Yahoo Weather

You are here

Proposed hospital district not the answer

This issue is not about needing a hospital. That is a given. However, the question at hand is about how we do it.

Grays Harbor Community Hospital (GHCH) started from a financial crisis when its predecessor failed. It remained a private, non-profit hospital. Then, St. Joseph’s Hospital failed in 1988. In turn, it was purchased by GHCH. As Mr. Tom Quigg stated, Providence did leave, a sign that two hospitals could not exist based upon the economy here. In 2005, Weyerhaeuser announced facility closings.

Yet, since 2006 more building happened based upon borrowing. The bond market and the local economy did impact the hospital. However, the underlying problem has been hospital administration spending like drunken sailors.

Spending has continued to outpace revenue, even with increasing revenue from the individual sources such as Medicare, Medicaid, workmen’s ompensation, contracted and insurance since 1992.

Over the last three years, Total Patient Admissions and Patient Days have dropped. From 2012 to 2013, they lost $10 million in inpatient and gained $5 million in outpatient revenue; a net loss of $5 m illion. Medicare and Medicaid patient admissions have dropped, but the “Other” group has increased. In 2013 there were 2,163 Medicare, 1,023 Medicaid and 793 “Other Patient Admissions.” Medicare is the leading group, not Medicaid. The “Other” group is not much smaller than Medicaid patients.

They have more than $17 million in cash with more than $8 million in “other assets,” enough to cover their “shortfall” for 6.5 years while seeking a better solution.

The debt is $34 million in Key Bank bonds. They have $39 million of equity with $101 million for assets. The simple formula for accounting is assets minus liabilities is equity which tells you they have $62 million in total debt, a 62/39 debt-to-equity ratio. Not good!

Community Hospital CEO Tom Jensen stated they did not want a hospital district and wanted to keep the hospital as a private corporation: “their hospital” not “our hospital.” In August of 2012, the board decided on an affiliation with Multicare Health Systems rather than a merger.

Don’t be fooled by the term “non-profit.” All corporations are “non-profit” until they make a profit. Instead of paying out a dividend, non-profit corporations pump the money into the business as retained earnings.

Non-profits serve the employees of the non-profit first by providing salaries and benefits. Mr. Jensen made $292,000 in 2013. The top-five management team made $1,025,181 in 2013 — $15,866 more than the previous year. The new 2013-16 contracts gave everyone a raise, and reduced days a part-time employee needs to get medical. Is this the way you operate when you are failing?

The amount of Medicaid reimbursement since 2006 was around 15 percent of the amount billed except in 2011 it jumped to 32 percent and, in 2013, it increased to 19.34 percent, resulting from negotiations with the Medicaid HMOs. The Vidette reported the contract cancelations were done in December to get more of the state money for hospital services. The hospital cut the Medicaid HMOs to just two, Amerigroup and Molina.

So, is this district on the right path?

When announced, Becker Hospital Review writer, Bob Herman, wrote on April 7, 2014, “The move bucks the general trend of hospitals moving away from public ownership structures. Since 2003, approximately 17 health care districts and public hospitals have declared Chapter 9 bankruptcy.”

So, why would we be moving against the industry trend and what is it?

The trend is for larger, private non-profit hospitals to buy the smaller hospitals. What are the advantages? Management is centralized, saving $1 million for local management with greater financial strength and the personnel that can be distributed around the organization. You get the resources and ancillary services of the organization. You can buy supplies and services at volume discounts. And most important to the patient, you get a better continuum of care. It is an economy of scale.

So, what needs to happen?

The larger, cash-rich hospital walks the fiscally challenged smaller hospital through a “packaged” Chapter 11 bankruptcy, negotiating with the bond holders, creditors and contract holders for better terms or eliminating the debt and use existing cash to pay them off. Also, contracts are revised and workers have a job in the future.

The result is that the new hospital is debt-free and able to continue operating, a win-win for the community.

If this passes, there is a transition period where assets are transferred to the district in a negotiated transfer, not just a wholesale handing over of the whole thing with all its “warts.” The district sells bonds to pay the bond debt and the penalties. Some think that the 501(c)3 can hold on to the assets and debt and lease them to the district. Olympia officials say this solution does not meet the letter of the law. The law requires the hospital to be owned and operated by the district.

You guarantee those bonds, even if the hospital fails and pay a levy for 25 or more years with no benefit.

Senator Jim Hargrove has danced around this issue, but the law is clear. You will have a levy if this passes. He just does not want to admit he screwed up with this legislation.

The district could follow the private non-profit “packaged” bankruptcy plan, but it doesn’t have the cash. It only has your money and it will not see dime until April of 2016.

You already have “transparency” in the hospital operations through the state Department of Health. Financial records, treatment records, operations, payments of salaries to the top earners, etc. are reported annually.

What representation do you really get? How many candidates have a current stake in the hospital operation or directly benefit because of their relationship with it now? Do we really want the same board and management running the new district when they just ran the private entity into the ground?

Can you really control your representatives once elected? Anyone that has spoken at your local city or county knows they can both prevent public comment and ignore you.

The extra federal Medicaid money starts declining in 2017 and continues to decline until 2020. The state, because of the McCleary education ruling by the state Supreme Court, has no plan to back fill the lost funds. We will be getting 125 percent of a declining pot of money.

Can the district control costs or cut salaries? The current contracts are good until 2016. Has your local city, county or state done that?

The private non-profit hospital impacts you, the voter, the least — no new levy, no long-term liability for the bonds, debt, pensions or lawsuits.

What should the hospital do? Go to Olympia and get legislation that provides Medicaid money with a guaranteed payment above and beyond the decline in federal payments that are sufficient to cover the costs of providing the Medicaid services.

Find a buyer. Go through Chapter 11 bankruptcy and emerge as a functioning portion of a more robust private non-profit hospital.

What should you do? Vote no on this Hospital District.

Randy Peck lives in Ocean Shores and is an advocate against turning Community Hospital into a public hospital district. A longer version of this column can be found at