The University of Texas Medical Branch plans to enter a long-term lease of the 373,000-square-foot Bay Area Regional Medical Center in Webster that abruptly closed in May, a move that would give it more presence and teaching sites in a rapidly growing market, officials said Friday.
Medical branch officials were confident Friday they could succeed with the Webster hospital even though the previous owner, Medistar Corp., had not, they said.
The medical branch Friday had signed a letter of intent to complete negotiations with real estate investment trust Carter Validus Mission Critical regarding the long-term lease, officials said.
The lease agreement would include hospital equipment, officials said.
The medical branch is negotiating directly with Carter Validus Mission Critical, which in late 2014 acquired a 60 percent interest in the medical facility for nearly $119 million and committed another $35 million for a future build-out, it said in May.
The property’s developer, an affiliate of Medistar Corp., retained the remaining 40 percent interest in the 370,000-square-foot property.
The hospital at 200 Blossom St. opened in 2014 and closed with little warning on May 4, leaving 900 employees seeking jobs elsewhere and many industry observers speculating about what had caused the closure.
Bay Area Regional Medical Center faced “significant hurdles with managed-care companies,” company officials said at the time.
Dr. David L. Callender, president of the Galveston-based medical branch, said there was little other information about what caused the hospital to close.
In considering the lease, the medical branch analyzed its own reimbursement rates from governmental and commercial payers, how it would use the Webster facility and what sorts of patients would use the hospital, which has a 191-bed capacity, Callender said.
The medical branch also considered how it could work with area physicians who previously used the facility, he said.
But the medical branch also considered its need for more inpatient space and how the Webster hospital would work strategically in education and research programs, Callender said.
With those considerations, medical branch leaders believe they could make the Webster hospital viable, Callender said.
Becoming the dominant player in a market where major health care systems are making large investments wasn’t a consideration, however, Callender said.
Callender called it an opportunity to advance the medical branch’s mission of education, research and patient care.
“We want to grow clinical placement sites for students and have enough room for academic programs to be successful,” Callender said. “We have no interest in being the dominant player.”
Founded as the state’s first medical school in 1891, the medical branch offers programs in health science education, patient care and research.
The University of Texas System Board of Regents on Thursday approved the medical branch’s proposed plans. Financing will be managed through operational funds, officials said.
Financial terms of the agreement weren’t available because negotiations were underway and weren’t finalized, Callender said. The medical branch, a state-controlled institution, would provide financial terms in coming days, Callender said.
When Bay Area Regional Medical Center closed, operators said it would file for bankruptcy. But there are no records of such a filing so far.
When a lease is final, the medical branch will work with its faculty and program leaders, as well as existing physicians in the Bay Area, to determine how best to use the property, officials said. Once the parties sign agreements, the medical branch will determine an opening date, officials said.
“The Webster location will complement our existing facilities on our League City campus and in surrounding areas, as well as our future plans for education and research activities in the Bay Area,” Callender said. “Together, these facilities will enable us to broaden our efforts to serve a rapidly growing region, while supporting our academic work to define the future of health care.”
The medical branch will continue with plans to add 60 beds to its existing 37-bed League City Hospital, which includes an emergency room, mother-baby unit and medical/surgical services for adults.
The medical branch in 2016 dedicated the 250-bed Jennie Sealy Hospital in Galveston and work is continuing to modernize the nearby John Sealy Hospital.
The medical branch also has a hospital at its Angleton Danbury Campus in Brazoria County, as well as numerous clinics throughout the Houston/Galveston area.