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Long-term lease could provide long-term health care financing for community

Munroe's other option

Ocala, FL - March 25, 2012

Published in the Ocala Star-Banner Sunday, March 25, 2012 at 7:55 p.m.

Special to the Star-Banner

Without question, Munroe Regional Medical Center is operating a great hospital it leases from the Marion County Hospital District. MRMC is a tremendous tenant, operating an award-winning facility that provides excellent, affordable, quality care to the residents of Marion County.

So, why are we having a discussion of leasing the hospital to a different hospital organization?

The reason that the Hospital District is reviewing proposals from other hospital organizations is because MRMC has informed the district trustees that it needs $18 million a year of additional revenue in order to continue operating the hospital it leases from the district. Without this additional revenue, MRMC will no longer be able to operate the great hospital we have today.

The Hospital District trustees must decide whether to impose taxes on residents to keep the current tenant or lease the hospital to another tenant. So what are our tax options?

According to MRMC's request to the trustees, MRMC needs $9 million for current and future capital needs, $4.5 million for essential community safety-net services and $4.5 million to provide support for indigent care. This additional income is needed on a yearly basis as long as MRMC operates the hospital.

The only sales-tax option available to the Hospital District would only address $4.5 million of MRMC's needs. Thus, in order to keep MRMC as the tenant operating the hospital, the trustees would have to request an increase of property taxes by at least 1 mill ($100 for every $100,000 of property value).

Alternatively, the trustees could lease the hospital to another tenant. Currently, the trustees have narrowed the list of potential tenants to four. There are a number of factors to consider besides the compensation offered to lease the facility. Those factors are diligently being examined by the trustees and their consultants.

However, the compensation being offered is considerable. The highest compensation currently being offered is an initial payment in the range of $275 million to $325 million dollars for a 40-year lease. Additionally, the proposal includes $150 million for a major capital improvement project and an average capital investment of $15 million a year during the 40 years.

Additionally, instead of seeking tax dollars from the community, this tenant would be paying tax dollars back to the community. Sales and property taxes from a new tenant are estimated to be $1.25 million a year.

Besides compensation, the trustees also must consider quality of care, indigent care and continuing the current services while expanding and creating new service lines. All these issues are to be reviewed and considered during the next phase of due diligence.

Trustees and members of the Strategic Options Committee will visit hospital facilities operated by the prospective tenants. Then, with the assistance of expert consultants, conduct extensive interviews and thorough investigation of the history and experience at other facilities. If a suitable operator of the hospital is discovered, then, with the assistance of experts and attorneys, an agreement and new lease will be created to ensure the continuation of the excellent quality of care that the residents of Marion County have come to expect.

Assume the trustees were to select a different tenant to operate the hospital after completing its due diligence. Then the trustees could have approximately $300 million dollars to provide for the health care of the community beyond the operation of the hospital itself. If the trustees were to establish a foundation with $275 million it would generate between $11 million to 12 million dollars a year in interest alone the trustees could use for addressing the health care needs of our community while still retaining the $275 million dollars in trust for the community. This is all in addition to the continued operation of the hospital.

So that is the choice. Raise your property taxes to keep the current tenant that provides excellent health care to our community or lease to another tenant who could enter into an agreement to pay as much as $300 million up front for a 40-year lease while also committing to as much as another $750 million of capital reinvestment into the hospital facilities during the lease period. Additionally, the new tenant would pay approximately $1.25 million a year in property and sales taxes. In addition, the trustees could immediately invest $25 million dollars to address community health needs while generating the interest off the $275 million dollars held in trust for the community.


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