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Munroe lease terms set


Published: Monday, December 16, 2013 at 9:38 p.m.

http://www.ocala.com/article/20131216/ARTICLES/131219748?p=all&tc=pgall

A long endeavor to hand over operation of Munroe Regional Medical Center reached a milestone Monday night when Marion County Hospital District trustees unanimously agreed to the terms of a 40-year lease with a private, for-profit healthcare company.

The Florida Legislature will now review the terms of the lease for approval. The new operator could begin work as soon as early next year.

The lease calls for Health Management Associates, Inc. to pay the Marion County Hospital District $212.8 million.

The trustees will create a foundation and use the money to fund healthcare-related programs throughout Marion County.

HMA also will lay out $225 million — plus at least 4 percent of hospital revenue per year — for Munroe improvements.

HMA is partnering with UF Health Shands Hospital, which will buy a $10 million share of the partnership and contribute academic and medical expertise.

There was a last-minute potential road block to the agreement: HMA asked that the lease not be finalized until the first quarter of 2014, after HMA and another healthcare giant, Community Health System, Inc., merge.

Some trustees feared that if the CHS/HMA merger is held up by federal regulators, or by either CHS or HMA themselves, the Munroe lease could be postponed indefinitely.

But trustees Chairman Jon Kurtz said waiting for the HMA/CHS merger is no problem. That way, the trustees will deal with the newly combined CHS right from the start.

According to the lease terms, the Hospital District will retain its share of the TimberRidge Rehabilitation and Nursing Center and all of Munroe's cash on hand.

The lease calls for HMA to give Interfaith Foundation of Marion County $1 million and $200,000 per year for five years to the Heart of Florida health center.

Other terms of note: HMA will keep Munroe's existing charity care policy. A local board of trustees will provide operating guidance. And Munroe will begin paying property taxes.

Trustees considered several potential lease holders during a comprehensive search. They chose Naples-based HMA after the healthcare company offered $31 million more than runner-up Duke LifePoint Healthcare.

But HMA is not the company it was in December 2012, when trustees voted to begin negotiations.

In August, the HMA board was replaced after one of the company's chief stockholders convinced other stockholders that profits were below expectations.

Shortly before that, CHS offered to buy HMA, which operates more than 70 hospitals in 15 states.

CHS, based in Franklin, Tenn., runs 135 hospitals in 29 states. It offered $7.6 billion and to take on HMA's debt.

This fall, the new HMA board voted to accept CHS' offer. The CHS/HMA merger is expected to close in early 2014, with HMA stockholders voting Jan. 8 on the deal.

Munroe is owned by the state-sanctioned Marion County Hospital District and is overseen by seven trustees who are appointed by the County Commission.

The trustees lease the hospital to the nonprofit Munroe Regional Health System Inc., which is overseen by a 13-member board, some of whose members also are district trustees.

Currently, the public hospital remains financially sound. But Munroe representatives have said for years that its financial picture is steadily eroding, and they predict that within a few years the institution would begin to operate in the red.

Munroe has made ends meet mainly through financial investments and reserves.

Hospital leadership said they did not have the financial resources to make the long-term investments to keep the hospital competitive.

In 2012, hospital supporters proposed tax support. But a ballot measure failed in November, setting trustees on a permanent course to find a for-profit leasee.

HMA continues dealing with problems unrelated to Munroe. The U.S. Justice Department launched an investigation this year after “60 Minutes” aired allegations that HMA pressured its emergency room physicians to boost admissions.

That was followed with the company disclosing that it was under investigation by the SEC, which had subpoenaed billing and accounting data.

Last month a federal grand jury indicted Joshua Putter, a former HMA vice president, for obstruction in a federal investigation into HMA. Court documents indicate there could be more indictments to follow.

This summer, HMA President and CEO Gary Newsome surprisingly announced his retirement. This fall, former HMA Executive Vice President and CFO Kelly Curry resigned along with HMA Senior Vice President of Finance Kerrin Gillespie.

Former HMA Florida President Alan Levine, who had spearheaded much of the efforts for the Munroe lease, also left HMA for a job with a healthcare group in Tennessee.

Despite changes at HMA, Marion County Hospital District trustees remained adamant about continuing lease negotiations. After the CHS merger was announced, trustees and hospital staff took the extra step of visiting a CHS hospital in Valparaiso, Ind., to assess how CHS ran its facilities.

The Valparaiso hospital was a public medical center until it was purchased by CHS.

After that visit, trustees and Munroe staffers said they were impressed with CHS' operations, and noted that Munroe would be in good hands.

Trustee Larry Strack said he was never concerned about the HMA changes.

“As it turns out we're getting a bigger deal,” he said.

As for all HMA's troubles and changes, Strack said, “That's typical corporate acquisition stuff. That's how I viewed it from the beginning.”

Reach Fred Hiers at fred.hiers@starbanner.com and 352-867-4157.


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