With something as complicated as a health care facility, there is always something that needs
fixed or replaced. In addition to the construction, expansion and renovation, this project will allow
us to replace the existing fire and security systems throughout the buildings. We will also be
installing a new nurse-call system for better communication between patients, residents and staff.
We are evaluating a few other needs that could be addressed while we are in construction mode,
such as heating and cooling improvements. As you can imagine, most decisions are dollar-driven.

The application process for funding the new construction, renovation and upgrades is underway.
Fortunately, this project can qualify for favorable financing through USDA Rural Development
programs. The campaign will help us bridge the gap between what is available through USDA
and what we need to complete the project.

Most people are aware of the financial challenges facing the hospital in recent years. The good
news is that the Board of Directors and current administration have been able to work through
major issues while putting a comprehensive strategy in place. These efforts have stabilized the
finances and allowed administration to enhance revenue while lowering expenses. Being able to
provide new and renovated space and strengthen operations in the nursing home will be of great
value. The outcome will also foster a vastly improved lifestyle and allow an even greater quality of
care for our residents.

Nursing home room rates offered to Medicaid and private-pay residents have always been based
on the cost of operating the facility. Following standard accounting practices, capital investment
in this project will require a modest increase in the rate of about $16 per day. We feel this cost is
reasonable in order to provide much-needed improvements and upgrades to the facility that will
greatly benefit our residents and their families.

This issue received a great deal of attention during our feasibility and planning sessions early on in the process. Both communities are fortunate to have long-term care facilities. The new facility will be crucial in addressing the senior care needs of the surrounding area, which are expected to increase in the near future. There is enough demand for senior care that Philip and Kadoka can both serve the needs of our region. Together we cover a large service area in west central South
Dakota, particularly caring for people who do not have access to a nursing home in their local community.

Multiple factors support the decision to award 12 beds to the Philip Nursing Home. Among the
most important are the demographics of our service area and the increased need for long-term
care. Our nursing home has been designated an “access critical” facility, meaning that it is vital to
the people in our service area that we continue to stay in operation, and accommodate more
people. In addition, the nursing home is an important companion to the hospital. Patients
completing a hospital stay often need placement in a long-term care facility, while long-term care
residents often need acute medical care. The additional nursing home beds will better support the community’s need for senior care, and improve hospital operations by allowing patients greater
access to these beds.

From the beginning, the intent was to work with construction and design people that were not only
recognized for their proficiencies, but also had a history of working with health care facilities. There
was also a wish to work with those who had an awareness of the Philip area and surrounding
counties. Once the decision was made to work with the USDA for financing, additional guidelines
and requirements came into play. The Board of Directors and Administration are confident that the
team of architects, contractors and managers they have assembled are exceptional and up to the
task, and are designing a facility that will meet our area’s senior care needs for years to come.

Staffing is an on-going challenge. We believe, however, the vast improvement in the work and living environment will make it easier to recruit and retain employees. We believe that with the more efficient layout of the new facility, staff will spend less time going back and forth, less time waiting for equipment and facilities to become available, and more time with residents. Due to
these efficiencies, the new facility will allow us to take even better care of more residents with a
relatively minor increase in the number of staff members. We’re also working on some solutions that will enhance our recruiting. We believe there is value in additional continuing education, training and staffing enhancements.