Children's Hospital of Wisconsin plans $265 million expansion at its Wauwatosa campus

Children’s Hospital of Wisconsin plans to spend approximately $265 million to expand and upgrade its campus in Wauwatosa, its first major expansion in a decade.

The project includes a six-story building for physician offices, as well as an expansion of the hospital's emergency department.

Children’s Hospital’s last large addition was a $165.9 million tower completed in 2009.

The new project will be the fourth major expansion since the hospital moved to the Milwaukee Regional Medical Center in 1988. Since then, Children's Hospital of Wisconsin has become one of the largest children's hospitals in the country.

The planned addition would be the most recent in a string of building projects by health systems in southeastern Wisconsin.

• Advocate Aurora Health plans to spend $250 million to build a hospital and medical office building in Mount Pleasant and plans to open clinics in the Racine area. The health system also is spending more than $300 million to build a hospital, outpatient surgery center and medical office building in Kohler, replacing its existing hospital in Sheboygan.
• ProHealth plans to build a 24-bed hospital projected to cost $55 million on its medical campus in Mukwonago.
• Froedtert Hospital expects to complete next summer a $43 million addition of four floors to its Center for Advanced Care opened in 2015. That project, costing $140 million, was the initial phase of a larger project projected to cost $240 million.
• Ascension Wisconsin plans to build a $42 million medical center, including an outpatient surgery center, in Mount Pleasant.

The increase in medical construction projects can be seen throughout the country, said Jeffrey Hoffman, a principal at ECG Management Consultants.

One factor is the need to replace buildings that are too old and dated for new technology. And though hospital admissions are decreasing, the patients admitted to the hospital tend to be sicker and require longer stays.

Construction on the planned addition at Children’s Hospital is expected to begin late this year or early next year and the move to be complete in 2021, according to a news release.

The 237,000-square-foot addition would be built between the north side of the hospital and Children’s existing clinics building.

Renovation and expansion of the emergency department is expected to begin in 2019 and be completed in 2022.

It would add at least 10 examination rooms to the emergency department, increasing the total to 44 and potentially reducing wait times.

The hospital’s emergency department and trauma center treated 67,000 patients last year, or an average of 183 a day. Roughly 42 percent of the hospital’s admissions are through its emergency department.

The addition also will enable Children’s Hospital to consolidate its surgical services, now on two floors, on one floor.

That will increase operating efficiency and improve the experience for patients and families, said Scott Turner, chief operating officer of Children’s Hospital.

The surgical prep and recovery rooms will be on one floor, for instance, enabling physicians and other staff to move easily from room to room.

The operating rooms will be slightly larger to provide more room for new technology, and all the rooms will have the same layout and design.

Children’s Hospital performs about 14,500 inpatient and outpatient surgeries a year — or about 280 a week — on its Wauwatosa campus.

The new project will add about $100 million to Children’s Hospital's long-term debt, with the balance being paid for from the health system's reserves, said Marc Cadieux, chief financial officer of Children’s Hospital.

Children’s Hospital and Health System, the parent organization, had reserves of $860.2 million as of Dec. 31, up from $713.8 million at the end of 2016 after the stock market’s strong gains last year.

The health system reported an operating profit of $43 million and a net profit of $75 million on revenue of $1.1 billion in 2017.

That reversed two years of declining operating income.

In recent years, the health system has invested in opening clinics in suburban areas, such as Mequon, as well as in Children Community Health Plan, Cadieux said.

The new clinics are part of its strategy — one that other health systems also are adopting — of providing more services closer to where people live.

Children’s Medical Group employs about 120 pediatricians. Children’s Specialty Group, which is owned jointly by the health system and the Medical College of Wisconsin, employs more than 500 physicians and other clinicians in more than 30 specialties.

For its part, Children’s Community Health Plan insures about 130,000 people covered by BadgerCare Plus, the state’s largest Medicaid program, and is the largest Medicaid managed care organization in southeastern Wisconsin.

The health plan also insures about 30,000 people who buy health insurance on the marketplace set up through the Affordable Care Act.

Children's Hospital also has a 42-bed pediatric hospital at ThedaCare Regional Medical Center in Neenah.

More than half of the health system’s patients are covered by BadgerCare Plus and other Medicaid programs. Those programs pay much lower rates than commercial health plans.

For instance, 54 percent of the health system’s patients are covered by Medicaid programs. Yet the programs account for 29 percent of the health system's revenue, according to financial documents.

In recent years, Children’s Hospital has faced increased competition from Aurora and UW Health, which has a pediatric hospital in Madison.

But Cadieux said Children's Hospital has held its own and even seen an increase its market share in the northeastern part of the state.

Still, it could face increased competition in Racine and Kenosha counties from Advocate Aurora Health. That system, created by the merger of Aurora Health Care and Advocate Health Care Network this year, includes a children’s hospital.

Peggy Troy, chief executive officer of Children’s Hospital, has long said the specialized services that the hospital can provide are just one part of ensuring the overall health of children in the region and that lessening the health disparities in Milwaukee and other parts of the state hinges on focusing on other determinants of health, such as housing and jobs.