9/15/11
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| Memorial Hospital, circa 1950. |
Memorial seeks a second opinion
by Amy Fletcher
City-owned Memorial Hospital, one of the largest health- care providers in southern Colorado, may face a change in how it is governed.
The hospital's board of trustees, appointed by the Colorado Springs City Council, now makes most major decisions about hospital strategy and policy, although the council must approve some actions, such as issuing bonds or beginning major expansion projects.
Council members recently have exercised greater influence on Memorial's operations by pushing for expansion of the hospital's bonus pay program to all employees, seeking hospital payments to cover some city expenses and turning down a proposed expansion plan.
That relationship could change dramatically with a study of whether the city should continue to own Memorial and how the hospital should be governed. It stems from a joint effort by the hospital trustees and council to develop the hospital's strategic plan.
Mayor Mary Lou Makepeace and Harlan Loomas, chairman of the hospital's trustees, will appoint a work group to develop recommendations on Memorial's ownership and oversight. The group is scheduled to report back to the council by March 1.
Among the options the group may consider:
Create a private, nonprofit organization to own and operate the hospital.
"The organization is still legally bound, even if it is a (nonprofit), to operate in the best interest of the community it is serving," said Jamie Orlikoff, president of Chicago-based Orlikoff and Associates Inc., a consulting firm specializing in health-care governance.
A separate organization could allow the hospital to operate more independently of the council but prevent the hospital from seeking operating subsidies from the city if it starts losing money.The change would reduce the council's authority over hospital operations, but the council could retain some control by appointing the organization's board members or ratifying board appointments, Loomas said.
Form a hospital authority that could collect taxes, a system used in such states as California, Oregon and Washington.
The authority's board could be elected by residents or appointed by the City Council, said Michael Annison, a consultant hired to help the council and hospital trustees develop Memorial's strategic plan.
Voters may not have an appetite for a new level of government after rejecting a special transit district and tax last month.
Sell the hospital to a for-profit entity. A sale appears to have little support among city officials, who have rejected several previous offers for Memorial.
The city would get millions of dollars that could be invested in infrastructure if Memorial was sold, but any sale includes trade- offs, Loomas said.
"We no longer control our own fate" in a sale, he said.
Debate about Memorial's ownership began earlier this month during a joint meeting of the council and hospital trustees. During a presentation, Annison said changes in the health-care industry warrant a new management approach for Memorial.
"The present situation is probably unworkable going into the future," Annison said.
Experts expect hospitals nationwide will face financial difficulties as payments from the federal government are cut and managed-care health plans become more popular.
The Balanced Budget Act of 1997 is projected to cut Medicare payments in Colorado by $897 million through 2002, said the Colorado Health and Hospital Association.
Public hospitals such as Memorial are particularly vulnerable to the changes, Orlikoff said.
"All hospitals are under tremendous pressure, and public hospitals have two strikes against them," he said.
According to Orlikoff, the disadvantages include:
Board members, who guide operations and long-range planning, are either appointed or elected in a political environment.
"Consequently you tend to get one-trick ponies - people who are only concerned with one issue," Orlikoff said. "And it just tends to be fairly bad governance."
Memorial board members are appointed by the City Council for three-year terms; the board elects its officers.
City Councilman Ted Eastburn said he recognizes the importance of choosing qualified board members but sees nothing wrong with the current system.
Public hospitals are subject to open meeting laws. News media, competitors and others have access to documents and meetings that normally are off-limits for private hospitals.
Open meeting laws allow the public to monitor hospital operations, but competitors can learn hospital strategies, Orlikoff said.
Donna Bertram, chief operating officer of Penrose-St. Francis Health Services, Memorial's primary competitor, said she doesn't learn much from information Memorial must make public.
"The information that is presented or published in the paper is very global," she said, "and we certainly don't have the inside information."
Bertram said city ownership gives Memorial some advantages. For example, Memorial can offer employees better benefits because the combined size of the city, hospital, utilities and other enterprise operations gives the city more bargaining power than Penrose-St. Francis with benefit providers.
Public hospitals often must treat all or most indigent patients, a mission not always shared with for-profit competitors. Nonprofit Penrose-St. Francis provides some indigent care, but the bulk is provided locally by Memorial.
In 1998, Memorial Hospital provided $31.2 million in charity care and bad debt; Penrose-St. Francis Health Services provided $15 million, said the Colorado Health and Hospital Association.
The association defines charity as care provided patients who don't have the means to pay. It includes the unpaid care of patients in the Colorado Indigent Care Program.
Bad debt reflects the uncollected charges for care to patients who are believed to have the financial ability to pay at the time the care is provided. They may have a change in financial circumstances that makes payment impossible. It includes charges for patients who may be eligible for Medicaid but who do not apply.
Earlier this year, an official in Hennepin County, Minn., said unless other hospitals accept more indigent patients, he would propose the county's public hospitals refuse all but emergency care to residents of other counties who cannot pay for their own care.
Loomas believes indigent care plays a pivotal role in the Memorial Hospital debate because it is a drain on the hospital's finances. No one has questioned the importance of providing indigent care, but he wonders what will happen when the hospital begins losing money.
"The financial viability of hospitals in this country is in question, and it's going to get worse," Loomas said. "The hospital is going to be knocking on the door of the City Council saying we need some money to operate this."
Loomas didn't say how soon that would happen. However, based on the hospital's shrinking profits, Orlikoff believes Memorial could be asking for a city subsidy as soon as 2001.
Tony Kovner, a professor of health policy and management at New York University, said Memorial may want to remain under city ownership to remain eligible for city subsidies.
"Once you become a (private) not-for-profit, you may lose the city subsidy," he said.
Memorial, a nonprofit organization, has not received operating subsidies from the city since the mid-1960s. The city made bond payments for Memorial until 1992.
- Amy Fletcher may be reached at 636-0190 or amyf@gazette.com. Edited by Wayne Heilman. Headline by Wayne Heilman
Copyright 1999
Provided by ProQuest Information and Learning Company. All rights Reserved.
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