project.
Secondly, the entire project is designed to encourage a healthy, wellness-focused lifestyle. From a tenant mix offering locally-based businesses, ALDI’s sustainable store concept and the UAB medical office building to a landscape design with shade trees, native plants, pocket parks, and pathways that connect the whole site to the community on foot, Stadium Trace Village is crafted to bring walkability and connectivity to Hoover. The UAB hospital plan expands the natural environment by turning two fast-moving streams into a water feature surrounded by additional walking paths and jogging trails set in the existing wooded areas.
For area residents concerned about the impact on adjacent neighborhoods, the site plan includes conservation easements that will establish large natural buffers forever. The landscape plan calls for a dynamic mix of large street trees that change to more natural plantings as you transition into the adjacent neighborhoods. Further, landscaped natural areas will wrap the perimeter of the project to create additional screening and privacy.
For area residents concerned about increased traffic, as already mentioned, Broad Metro has spent considerable resources to address and improve existing traffic concerns in anticipation of a hospital coming to the site. Additionally, the Skipper Engineering Traffic Study demonstrates that hospital use will not interfere with rush hour traffic. Hospital hours are in several non-competing time slots. Surgery hours begin at 5:00 AM before typical daily traffic, and patient appointments are spread throughout the day – both of which will create needed activity for Hoover-area retailers and restaurants. All I-459 traffic would enter from Highway 150, and a planned future I-459 flyover and slip ramp. The interior single lane entrance roads will receive very light off-peak traffic only from residents who need to visit the hospital. Kindly read the traffic reports before joining any false mob driven mentality.
Why we bring this up now.
Opposition to locating the hospital in Hoover is wrongly arguing that incentives are too expensive, that the region is not really gaining anything in terms of job growth, and that a hospital on the site will lead to lost revenue opportunities for the city.
First, the incentives needed are a fraction (near one third) of what was offered to Grandview Hospital.
Second, Medical West is not closing in Bessemer. It is expanding and will invest millions in the Bessemer site to establish a new emergency room and a new facility to serve an increased need for mental health services in the state. No jobs will be lost, and thousands will be created.
Third, Hoover’s existing retailers and office headquarters are stressed. With UAB Medical West, Hoover’s retailers and overall business community will benefit from the buying power that hospital employees and visitors to the hospital will bring. Further, while Hoover has retail, it lacks the world-class hospital services required for the city to better position itself for the future.
Most importantly, after the city’s initial investment, Keivan Deravi, an economics professor from Auburn University at Montgomery, predicts the operation of the new hospital at the Stadium Trace Village location would generate around $27.8 million in new economic activity in its first year of operation and $101.5 million in new economic activity by the fifth year. The expected average annual addition to the city’s economic output is projected to be $2.3 million per year. Sales and property taxes for the city of Hoover would grow by $1.2 million per year during construction of the hospital and by $2.2 million by the fifth year of operation.
Broad Metro can attest that talk of the Medical West Hospital on the Stadium Trace Village site has already brought interest from better quality retailers and national hoteliers. Also, we project that starting in 2020, Stadium Trace Village Phase 1 will provide approximately $1.5 million dollars in new tax revenue (sales tax, lodging tax, and real property taxes) to the city of Hoover annually. This was made possible by a unanimous vote of the Hoover City Council that incentivized us to spend the more than $20 million that was required to make a hospital on the site even possible.
The City of Hoover will begin to see an immediate return on investment once the hospital is secured. Then there are items of intangible return such as increased property values (including increased home value driven by new demand as UAB lands the finest doctors and researchers who choose Hoover to buy a home and raise families over areas surrounding Duke, Emory, John Hopkins, Walter Reed of Texas, etc.) and an enhanced quality of life for every Hoover resident.
Deravi Economic Impact Study for UAB Medical West Hospital in Hoover
This report attempts to estimate the economic impact of a major investment toward the creation of a health care facility on the economy of the city of Hoover, Alabama. The variables of interest to be analyzed are employment, earnings, and final demand (output).
This economic report is an estimate based on the sound theoretical foundation of the region’s economy and the most updated socioeconomic, demographic, retail, and general business climate information available.
