City’s role in new hospital in question

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September 14, 2011 - 12:00 AM

Allen County Hospital trustees were caught off guard at their meeting Tuesday night by questions from Iola City Administrator Carl Slaugh as to their “expectations” of Iola’s role in extending utilities to the proposed site of the new hospital on north Kentucky Street.
 “Have you received any formal feedback from the council that they would fund these extensions? It’s not an automatic policy,” Slaugh said. “I work on votes, resolutions. Not the opinions of a few members of the council.”
Slaugh was referring to a subcommittee of three city council members who have met several times with an equal number of hospital trustees to discuss the extension of water, gas and electricity to the new hospital.
Trustees were visibly perplexed by the cold manner in which Slaugh approached the subject.
“It looks like we need to reconvene the subcommittee,” said Patti Boyd, hospital trustee who also serves on the committee to facilitate dialogue between the hospital board and city council.
Boyd said one of the reasons that trustees decided to ultimately locate the hospital within city limits was so Iola could be the sole provider of utilities for the hospital.
“We acted in good faith,” that the city would now cooperate with board efforts to build the $30-million facility, Boyd said.
Trustee Debbie Roe said the board had understood the city would pay for the extension of electricity, water and gas, while the hospital would assume the hookup of sanitary and sewer services, a much larger expense.
Alan Weber, Allen County counselor for the hospital board, said, “Mayor Shirley has assured us this would be taken care of numerous times.”
From the audience, County Commissioner Gary McIntosh said the issue had been resolved “way back.”
Slaugh was not convinced.
“Individuals may have made statements, but I work on ordinances and an official vote that says yes, we are willing to extend utilities at city expense,” he said. “I need to see if we have the money in the budget and whether we can make it work.”

IN OTHER NEWS from the meeting, trustees all but approved a management agreement with Hospital Corporation of America. Board members Tom Miller and Harry Lee, board chairman, were absent, leaving the rest of the board uncomfortable to approve such an important decision.
“We want the full board present to make the vote,” said Karen Gilpin, who ran the meeting in Lee’s absence. “We are feeling very positive about the agreement.”
Mark Thompson, serving as attorney for Allen County, gave a rundown of the agreement. Thompson works for Siegfriend, Bingham, Levi, Selzer and Gee law firm in Kansas City, Mo.
Thompson said the agreement contains the “four pillars” of sound management, including the terms of the agreements, compensation for returning the hospital under the county’s domain, provisions for the hospital under HCA’s management, and the board’s role as the voice of authority for hospital decisions.
HCA has leased the hospital since 2003, assuming its control and its profits.
“The balance sheet now comes back to the county,” Thompson said, once the agreement is set in motion.
Since January, a subgroup of hospital trustees has been working with HCA officials about the new structure of management.
Thompson said “a fair amount of feedback” by current hospital employees to retain HCA as their employer was factored into seeing if a satisfactory agreement could be reached rather than seek bids from competing management companies such as Quorum, which manages Neosho Memorial Regional Hospital in Chanute.
“Both sides bargained in good faith,” Thompson said. “The committee has done due diligence. There has been considerable give and take on both sides.”

THE AGREEMENT includes an initial five-year management term with two automatic renewals. First, a two-year renewal, followed by a five-year renewal. After the 12 years, a renegotiation of terms is possible. Trustees must give HCA a 180-day notice if it wants to terminate the agreement.
The hospital will pay HCA an annual $350,000 management fee, subject to a 5-percent cap for inflation.
Hospital administrators will be responsible for the day-to-day management of the hospital, while trustees will be responsible for the appointments of the chief executive officer, chief financial officer and the chief of nursing operations.
Future physicians may also opt to be employees of HCA or of Allen County Hospital if they so desire. Currently, all physicians with hospital privileges are in private practice.
Trustees will receive monthly reports of all hospital financials and operations.
In the eight years HCA has leased the hospital, it has invested $3.4 million into the facility and its capital assets, Thompson said.
Meanwhile, the county brought a $1.55-million hospital in net equity into the equation. The difference of $1.85 million is what the county will pay HCA in the buy-back, which includes $30,000 per acre for the approximate six acres the hospital leased to HCA, including its home health facility on North State Street and the clinic in Moran that The Family Physicians operates.
Buying back the land was a small irritation for trustees, they admitted, and viewed it as “a penalty,” for getting out of their existing contract with HCA, which was due to expire in 2035.
Joyce Heismeyer, hospital CEO, said the purchasing power of HCA would more than offset its $350,000 management fee.
Chanute’s hospital pays $295,000 a year for similar services.
Heismeyer estimated about 40 percent of the hospital’s $18-million budget goes to purchases.
“Group purchasing is a big deal,” she said, of not only its efficiencies but also the leverage a big player can have for other services in such a competitive market.
HCA owns 162 hospitals and 106 ambulatory surgery centers across the country. For 2009, it had $30.1 billion in revenue.
It has 192,000 employees.
“We get the buying power of 162 hospitals,” Heismeyer said.
On a somewhat somber note, Stephen Corbeil, an HCA division president based in Kansas City, Mo., told trustees that a replacement for Heismeyer would be coming to Iola Thursday for a visit. Heismeyer announced in August that she had accepted a position with the Kansas Heart Hospital in Wichita.
We have a good candidate,” for the position, Corbeil said, “who is excited at the prospect of overseeing the construction and management of a new hospital.”
A final decision on purchasing the land on North Kentucky awaits two things: Approval by the Iola Planning Commission that the land can be zoned commercial from agriculture; and word from the Centers for Medicare and Medicaid Services that the move would not jeopardize the hospital’s status as a critical access facility.
Trustees next meet Sept. 27.

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