Rex Healthcare, the Raleigh operator of Rex Hospital, said Thursday it has finalized borrowing $150 million to help pay for the construction of an 8-story N.C. Heart and Vascular Hospital that’s expected to start treating its first patients in two years.
The new loans set the course for Rex’s most ambitious and expensive expansion project in 35 years. The project will swell the organization’s total outstanding debt to $279 million.
Rex’s investment is reflective of the Triangle’s highly competitive health care market in which hospital networks are hiring hundreds of doctors, building satellite facilities and encroaching into each other’s service areas.
“The N.C. Heart & Vascular Hospital now under construction is one of the biggest and most important investments in Rex’s 120-year history,” said Steve Burriss, who became president of Rex in April. “This investment is necessary because of this region’s growing and aging population, and the prevalence of cardiovascular disease.”
The added debt – and the interest payments that could top $90 million over the next 30 years – prompted all three Wall Street credit rating firms in March to downgrade Rex’s debt or revise the hospital’s bond outlook from stable to negative.
In this most recent round, Rex borrowed $50 million by issuing tax-exempt bonds through the N.C. Medical Care Commission and raised $100 million through TD Bank. The last of the bonds are not due to be repaid until 2045.
In recent years Rex has beefed up its team of heart specialists as it planned its new 300,000-square-foot treatment facility to compete with WakeMed Health & Hospitals and Duke University Health System. The $235-million heart center is slated to open in early 2017 on the Rex campus.
Just months after the heart hospital is completed, Rex is set to begin construction of a $70-million hospital in Holly Springs, which will be the 11th hospital in the UNC Health Care System, the regional entity that also owns Rex.
Those expansions and other investments have taken a toll on the system’s financial performance.
Rex’s 2014 operating income slipped to $2.8 million from $40 million the year before. UNC posted an operating loss of $31.2 million in 2014, compared to operating income of $94.2 million the year before. Both organizations had spent millions of dollars on the Epic electronic medical records program, among other expenditures.