This study estimates possible changes to the regional economy predicated on an existing economic operation and does not consider the presence of any externalities, either positive or negative, in its computation.
The premise of this analysis is that there will be no major event to change the short or long term economic foundation of the region, and there will be no other competing investment in the area in the future.
Every attempt has been made to use the most recent information. The author, however, does not assume responsibility for any changes or revisions that may be made to the source data.
M. Keivan Deravi, Ph.D. Professor of Economics
Auburn University at Montgomery September 2018
Email address [email protected]
- The purpose of this report is to estimate the economic impact of construction and operation of a new campus for Medical West Hospital Authority, an Affiliate of UAB Health System (MWH) (if located in the city of Hoover), on the economy of Hoover, Alabama.
- The new MWH facility will be a full-service hospital with in-patient and out-patient medical care capability.
- The facility will have 220 total private in-patient care beds with allocations for obstetrical/nursery and pediatric care, acute care, intermediate care, critical care and neonatal intensive care and will incorporate community meeting rooms and retail support space.
- Imaging/diagnostic services, surgical services, emergency services and observation, in- patient treatment modalities, and ancillary support functions supporting all services will be provided.
- A parking deck and a medical office building will also be constructed adjacent to the hospital.
- The parking deck, the hospital, and the medical building will be interconnected.
- The total square footage of the entire project will be more than 500,000 and will cost approximately $412 million.
- Estimates indicate the total annual output impact of construction of MWH on the City’s economy would be more than $177.6 million.
- The total impact of output of construction, over a period of two years, would add up to $355 million on a cumulative basis.
- It is estimated that the construction spending will be responsible for 1,707 full time equivalent (FTE) jobs each year in the city.
Operation – Five Year Horizon‐ Net Addition Basis
- The results presented here are based on “net addition basis”. That is, we only estimated the economic impact of the net additions to the employment and output after MWH relocation from Bessemer (current facility) to Hoover (new site).
- The output impact of the net addition solely attributable to the MWH Hoover operation is expected to grow from $27.8 million in the first year of the operation to $101 million by the fifth year of operation.
- The average annual addition to the city’s output is projected to be $23 million per year.
- Regarding employment impact, the number of FTE jobs attributable to the new MWH facility is projected to increase from 186 in the first year to a total of 576 by the fifth year.
- Average annual additional number of jobs for the first five years of the operation is estimated at 115 FTE employment.
- It is our estimate that the sales and property taxes for Hoover will grow from $1.2 million during construction to a total of $2.2 million by the fifth year of operation.
- It is important to note that these estimates do not take into account all possible taxes levied by the municipality referenced above.
Medical West Hospital Authority (MWH), an affiliate of the UAB Health System, is a 310-bed community hospital. It is currently located in the city of Bessemer, Jefferson County. MWH and its hospital-owned primary care physician clinics provide comprehensive health care services for residents living on the west side of Jefferson County.
MWH proposes to replace and relocate the existing 310-bed hospital at its current location in Bessemer with a new facility on a site located in west Jefferson County along the Interstate 459 corridor. The new hospital will include the relocation of its current services and physician practices. The new facility includes a 220-bed inpatient hospital, a medical office building, and a parking deck. Total square footage of the entire project will be more than 500,000 ft2 and will require an investment of approximately $412 million.
The decision to relocate and replace the hospital is an economic decision which is based on a cost-benefit analysis of the renovation of the existing facility versus the construction of a new hospital. The new hospital should provide MWH with increased efficiency, expansion in necessary services, lower operational cost, and long-term business viability. The Bessemer facility will be re-purposed and used in some health care delivery mode. Preliminary evaluation for possible alternative options will be weighted once the decision regarding MWH relocation is firmed.
This report seeks to estimate the economic impact of construction and operation of MWH’s new campus if located in the City of Hoover on the economy of Hoover, Alabama.
MWH has served the communities of west Jefferson County for more than fifty years. It first opened as Bessemer Memorial in 1964 on Ninth Avenue in the city of Bessemer. In 1973, Carraway bought the hospital, and the facility became known as Bessemer Carraway. In 2002, the hospital became UAB Medical West when it joined the UAB Health System. In 2006, the hospital became a healthcare authority.
