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Munroe workgroup mulls offers

Some people have floated the idea of local tax support, but that has gotten no support form local elected officials.

Ocala, FL - February 16, 2012
Published: Thursday, February 16, 2012 at 6:02 p.m.
 

Munroe Regional Medical Center's hope of a financial lifeline came closer to reality this week as seven healthcare companies submitted initial proposals to create a partnership with the hospital, lease the facility or buy the medical facility outright.

The businesses, all of which are for-profit organizations, also handed in estimates as to what the 400-bed hospital and its future improvements would be worth to consultants hired by the Marion County Hospital District trustees to help in the search. Their estimates ranged from about $130 million to about $550 million.

The public hospital is owned by the state-sanctioned Marion County Hospital District and overseen by seven trustees who are appointed by the County Commission. The trustees currently lease the hospital to Munroe Regional Health System, Inc., which is overseen by a 13-member board, some of whose members are also district trustees.

The seven healthcare companies interested in Munroe are:

  • Nashville, Tenn.-based Ardent Health Services
  • Tennessee-based Community Health Systems
  • Naples-based Health Management Associates, Inc.
  • Texas–based LHP Hospital Group, Inc.
  • Tennessee–based LifePoint Hospitals, Inc.
  • Tennessee-based RegionalCare Hospital Partners
  • Pennsylvania-based Universal Health Services.

Driving the trustees' search for help is the hospital's rocky financial history. For several years the hospital's expenses have been greater than the revenue generated from patients. During lean years it has survived due to its savings and Wall Street investments, but it has been warned by its economic advisers that it can't continue as it has and still hope to expand to remain competitive.

Some people have floated the idea of local tax support, but that has gotten no support form local elected officials.

Meanwhile, the hospital faces annual cuts to its Medicaid reimbursements and last year predicted it will lose tens of millions of dollars by 2015. Part of the reason for the loss is that, as a community hospital, Munroe provides services that are vital but don't make much money.

The Strategic Options Workgroup, which is conducting the search and is made up of trustees, hospital board members and staff, will report its findings thus far to the Marion County Hospital District during the district board's Feb. 27 meeting and get more direction as to narrowing the search. That will mean deciding whether the workgroup should pursue either a partnership, leasing the hospital or selling it.

The workgroup will also plan to visit some hospitals that the seven investors lease or partially own to see how those facilities are operating.

The workgroup decided during its Wednesday meeting it will also develop a strategy to weigh different aspects of what investors are offering, such as allowing the current hospital board to make up some of the new board if a partnership is created, charitable services to area patients and promises to make capital improvements to the hospital. Part of the workgroup's request for any deal is that the selected health care firm invest $150 million in capital improvements to expand the hospital and another $15 million annually for other improvements.

Some of the health care firms looking to either lease or create a joint venture are offering to allow current Munroe officials to make up half its board.

But Munroe CEO and President Steve Purves warned that the new investor will likely protect its financial interests and ensure it has "reserve powers" to decide major issues over any board that's formed.

A remaining concern for many of the workgroup members and the 50 members of the public who attended Wednesday's meeting was how someone can make the hospital profitable.

"How are they going to do it when the current administration can't?" asked Dr. Harvey Taub, who serves on Munroe's medical staff.

Eb LeMaster, of Ponder & Company, the company hired to help in the search, said a future investor will likely plan on the $150 million in improvements to attract new business and get a larger part of the healthcare market share. Other factors will include economies of scale and improving efficiencies, he said.

But trustee and workgroup member Kulbir Ghumman said after the Wednesday meeting that concern about how the new buyer or investor will operate the hospital is important.

That's because a new owner or majority partner probably won't benefit from some of the financial advantages that the hospital currently enjoys, he said. Those current advantages include property tax exemptions, enhanced Medicaid reimbursements, help from financial donors and volunteers and some protection against lawsuits.

Ghumman said that once a potential lessee, partner or buyer is found, county voters may want to consider other options instead — namely, public support for the hospital. A plan to lease or sell the hospital or find an investment partner will, if nothing else, finally bring the issue of public support to a head, Ghumman said.

Workgroup and trustee Chairman Jon Kurtz said it wasn't for the workgroup to concern itself with whether the hospital should be looking for investors, but rather to recommend to trustees the best offer.


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