Bids for Memorial now public, online

ANDREW WINEKE Updated: December 1, 2011 at 12:00 am • Published: December 1, 2011

The city’s Memorial Health System task force will choose between five very different bids for the city-owned hospital system that were made public Thursday.

The options range from:

• a proposal to turn Memorial into an independent nonprofit
• a partnership with Memorial’s erstwhile rival, Penrose-St. Francis Health Services
• a $500 million up-front lease from for-profit hospital giant HCA-HealthOne
• a plan in which Memorial would become part of a network University of Colorado Hospital is creating
• a $400 million offer to join the parent company of Denver’s Exempla Healthcare, Sisters of Charity of Leavenworth Health System.

All of the bidders attempted to address in different fashions the task force’s desire to maintain Memorial’s current level of services, commitment to charitable and military care, an expansion of medical education in Colorado Springs, as well as to meet the city’s goal to be cleared of future liabilities for the hospital.

The task force plans to recommend a winning bid to the city council by the end of the year. Voters would approve or reject the proposal some time in 2012.

Council President Pro Tem Jan Martin, who heads the task force, said she was pleased with the variety of the bids and their attempt to address the community’s goals.

“We have our work cut out for us, but we have some really good options to consider,” she said. “It’s exciting and I think it really shows that the (request for proposals) process really fulfilled its mission.”

Here are summaries of the five bids, in the order the bidders will present their proposals to the Memorial task force Friday.

— Sisters of Charity of Leavenworth Health System, which operates the Exempla Healthcare system in the Denver area, is proposing a lease offer of as much as $400 million via a combination of lease payments, capital commitments and liabilities, with the additional promise of a minimum of $100 million of capital investment into Memorial in the first five years. It would also provide $1 million initially and $500,000 annually for public health needs. SCLHS said its lease payments would leave the city with approximately $194 million after paying off Memorial’s liabilities.

SCLHS emphasized that its financial strength and credit rating would provide stable backing for Memorial over the long term. However, Sisters of Charity said that it is also open to forming a joint venture with Memorial, or signing an affiliation agreement rather than leasing the hospital outright.

— HCA-HealthOne is an arm of HCA, one of the nation’s largest for-profit hospital companies, which operates more than 160 hospitals across the country, including seven in the Denver area under the HealthOne banner. HCA-HealthOne has offered a $500 million up-front lease payment, plus allowing the city to keep Memorial’s cash-on-hand, plus a promise of a minimum of $1 billion of capital investment into Memorial over the life of the lease.

Under state law, the proceeds of the up front lease payment would have to be placed in a local health foundation. HCA-HealthOne estimates that the foundation would receive about $325 million once Memorial’s debts and pension liabilities were accounted for.

— Memorial Health System’s current leadership is proposing to turn the hospital into an independent nonprofit. The independent Memorial would pay an up-front lease amount of about $5 million and a variable annual payment based on the health system’s profits, although the figures would be subject to negotiation with the city. The new Memorial would assume all of the hospital’s current liabilities, including a pension liability that could be as much as $191 million.

Memorial board chair Jim Moore said making the hospital an independent nonprofit would keep all of its investments and its decision-making local. Moore said the new Memorial would explore partnerships such as the ones proposed by University of Colorado Hospital and Penrose-St. Francis parent company, Centura Health, but could enter those agreements on better terms as a strong independent entity.

The current leadership is also proposing that the new Memorial gets new leaders, both in the form of a new board and, potentially, a new executive team that could replace current CEO Dr. Larry McEvoy and his staff. Moore said a board selection committee would be formed, including three current board members, to pick a new board and that the new board would then choose its own executive team.

— University of Colorado Hospital is proposing to bring Memorial into a new partnership, called the University of Colorado Health System, it is forming with Fort Collins-based Poudre Valley Health System and Children’s Hospital Colorado.

UCH is proposing an up-front $74 million lease payment, a $5.6 million annual payment for 40 years, a $1.12 billion capital commitment over the life of the lease, plus a commitment of $3 million a year toward establishing a branch campus of the University of Colorado School of Medicine at the University of Colorado at Colorado Springs. Also, UCH is offering a profit-sharing plan in which the city would get 5 percent of any profits above 8 percent. UCH says it would investigate other ways to deal with Memorial’s pension liability, including allowing some employees to remain in the state’s Public Employees’ Retirement Association.

UCH President and CEO Bruce Schroffel emphasized the historic similarities between his hospital and Memorial in governance and mission, and said that UCH offered the best opportunity to advance medical education in Colorado Springs.

— Centura Health, the parent company of Penrose-St. Francis, is offering to form a partnership, called the Community Health Collaborative, with an independent, nonprofit Memorial that would tackle such goals as advancing medical education at UCCS, and establish jointly sponsored institutes for rehabilitative medicine and neuroscience.

Centura is proposing to consolidate some functions between the two hospital systems, such as trauma and some support services, but it is not suggesting that it would actually lease or run Memorial, which would likely lead to anti-trust concerns.

Penrose-St. Francis president and CEO Margaret Sabin said the plan to create “coopetition” would greatly expand the existing partnerships between the two hospitals and increase their ability to focus on improving care in the region. Sabin said Centura does not support leasing Memorial to an outside company, arguing that an outside company would lead to a medical arms race in the city that would drive up costs without focusing on the health care needs of the community.

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Memorial Health System bidder meetings

The city’s Memorial Health System task force will meet with all five bidders beginning at 8 a.m. Friday in the Colorado Springs Utilities board room, on the fifth floor of the Plaza of the Rockies, 111 S. Tejon St.

Sisters of Charity of Leavenworth Health System will present at 8 a.m., HCA-HealthOne at 9:15 a.m., Memorial Health System at 10:30 a.m., University of Colorado Health System at 12:30 p.m. and Centura Health at 1:45 p.m.

On Dec. 7, the task force will hold an “E-Town Meeting” in which the public can hear more about the bids and ask bidders questions at City Hall, 107 N. Nevada Ave. The meeting will last from 1 p.m. to 7 p.m and will be televised and streamed on springsgov.com. People can submit questions in person, via e-mail at memorialtownhall@springsgov.com, or by calling 385-5961.

Centura Health will present at 1 p.m., University of Colorado Health System at 2:15 p.m., Memorial Health System at 3:30 p.m., HCA-HealthOne at 4:45 p.m. and Sisters of Charity Leavenworth Health System at 6 p.m.

To see the bids, go to springsgov.com and click on the Memorial task force link.

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