In 2017, the hospital became a university hospital authority and is now known as Medical West, an affiliate of the UAB Health System. Medical West’s current key service lines include two busy Level III emergency departments (one at the hospital campus and one free standing), general acute care, intensive care, imaging, labor and delivery, catheterization laboratory, geriatric psychiatric, acute rehabilitation, wound care, and surgical services.
The original hospital was designed and constructed in the early 1960’s. Subsequent expansions in the 1970’s included the fifth and sixth floor inpatient care areas and the first professional office building.
There have been several efforts to renovate portions of the facility over the years. These projects were more limited in addressing issues when and where needed. Examples of these renovation projects include: emergency room renovations and expansion; outpatient surgery relocation to the professional office building; endoscopy lab expansion; intensive care unit expansion; psychiatric unit expansion, minor repair; refurbishment and maintenance (paint, wallpaper, furnishings) to each patient floor.
These limited efforts could not address the more comprehensive and costly solutions to slow the deterioration of the aging facility and mechanical systems. Some of the issues related to an aging facility and inadequate design include: undersized patient rooms and bathrooms; some areas with obsolete mechanical systems; inadequate accommodation for outpatients; multiple leaks in roofing and expansion joints throughout the building; lack of a pneumatic system, thus requiring hospital employees physical delivery of supplies and specimens; small and inadequate elevators; inefficiency in operations (kitchen and cafeteria located in separate buildings, diagnostic imaging modalities located in several areas and buildings, departments separated in multiple locations due to size constraints); undersized and outdated surgical suites and recovery areas; inadequate storage throughout the facility.
The current facility is unable to accommodate patients’ expectations for private room demand. The ultimate result of these operational and design limitations has resulted in a history of declining inpatient volumes.
Methodology – Economic Impact
The methodology employed to estimate the impact of MWH’s investment on the region’s economy is derived from regional economic models. The basic premise is that the MWH’s construction and capital investment along with its operation will stimulate various sectors in the local economy, as the transaction activities by MWH increase the demand for goods and services in the region. In turn, the affected sectors will increase their demand from their suppliers throughout the region to respond to the demand for their output by MWH.
Classifying the impacts into three broad categories facilitates an understanding of how an initial change in the demand for goods and services in the economy, due to an economic activity, is multiplied into additional impacts.
The three categories of impact are:
Direct: The direct impacts of MWH are the additional demand and expenditures in the local economy that are directly attributable to the regular and day-to-day operation of the MWH.
Indirect: To the extent that direct purchases of goods and services, by MWH, reverberate throughout the economy and result in further increases in business transactions, there will be indirect impacts. An indirect impact, for example, results when a business needs additional resources to service the increased demand directly attributable to the operation of MWH. The suppliers of these items find their sales increasing and, in turn, need more input to meet the new demand. This process continues, yielding a multiplier effect on the output of the local economy. Whenever the extra demands are met by industries outside the local economy, there are leakages from the flow of products and income from the local economy. The greater the number of leakages, the lower the indirect impacts and the lower the multiplier. On the other hand, the more diversified the local economy, the higher the value of multipliers.
Induced: Additional indirect effects are induced by the change in income in the economy. For example, when a business hires an additional worker to meet the demand caused by MWH, the worker’s spending further enhances economic activity in the region.
Determining multipliers is a fundamental step toward conducting an economic impact analysis. The term multiplier refers to the ratio of all direct, indirect, and induced effects to the direct effects. Once the total direct impact of MWH operations — specifically the earnings, employment, and output directly attributable to — are estimated, they are linked to other relevant criteria to estimate the pursuant demand on housing, labor force, and any addition to sales tax, property tax, and income tax revenues realized by the local officials.
For the purpose of estimating the economic impact of this project, economic, demographic, and housing market information was gathered from:
The U.S. Department of Labor
The U.S. Census Bureau
The U.S. Bureau of Economic Analysis
Alabama Department of Revenue
Economic Development Partnership of Alabama
Notes about the Model
The following observations should be noted about the model that has been used for conducting the analysis in this study:
- The Input-Output model used for this study deals with readily available quantifiable impacts such as dollars of spending or employment.
