County warms to Saint Luke's option
“Originally, I was not at all inclined to lease the hospital. Our main platform to get the new building passed was to take back ownership of the hospital,” said Mary Kay Heard.
Now, she’s changed her mind.
While traveling through northern Missouri a few months ago, Terry Sparks made an impromptu visit to Wright Memorial Hospital in Trenton. As a trustee for Allen County Regional Hospital, Sparks knew it was studying its management contract and could potentially make a change. To that end, Sparks set a goal of seeing not only how other hospitals were managed but also how their communities viewed them.
He was impressed by what he saw in Trenton, a hospital owned by the city and leased to Saint Luke’s Health System. He heard positive reviews, about both hospital services and community engagement. He learned about cooperative efforts with another Saint Luke’s hospital at Chillicothe, Mo., about 23 miles away.
Sparks immediately thought about Anderson County Hospital, a Saint Luke’s-leased hospital in Garnett, about 29 miles away.
Those three hospitals all had been built in recent years with financial support from Saint Luke’s. All were critical access hospitals, with 25 or fewer beds in rural areas that qualify for special federal funding. ACRH is also a critical access hospital, built five years ago. Funding for construction of the hospital comes from $25 million in government-issued bonds and $5 million in a bank loan, approved by voters in 2010. City and county sales taxes and hospital revenues work to tackle the now $26 million debt.
It was through their efforts of trying to build a new hospital that trustees’ relationship with a lease arrangement soured. When under contract with Hospital Corporation of America, the Nashville-based corporation refused to contribute to new construction.
So when Sparks said he believed he had found an exception, fellow trustees were skeptical.
They’d leased Allen County’s hospital for decades before taking back control in 2013, and weren’t interested in going back. They also didn’t think after their experience with HCA that anyone would be interested in assuming their debt.
But after pressure from county commissioners and others, trustees listened to presentations from Saint Luke’s on Wednesday morning, joined by county commissioners, hospital employees and others. The meeting was for information-purposes only and no decision was made. ACRH trustees still plan to collect proposals and interview hospital management companies, with a goal to make a decision by the end of the year.
But at least two of those who were initially opposed to a lease, including one trustee, said they’re more open to the idea after hearing Wednesday’s presentation.
About Saint Luke’s
Saint Luke’s is a non-profit, faith-based health system with 16 hospitals and campuses in the Kansas City area. They also offer a number of primary care offices, community clinics, hospice offices and long term care facilities. In recent years, they’ve opened five pint-sized community hospitals, eight-bed facilities that offer emergency room care as a model for areas that can’t support a full hospital.
They also offer one of the nation’s top cardiology and heart surgery programs, among other nationally recognized programs. The system has earned numerous awards for services and programs.
Julie Quirin, senior vice president and chief operating officer for the Saint Luke’s Health System, and Chuck Robb, chief financial officer, spoke on behalf of Saint Luke’s at Wednesday’s presentation.
ACRH looks very similar to the system’s other three critical access hospitals, Quirin said. Despite local concerns that ACRH’s market share captures around 29 percent of area residents, Robb said it’s a positive sign that it is still the leading provider in its primary service area. Neosho Memorial Regional Hospital in Chanute, for example, captures about 14.83 percent of the Allen County area. The next highest provider is Via Christi Regional Medical Center in Wichita, at 7.57 percent.
The hospital also appears to have a high number of Medicare patients, which is a positive sign for a critical access hospital with an aging population.
“Our strategy over the years really has been to keep patients as close to home as possible to get their healthcare services,” Quirin said. “Our strategic plan, which we call Vision 2020, is all about the patient, taking care of the patient how they want to be taken care of and where they want to be taken care of.
“We really do want to retain and grow the business locally but also leverage all the strengths and the power of Saint Luke’s into a community like Iola. We think it’s a win-win scenario.”
Again and again, ACRH trustees and others in the local communities said their biggest fear about a lease was losing local control. They’d fought for years to build a new hospital, selling a $30 million bond issue to voters with the promise of taking back health care in Allen County. The community had lost faith in the hospital after decades under a lease, with concerns about a lack of services, low employee morale and poor upkeep on the building with no investment from the leasing company, HCA, toward a new hospital.
Mary Kay Heard served on a committee appointed to study whether to renovate Allen County Hospital or build a new facility, and then on the committee that helped push through the bonds. The group met weekly for about four years. It was a commitment and a responsibility, and she’s still protective of the hospital because of it.
“Originally, I was not at all inclined to lease the hospital. Our main platform to get the new building passed was to take back ownership of the hospital,” she said.
Now, she’s changed her mind. She’s open to the idea of a partnership with Saint Luke’s, but is looking forward to hearing proposals from other companies.
“Saint Luke’s is well respected and has a good reputation. I think that could only be good for us,” Heard said. “The thing I liked best, they didn’t act like they wanted to take over. We’d still have local people in control. They’ve done this before and they sounded like they knew what they were doing as far as working with rural hospitals.”
