DISCLAIMER: THE FOLLOWING ARE TIM LEIGH’S PRIVATE THOUGHTS AND ARE NOT REFLECTIVE OF ANY OTHER MEMBER OF THE MEMORIAL HOSPITAL TASK FORCE INDIVIDUALLY OR COLLECTIVELY.
Pay attention. Be informed. Make a difference. Keep it real.
There is no option for our Memorial Health System (MHS) to remain the same. Because of forces beyond our control, (national health care policy and financial demands driven by modern health care systems), we have to grow MHS or it goes out of business over time. It’s that simple. We either do something smart now or do something stupid later.
After reading the 5 health care proposals and sitting through the 1st of 2 rounds of pitches, there are some easy observations:
- Every proposer says they will deliver world class health care
- Every proposer says they will deliver equal or greater indigent care
- Every proposer says they will make the PERA problem disappear
- Non-profit entities feel like (people with a soul) who you can call and someone will answer
- For-profit entities feel like soulless, (anonymous) corporations, who if you call, you receive a recorded message or an opportunity to speak to one of our good friends over-seas
- At the end of the day, (like everything else), the ever-looming question becomes “Who do you trust?”
The University of Colorado Hospital (UCH) has a very compelling proposal including about $1.8 Billion in investment by way of partnership with The Poudre Valley Health System (PVHS) and MHS.
- The combined systems would be equal partners in a newly formed 501c3 (front-range health care system) called The University of Colorado Health System. MHS would be its southern-hub.
- In addition to $50 million up-front; the local health-care-cost savings derived from combined operational economies-of-scale and a share of all profits, UCH would lead construction of a major branch of the UC medical school on the campus of UCCS.
- That construction would immediately create local construction jobs and other jobs producing sales and other tax revenue for the city’s general fund.
- And, (by the way), newly minted physicians & nurses typically remain near their Alma matter – they’d stay in southern Colorado.
HCA’s proposal is compelling because – who doesn’t want a half a billion dollars? HCA’s story is; after the dust settles we’d have $320,000,000 to fund a health care trust. At 3% (pick a number) annual ROI, that’s about $9,600,000 per year. Furthermore, they claim their local operations would generate another $8,000,000 in new taxes to be used by the general fund.
- Here’s some context – depending on the year, $8,000,000 would cover most of the city’s general fund obligation to the parks department.
- HCA’s challenge is whether the citizens will agree to “sell” to a “for profit” entity. And I know – it’s a lease, but it’s a 40 year lease. Remember, if it looks like a duck…
The Sisters of Charity say they’ll do whatever we want to do – lease or joint venture. They just want to be in the game; theirs was a proposal to make a proposal. They would not commit to moving their corporate headquarters to Colorado Springs and they made an odd statement; “in the future, our health care system would likely grow smaller.” (I know – but I heard it with my own ears.)
- They crowed about the size of their balance sheet – it’s the biggest (and therefore they believe they offer the best guaranty against default). I remember 2007. I knew a lot of guys with big balance sheets. Then the clock ticked over to 2008 and the world changed. Having the biggest balance sheet is not a compelling reason for marriage.
- The Sisters have a fundamental flaw to overcome – they’re religious in organization. I’m not personally adverse to their religiosity, but having 2 religious health care systems in Colorado Springs may be troubling to the citizens, especially as it relates to birth control issues – vasectomy, abortion, etc.
Centura said MHS should become a new 501c3; that the city should not engage in a health care arms race; and we should love-one-another. They call it Co-Opetition. (Their “love everybody” presentation sounded like tie-die, bell bottomed psychedelica from the 60’s, but I digress. . . )
- We enjoy an interesting health care culture in Colorado Springs where most physicians are credentialed to admit patients at both, MHS or Penrose. This is not normally the case in most markets. To Centura’s very good point, we’ll have to be careful not to lose that magic in the process of this process.
- Furthermore, they made another very good point about free money (of the up-front kind). There’s no such thing – reminded me of Fival the mouse – he came to America looking for roads that were paved with cheese. I think the cat ate him.
- Centura’s proposal felt like a last gasp to eliminate any real competition in the market.
Memorial Health System proposed more of the same. If you change us they will come. Here’s a news flash! MHS’s issues were never about governance. The reasons demanding change are financial and environmental not governmental. MHS’s proposers said their vision includes a new board and new executive leadership team.
Ultimately, for MHS’s proposal to have credibility it’s likely that many of their leaders will have to resign before any 501c3 designation is made and good questions might be:
- Would the citizens vote to transfer MHS to existing leadership with their (promise) to resign?
- When and how would current leaders begin implementing an orderly resignation/transition process that does not hurt the operational flow of MHS?
- Not to beat a dead horse, but the current MHS administration (by their admission in their proposal) is lame duck and as hunters know, wounded ducks have weak quacks.
- Who is going to guarantee the transaction on behalf of a new MHS 501c3?
- Current cash balances and on-going cash flow as the guarantor is not a guarantor.
- Without significant guarantees that the citizens won’t re-inherit PERA and other debt obligations after closing, this duck won’t take flight.
Other questions at 4:00 AM
- Who are the actual people we’ll be negotiating with in the transition?
- Who will our negotiation team be?
- Will our team be equal negotiation partners? Intellectually? Experientially?
- Should our negotiation team be politicians (recall the USOC debacle) or seasoned business people with experience in handling very large transactions?
- Do we have respected, credentialed citizens who would volunteer to lead our negotiation team? At no cost?
- Who chooses our negotiation team and how do we choose them?
Cutting to the chase – there are a couple of intriguing proposals and others – not-so-much. The 2nd round should be very interesting. I’m sure the presenters will tighten-up their proposals with the more positive aspects of their stories. The next public session is Wednesday at City Hall from 1:00 – 7:00 and is designed for public comment and questions. I’d recommend you come early if you want ring-side.
Hopefully, Council will make a well-reasoned, unemotional business decision on who to recommend to the citizens. After all, the outcome could be staggering and transformational. We have the potential to create a health care behemoth; an economic powerhouse with special links to the concept of regionalization and our friends to the north – if we do this right.
Pay attention. Be informed. Make a difference. Keep it real.
I’d love to hear what you think. Tim@TimLeigh.com