- The model does not consider social costs or benefits of economic activities.
- The model used is a static process that does not take into effect changes over time in a dynamic economy. This suggests that the relationships between economic sectors are fixed, as of the date of the model’s underlying database, and do not account for adjustments that may take place over time.
- The model assumes a linear relationship between changes in demand for products and services and the resulting changes in income and employment. It does not consider the changes in productivity over time.
- The model assumes that a response to any incremental change in demand for goods and services is at the average rather than the marginal rate.
- The model does not take into consideration the additional capital expenditures required to support indirect and induced effects on the local economy.
Primary Direct Data
Primary direct data are economic additions to the local economy that are solely attributable to the operation of the MWH and its affiliated centers. Examples are net additions to the local area’s economy resulting from expenditures on infrastructure, construction, operation and maintenance expense, and payroll. In absence of the aforementioned entities, such additions will be null and void.
As reported in Table 1, the total investment by MWH is estimated to be $412 million. From that total, $245 million will be spent on the new MWH hospital and $50 million will be spent on equipment.
Table 1 highlights the construction spending for the near-future (a 30-month time horizon). This includes spending on labor and material expenses directly associated with the construction phase of the project. In order to derive this estimate, we subtracted equipment expenditure from the total budgeted construction investment. This figure is estimated to be $362 million over a period of two years. Next, in Table 2, we divided the short-term construction budget into categories of labor and material spending. These figures are estimated to be $144.8 million and $217.2 million for construction, labor, and material spending over a period of two years, respectively.
Next, we highlight employment, and payroll and total spending attributes of the core and supporting operation of the MWH.
As is highlighted in Table 3, total employment at the current facility is projected to be 1,000 full time equivalent (FTE) jobs in 2018. If expansion and replacement plans are not implemented, employment will remain at this level for the foreseeable future. With the relocation, projected employment will increase incrementally from 100 additional employees in 2021 (post-construction) to 248 more FTE employees by the fifth year of operation. The incremental increase is due to the fact that the additional capacity and built-to-purpose facility will add more efficiency and facilitate provision of additional health services during the next five years.
Likewise, the projected payroll, as highlighted in Table 4, is expected to increase from a total of $82.5 million annually in 2018 to $118.1 million by the fifth year of operation. This signifies a net increase of $35.6 million relative to the 2018 payroll. It is important to note that the 2018 data is being used as the benchmark for the no-relocation scenario.
The data pertaining to total spending is presented in Table 5. Total spending is defined as the sum of payroll and non-payroll expenditures. Non-payroll spending captures expenditures such as supplies, purchased services, repairs and maintenance, utilities, and other similar expenditures in support of the MWH’s day-to-day operation. The net increase in total spending is projected to increase from $15 million in the year immediately following the completion of the first phase of expansion to $59.2 million by the fifth year of operation.
Construction of the new hospital and other core support centers are scheduled to take 24 to 30 months. The total construction budget, including contingencies and reserves, is estimated at $362 million.
To prepare the data for the economic impact analysis, we allocated 40% of the construction budget to labor and the remaining 60% to materials. The expenditures on constructional materials spending (non‐payroll expenditure) totals to $217.2 million over a period of two years. The labor cost (payroll) of the project is projected to amount to $144.8 million. It is our estimate that 639 construction workers will be working on the site on a full time equivalent (FTE) basis.
The economic impact of the construction phase is estimated as follows:
The first aspect of the construction phase economic impact works through the salaries and wages (gross payroll) that are paid directly to the workers employed at the site. These workers will spend their realized income and will, in turn, create taxes and additional income as the multiplier process continues to complete its cycle.
The second aspect of the construction phase economic impact is through the purchase of construction materials (industry value in place). This expenditure creates direct demand and additional sales revenue for locally‐based companies. These additional revenues, following the national income and product mechanism, will trickle throughout the economy in the form of earnings for the firms and the workers who provided the material and services. The additional earnings, so generated, will become purchasing power which in turn will be spent on the purchase of goods and services. These purchases will create taxes and additional income as the multiplier process works through its cycle.