Because the meeting was a preliminary step, specific details about any kind of partnership would need to be hashed out later. That includes things like the amount of financial commitment and which responsibilities would fall to Saint Luke’s or the county.
But using its other leased rural hospitals as a model, the Saint Luke’s representatives outlined a basic structure.
If ACRH agreed to a lease, Saint Luke’s would form a new hospital corporation to operate the existing facilities and equipment. An operating board would be appointed, typically about a dozen people, to oversee the basic functions like medical staff credentials, quality control, establishing a budget — tasks currently done by the board of trustees. Two members would be Saint Luke’s officials. The rest would come from the local community, perhaps board of trustees members or county commissioners or interested citizens.
“It makes it more of a partnership,” Quirin said. “We made a very specific and deliberate decision to maintain our hospital boards in local communities, even in Kansas City. We recognize the Northland community is a little different than Overland Park or Lee’s Summit.”
Loren Korte, who serves on the ACRH board of trustees and is part of the task force studying the management issue, said the issue of local control made him reconsider the possibility of a lease.
“When we first got into this I wasn’t real excited about leasing the hospital to a big city corporation and have no local input,” he said. “It appears there would be at least some local input into the day-to-day operations. Things certainly operate different in Iola than in Kansas City.”
The board of trustees would remain as an advisory board, essentially serving as a link between the county, which owns the hospital, and the operating board, which runs it. The operating board would make all decisions, with Saint Luke’s having final approval of things like the budget.
The hospital still could retain its foundation, with donations and events to support various improvements.
The structure allows communities to still feel connected to their local hospital, Robb said. “If you talk to somebody who works at the hospital in Garnett, they’re all Saint Luke’s employees but they would say, ‘I’m an employee of Anderson County Hospital,’” he said. “People identify a lot with their local hospital and their clinics. I don’t think you’d really notice much change there.”
That type of structure pleased Allen County Commissioner Jerry Daniels.
“I was really impressed when they spoke of a partnership with the community and about patient care, how those things were the first things they would speak of,” he said. “I thought it was very impressive that 10 of the 12 members of the board would be locals. That’s a big statement as far as having local involvement. Their success is evident at Garnett and the two hospitals in Missouri. It’s not a test case. They’ve proven it works.”
With a lease agreement, the county would receive revenue from Saint Luke’s to create a capital fund from which it would pay for facility improvements and debt relief.
Exactly how much money Saint Luke’s would contribute is not known. Those are details to be hashed out if the process continues.
Typically, the lease payments cover a large portion — but not all — of the debt to build hospitals in places like Garnett.
Lease payments also could be used to fund other projects, even a new clinic on the grounds of the ACRH facility. That’s long been a primary goal of the trustees.
That would be “the icing on the cake,” Commissioner Daniels said. “They’re very open to expansion and reinvestment. I’m so happy to hear that.”
Cooperation with Anderson County
As Sparks learned with his visit to Trenton, a partnership with Saint Luke’s also could mean a partnership with Anderson County Hospital. Quirin said the organization could use the relationship between Trenton and Chillicothe as a model for the two Kansas hospitals. It’s an opportunity to avoid duplicating services, reducing travel time for patients and physicians, and keeping patients closer to home. Two hospitals might have more success recruiting physicians to the area.
“It’s much easier to drive 30 minutes than two hours. There could be synergies there,” Quirin said. “It would also benefit the folks in Garnett if we had more of a critical mass.”
“The doctors are enthusiastic about it,” Robb added.
Responding to a question, Quirin pointed to Allen County’s maternity department as an example. Anderson County Hospital does not deliver babies, so patients there must travel to the Kansas City area to give birth. If Saint Luke’s determined it was feasible to continue ACRH’s program, Anderson County patients might instead travel to Iola to give birth.
Quirin also cited the imminent closing of Mercy Hospital at Fort Scott as an opportunity to attract patients in smaller communities in eastern Kansas.
“We could see kind of trying to branch out to some of these smaller areas,” she said.
The task force members plan to receive proposals from hospital management companies Nov. 16. Then, they’ll pick two or three companies to schedule presentations similar to the meeting with Saint Luke’s. They plan to make a recommendation to the full board of trustees by the end of the year. If they decide to change management, they’ll have until June 2020 to hash out an agreement and transition the hospital’s management and systems.
It’s also possible the board may decide not to make a change and stay with HCA, the current management company.
At least three other companies have expressed interest in submitting proposals, Alan Weber, county counselor who also advises the trustees, said.
In a follow-up email after the meeting, Quirin said. “Saint Luke’s remains interested in partnering with Allen County Hospital if we can mutually agree on the terms and model that would benefit all parties and most importantly the patients. I think the next steps will be dictated by the trustees as I know they are currently involved in an RFP process for a different model. Saint Luke’s looks forward to continuing our conversations.”
“We are a ways away from any kind of decision,” Korte said, adding that he’ll need a lot more financial information before he can make a choice. “I think our mission as trustees is to put some longevity behind the hospital, so it will be something we’ll be proud of 10, 15, 20 years from now.”