Health & Medicine

Incomplete federally mandated study led to near collapse of new public health clinic deal

The proposed HealthFirst site, 496 and 498 Southland Dr., in Lexington, Ky., Tuesday, February 25, 2014. A portion of the roof of the smaller building on the left at the proposed HealthFirst site has collapsed. There is red tape around the whole structure and a Fire Marshall notice on the door. Photo by Charles Bertram | Staff
The proposed HealthFirst site, 496 and 498 Southland Dr., in Lexington, Ky., Tuesday, February 25, 2014. A portion of the roof of the smaller building on the left at the proposed HealthFirst site has collapsed. There is red tape around the whole structure and a Fire Marshall notice on the door. Photo by Charles Bertram | Staff Herald-Leader

The failure of previous HealthFirst Bluegrass officials to respond properly to federal requirements of a $11.7 million grant awarded in 2010 has caused a nearly two-year delay of the proposed new public health clinic on Southland Drive.

After several months of negotiation by new HealthFirst Executive Director Dr. Steve Davis, a money-saving deal was announced last month that shores up HealthFirst's previous financial instability and allows the clinic to be built on Southland Drive.

The final details are being worked out on the deal, Davis said Friday, and he is meeting with the Southland Neighborhood Association Tuesday. A second public meeting concerning the project will also be scheduled, he said.

The delay between the unveiling of the design in December 2012 and first shovel of dirt being turned has to do with the potential historical significance of the property. The buildings on the clinic's site — 496 Southland Drive — are more than 50 years old and the federal Historic Preservation Act requires buildings 50 years or older receive a historic evaluation involving state officials and interested community parties, such as the Bluegrass Trust for Historic Preservation and neighborhood associations.

Any work on the clinic can't begin before the evaluation is complete and there is a plan for preservation if the building is deemed significant.

HealthFirst Executive Director William North and developer Ted Mims filed incomplete information with the state, glossing over the age of the buildings, according to documents submitted by North to the Office of Historic Preservation in December 2012.

That ultimately led to stalled construction efforts as the review — which was recently completed — was undertaken.

North and Mims have denied responsibility for the delays. In January 2013 North told the Herald-Leader the request for the review was triggered by an anonymous complaint to federal authorities.

Mims, who North praised for being knowledgeable on federal regulations, blamed "delays beyond my control," as the cause of the stalled construction in a letter to the Health Resource and Services Administration in October, 2013.

So what happened?

In the spring of 2012 after months of searching, the HealthFirst Bluegrass board found suitable property for the clinic at 496 Southland Drive. Architects were hired, site plans were created and construction schedules were published.

According to a review of HealthFirst documents, Mims received an environmental assessment of the properties on May 3, 2012 from Environmental Assessments LLC. It stated the buildings at 490 and 496 Southland Drive were built around 1957. That meant a review was required.

Between May and December 2012, according to documents, HealthFirst worked with Urban Collage, an urban design firm, to complete the process for the historic review. It's unclear how much HealthFirst paid Urban Collage.

On Dec. 14. 2012, North sent to the state Historic Preservation Office what he called an Environmental Clearance Application. That document — which included a short letter, site plans and architectural drawings — stated the buildings had no architectural significance and did not address historic value. That letter triggered the required review, according to Jill Howe, environmental site coordinator for the state. Although, Howe said, she'd never heard of an Environmental Clearance Application.

The proper assessments were done in a timely manner, Mims said last week. But, he said, when HealthFirst switched from renovation of the buildings to construction of new buildings, that prompted the more extensive evaluation of the property than originally expected. That change happened in late October 2012. Cultural Resources Analysts, which conducted the final evaluation, was hired in January 2013. Cultural Resources was paid $18,850, according to the HealthFirst documents.

The real holdup was the time it took for various interested groups — neighborhood residents, Southland business owners and historic preservationists — to review and come to an agreement on whether the buildings were historic and how that historical value should be preserved, Mims said.

But throughout the process, Mims and North seemed to underestimate the scope of the review or how long it would take. Minutes from monthly building committee meetings between January 2013 and North's forced resignation in September 2013 showed that he and Mims repeatedly said the environmental report would be finished and construction would soon begin. They published construction schedules with demolition slated for June 24, 2013 and later amended that to Oct. 1, 2013.

North did not respond to the Herald-Leader when asked to comment.

Once construction was delayed, HealthFirst ran into other challenges. The Lexington Fayette County Board of Health had loaned HealthFirst more than $2 million for operating expenses and pressured the board to come up with a workable financial plan and payment schedule.

The BOH asked for North's resignation in late August 2013. He resigned about a month later.

When asked about the impact of the timing of historical review, BOH Chairman Scott White said he couldn't comment on any specific action taken by the previous administration. But, he said, "very serious concerns about the management and financial practices" of HealthFirst led the board to call for North's resignation.

HealthFirst Bluegrass planned to be in the new clinic by now, with plans to serve some 30,000 patients a year in a state-of-the-art, custom-designed facility.

At this point, about $1 million has been spent on the project, including $350,000 in rent to Greg McDonald and Mims, who are business partners, for buildings that are slated for demolition. In late February the roof on one of the buildings collapsed. Mims has also been paid $150,000 as project manager.

Since the initial delay, the Kentucky State Auditor issued a report in the summer of 2013 that raised concerns about the hiring of Mims and the financial stability of the agency. Four members of the HealthFirst Board of Directors quit along with North. The HealthFirst Board also voted twice, in May and August of 2013, to pull the plug on the project.

HRSA is reviewing how the tax money already invested in Southland has been spent and HRSA officials said a draft report of their review should be complete in two months. It will be sent to the new HealthFirst Board of Directors and be made public after that.

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