UAMS, Sage Partners partnering on 185,000 SF surgery center in Northwest Arkansas

The University of Arkansas for Medical Sciences (UAMS) is a step closer to significantly increasing its footprint in Arkansas’ fastest-growing region.

The University of Arkansas System Board of Trustees met in a special meeting in Little Rock on Friday (Oct. 30). It authorized UAMS to negotiate the terms of a letter of intent to pursue a lease agreement for a 185,000-square-foot outpatient surgery center and multi-specialty medical office building in Northwest Arkansas.

The lease agreement would be with commercial real estate development firm Cushman & Wakefield/Sage Partners in Rogers.

The building does not yet exist. According to a letter to the board from UA System President Don Bobbitt, Sage Partners would be responsible for acquiring land for the project and building the facility.

UAMS officials did not disclose an estimated project cost during Friday’s meeting. For some perspective on the UAMS project scope, Mercy Health System opened a 63,000-square-foot multi-specialty clinic near the Elm Springs Road exit in Springdale in September 2019. The project’s total cost was $47 million, which included land and construction costs.

Sage Partners officials were not available for questions Friday but offered this statement to the Northwest Arkansas Business Journal:

“Cushman & Wakefield/Sage Partners is honored to partner with the University of Arkansas for Medical Sciences to help make this much-needed surgical facility become a reality in Northwest Arkansas. Sage Partners is proud to help find innovative solutions to meet the needs of our growing region.”

As part of the negotiated lease, UAMS would have the option to assume the outstanding debt at a mutually agreeable date or purchase the facility for $1 at the end of the 30-year lease term.

The board expects to consider the lease agreement at its next regular meeting Nov. 19-20 in Fayetteville, if not sooner. If approved, UAMS expects the building would be ready sometime in 2023, according to the letter.

“We have been deliberate in our approach [to the project], which is fully aligned with and supported by the healthcare plan promulgated by the Northwest Arkansas Council,” UAMS Chancellor Cam Patterson said Friday. “Our plans have been vetted and supported by our partners in Northwest Arkansas, including Washington Regional Medical Center and Arkansas Children’s Northwest.”

Little Rock-based UAMS, the state’s only academic health center, established a Northwest Arkansas regional campus in 2007 in the former 323,510-square-foot Washington Regional Medical Center on College Avenue in Fayetteville but does not have a surgical center or hospital in the region. UAMS has an additional 400,000 square feet at other centers in Northwest Arkansas.

In the past year, UAMS has bolstered its orthopedic practice in the area by hiring five surgeons: Wesley Cox, Patrick Brannan, Tyler CarlLee, Navin Kilambi and Chad Songy. They are performing surgeries at other facilities.

“These surgeons are only able to generate professional fees for such cases; the technical/hospital-based part of the fee is collected by the facility where the surgery is performed,” Bobbitt wrote. “If the cases could be performed at a UAMS facility, this technical fee would also be secured by UAMS, which would result in a projected $3-4 million margin on the orthopedic practice alone.”

Amanda George, vice chancellor of finance and CFO at UAMS, said UAMS’ orthopedic practice in Northwest Arkansas now runs at an annual deficit of approximately $3 million.

UAMS currently leases two sites in Lowell and Fayetteville to provide orthopedic clinical services. Those clinics would close once the new building opens.

Bobbitt also wrote that although the main reason for building the surgical center is for orthopedic surgery, UAMS will be able to expand services and potential revenue beyond orthopedics in the future to include coronary, cancer and other specialties.

POTENTIAL SITE
Patterson said UAMS’ preferred location for the building is in Springdale. He did not mention a specific site, but speculation would logically lead to the area west of Interstate 49 near the Don Tyson Parkway exit. The area is a growing medical corridor but still has plenty of available land left to develop.

Little Rock-based Arkansas Children’s and Northwest Arkansas-based Highlands Oncology Group have built multimillion-dollar facilities recently in that vicinity. A 76,000-square-foot medical office building for Little Rock-based USAble Corp., a wholly-owned subsidiary of Arkansas Blue Cross and Blue Shield, is under construction in the same area.

A five-story, 80,000-square-foot building called Center for Children’s Health & Wellness is also under construction near Arkansas Children’s Northwest.

Bobbitt said UAMS considered building a facility and paying for it through bond financing, but the estimated costs under the lease with Sage Partners would be nearly the same amount as bonded indebtedness.

“By moving forward with this lease arrangement, UAMS will be in a position to occupy the space much faster, as UAMS is currently engaged in several other large building projects in Little Rock, most notably the East Campus Energy Plant, that precludes having a building manager supervise this project in Northwest Arkansas,” Bobbitt wrote in the letter.