In Table 6, we show the output impact of the construction‐related direct payroll spending in the region’s economy. The construction phase is projected to inject a total of $72.4 million of annual direct wages and salaries in the city’s economy for two years. This income (earned income) will be spent on the purchase of goods and services (output) throughout city’s economy. The total output impact is estimated as follows:
- Withholdings and spending leakages are subtracted from the gross payroll. This provides us with “contributory direct payroll”
- The output multiplier for payroll spending is 2.599.
Applying this multiplier to the contributory direct payroll yields an annual output impact contribution from payroll of $99.3 million for the construction phase of this project.
We then concentrate on the output contribution from non‐payroll expenditures. In addition to the payroll spending, construction companies also purchase materials and services in support of their operation. This includes purchases of heavy machinery, construction materials, and other supplies. This non‐payroll spending, in turn, will boost sales and revenues for the local suppliers of such products and services and also supports additional employment. The output impact of this category of spending is in the lower section of Table 6.
As is presented in Table 6, the construction’s non‐payroll expenditure should total $53.4 million, annually. This figure is estimated by subtracting the payroll expenditure from the construction’s value in place (added contribution to the City’s GDP). We applied a leakage factor of 60% in order to estimate the in‐city portion of construction spending. Finally, we applied a multiplier of 1.465 to this class of spending. This resulted in an estimate of $78 million of annual output impact from non‐payroll expenditure.
The total output impact of the construction phase of this project on the city’s economy is the sum of these two subcomponents. Our calculation indicates the total output impact of construction of MWH on the city’s economy to be in excess of $177 million. Please note that $177.6 million is an annual impact. The total construction impact, over a period of two years, would add up to $355.2 million.
Next, we concentrate on the employment impact. Similar to the output case, we compute the employment impact using both the payroll and non‐payroll spending. It is important to note that these two classifications of spending have their own distinct multipliers. The exact process and results are in Table 7. As reported, it is our estimate that the construction spending associated with this project will be responsible for 1,707 full time equivalent (FTE) jobs each year in the city.
Please note that the economic impact of the construction is non-recurring or transitory in nature.
In terms of the economic impact of the operation of MWH, we used the same procedure as outlined earlier. We first concentrated on the gross payroll of the operation then moved to the non-payroll expenditure. Appropriate multipliers and leakage factors were applied for each case. For example, a leakage factor of 30% was applied to the MWH’s annual non-payroll expenditures. In this context, the total economic contribution was defined as the sum of the economic contributions from wages and salaries and non-payroll expenditures. Finally, for the employment impact analysis, a similar practice, as described for the construction investment, was followed.
This practice was repeated for the first five years of the operation of MWH following the completion of the construction phase. The results for output and employment are reported in Tables 8 and 9.
It is important to highlight that the results presented here are based on a “net addition basis”. That is, we only estimated the economic impact of the net additions to the current hospital and the new facilities. These added capacities are above and beyond the current hospital’s ability and reach.
The output impact of the net addition to MWH’s operation is expected to grow from $27 million in the first year of the operation to $101.5 million by the fifth year of operation. The average annual addition to the city’s GDP is projected to be $23 million per year. In terms of employment impact, the number of FTE jobs attributable to MWH expansion is projected to grow from 186 in the first year to a total of 576 by the fifth year. Average annual additional number of jobs for the first five years of the expanded operation is estimated at 115 FTE employment.
The overall output and employment impacts of the MWH, defined as the sum of the construction of the new and expanded facilities and their respective ongoing operations, are presented in Tables 10 and 11.
It is our estimate that the output impact of the construction will total to $177.6 million for two years. This will be followed by a solid and impressive trajectory of growth solely attributable to the operation of MWH. We estimate the average annual GDP level for the first seven years will be approximately at $67.3 million per year. The average annual overall employment level for the first seven years is expected to be 768 FTE jobs.
In this section of the report, we attempt to highlight the estimated increase in the tax collection for the city of Hoover. More specifically, we computed sales and residential property taxes attributable to the relocation of MWH. These estimates are reported in Table 12.
It is our estimate that the sales and property taxes for Hoover will grow from $1.2 million during the construction years to a total of $2.2 million by the fifth year of operation. It is important to note that these estimates do not capture all possible taxes levied by the municipality referenced above.
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