Memorial bidders take proposals to the public

ANDREW WINEKE Updated: December 7, 2011 at 12:00 am • Published: December 7, 2011

Can we interest you in a slightly used health care system, $600 million in annual revenue, busiest emergency room in the state? Bidders for Memorial Health System on Wednesday took their pitches to the public, and took questions in turn at a town hall meeting at City Hall.

Several of those bids featured refinements from the Dec. 2 meeting at which the city task force running the leasing process for the city-owned hospital heard the proposals:

HCA-HealthOne argued Wednesday that the $332 million of Memorial’s cash-on-hand its proposal would return to the city should not be subject to the state’s Hospital Transfer Act, which requires proceeds from the sale or lease of a nonprofit hospital to a for-profit company be put into a health charity.

“The way we view it, the only thing standing between Colorado Springs and the access to those funds is changing a local law,” said Joe Sowell, chief development officer for HCA, referring to a city ordinance governing the use of enterprise funds.

HCA-HealthOne CEO Jeff Dorsey pledged to raise Memorial a level one trauma center, the highest level, from its current status as a level two.

And Penrose-St. Francis Health Services CEO Margaret Sabin promised $1.5 million a year toward creating a branch medical campus of the University of Colorado School of Medicine, provided Memorial became an independent nonprofit.

Building a branch medical campus at the University of Colorado at Colorado Springs has become a key issue in the leasing debate and all of the bidders pledged their commitment to enhancing education in Colorado Springs. Dr. Richard Krugman, dean of the University of Colorado School of Medicine, said that it would take a firm commitment of $3 million a year to get a new branch campus accredited. Krugman said the school was open to partnering with anyone who could provide that commitment, but said University of Colorado Hospital’s bid, which includes $3 million a year dedicated toward education, is the first firm offer he’s seen.

“After five years (on a previous attempt to build a branch campus in) Grand Junction and two and a half here, this is the first opportunity with this partnership for us to get it going in the next year or two,” Krugman said.

Kyle Hybl, chair of the University of Colorado board of regents and CU president Bruce Benson both said the university is behind University of Colorado Hospital’s bid — although the hospital is a separate entity from the university.

“Our commitment is total and complete to making this happen,” Benson said.

Jim Moore, chairman of Memorial’s board, which is leading a drive to turn the hospital into an independent nonprofit, said matching Penrose-St. Francis’ $1.5 million pledge would be a question for the new entity’s board, but said he felt it was a reasonable number. Although Penrose-St. Francis competes with Memorial, it and its parent company, Centura Health, are backing the independent Memorial option, arguing that the two hospitals can collaborate in ways that improve care and control costs.

HCA-HealthOne’s Sowell said his company was open to reworking its bid to include funding for medical education, while Sisters of Charity of Leavenworth Health System CEO Michael Slubowski said his system would investigate funding a branch campus out of its operating revenue at Memorial.

Both University hospital and Sisters of Charity also reiterated their interest in working with Memorial in some partnership other than a lease, if it were to become an independent nonprofit. Memorial CEO Dr. Larry McEvoy touted that interest as a benefit of the independent nonprofit plan.

“This list of people wanting to partner with Memorial will not be going away,” he said. “These people will still be knocking at the door.”

Wednesday’s meeting was the public’s only chance to hear the presentations and ask the bidders questions. Many questioners asked about layoffs at Memorial following a lease.

Penrose-St. Francis, Memorial and University said they didn’t envision any layoffs, while HCA and Sisters of Charity said there might be some layoffs initially, but both envisioned growing the system and its employment over time.

Colorado Springs resident Walter Lawson, who has followed the process closely, said he was frustrated by the compressed timeline — the task force plans to recommend a winning bid to the City Council by Dec. 27.

“It’s astonishing,” Lawson said. “This is the biggest decision this city has ever made and it’s being done over a holiday time and it’s being made by rookies.”

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Memorial bids

Video of Wednesday’s town hall meeting with bidders for Memorial Health System will be available on springsgov.com later this week.

Here’s a summary of what the bidders are offering for the city-owned hospital:

Centura Health

Centura is not proposing to lease Memorial itself. Rather, the parent of Penrose-St. Francis Health Services said it supports the independent nonprofit proposal, but presented a vision for extensive cooperation between the health systems and touted the community benefits for controlling costs and improving care. Centura will commit $1.5 million a year toward a branch medical campus at the University of Colorado at Colorado Springs.

University of Colorado Hospital

$74 million up front 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 at UCCS. Also, UCH is offering a profit-sharing plan in which the city would get an estimated $2.5 million a year over the life of the lease.

Memorial Health System

$5 million up front and a variable annual payment based on the health system’s profits. The independent nonprofit Memorial would assume all of the hospital’s current liabilities, including a pension liability that could be as much as $191 million. It’s projecting an investment of $2 billion over the life of the lease.

HCA-HealthOne

$500 million up-front lease payment for 40-year lease, 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, plus pledging to raise Memorial’s trauma program to a level one. HCA-HealthOne estimates roughly $325 million would remain after paying off liabilities.

Sisters of Charity of Leavenworth Health System

$10 million annual lease payment for 40 years, a minimum of $100 million of capital investment into Memorial in the first five years. $1 million initially and $500,000 annually for public health needs. SCLHS said its lease payments would leave the city with approximately $194 million over the life of the lease after paying off Memorial’s liabilities.

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