Almost three years ago, I decided to get involved and learn as much as possible about MRMC and its finances in order to be able to make an informed decision about whether or not to support a tax for the hospital. I will not support the referendum on the Nov. 6 ballot.
First, the proposed property tax addresses the result of the problem, not the problem. The problem is simply that the revenue of a stand-alone hospital can no longer carry the overhead. MRMC's board of trustees has been told that by at least three different consultants, but the decision was made more than six years ago to reject the idea of merging with another organization to share that overhead burden and to assume that tax support would be obtained.
At a board meeting in early 2011, one of the dominant trustees complained to County Commissioner Stan McClain, "If the County Commission had sold it right, we would already have tax support." He did not say why he felt it was the County Commission's responsibility to "sell" tax support.
Second, the 1-mill property tax that has been proposed will not solve MRMC's financial problems. This has been discussed and acknowledged openly in recent board meetings but, as one trustee stated, "it will buy us two or three years in which we can hope for a miracle that will allow us to retain control of the hospital." What other business has a business plan based on hoping for a miracle?
Third, approving the proposed tax will be opening Pandora's box as tax support for MRMC will never end, and it won't remain at 1 mill. As stated above, the current proposed tax will not solve MRMC's income problem. MRMC would need tax support of at least 2-3 mills per year to break even and cover routine capital costs.
Fourth, collection of a sales tax for the support of indigent care is the fairest method. Under the current law, an indigent care sales tax would bring in about $14 million per year. However, contrary to the propaganda that implies that MRMC is the only indigent care provider in Marion County, they are not, and the tax revenue would have to be shared with the other indigent care providers. By MRMC's own estimate, they would only receive about 40 percent, or $5.8 million, of the revenue.
During the last half of my career, I worked on management teams that were assembled to turn around financially distressed manufacturing businesses. I also worked on mergers and acquisitions. Two of the most important things in turning a business around are a sense of urgency and strict cash management. Both of those things are missing at MRMC.
If management was serious about making this the most cost-efficient operation possible, they would challenge all proposed expenditures with the question: Is this expenditure essential, or is it optional?
One of the first items that should be questioned is the $85 million of bad debt expense for fiscal year 2012. Only about $30 million of that qualifies as charity. Justify the remaining $55 million. And reject unnecessary spending such as hiring an accounting firm at a cost of $85,000-100,000 to prepare a five-year plan when you have a chief financial officer that is paid $360,000 per year plus bonus ($93,000 in 2010) and should be capable of handling that task.
No one likes change, especially when your ego is tied so closely to the status quo. But MRMC is unsustainable in the current business model. We have other good nontax options available, but those will die with the passage of this tax referendum. Now we must decide whether we are going to accept financial reality and join with a hospital group or agree to pay unlimited taxes to maintain the status quo.
Carl Crabtree is a retired Marion county resident who worked as financial professional, including a corporate controller and internal auditor.