Memorial hopes for more than governance change

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After months of sitting on the sidelines, listening to the testimony of highly paid consultants and a host of others discuss health care, Memorial Health System officials finally got their say Wednesday night.

The plan they unveiled to the Memorial Citizens Commission was sweeping in scope — establish an independent community nonprofit hospital with integrated delivery of care and service a region that stretches across southeastern Colorado and crosses the Kansas border.

Oh, and the hospital they hope to create will be free of city council’s control.

The commission was established last year to help the city decide whether to sell the hospital to either a for-profit or nonprofit, among other options.

But rather than sell, Memorial CEO Larry McEvoy argued the better strategy would be to establish a community nonprofit to take over the hospital.

“It’s the best of both worlds,” he said in an interview with the Business Journal earlier in the week. “It’s community-based, so the community retains control. It provides access for everyone, and the returns go back into the system.”

Removing that layer of city bureaucracy would create a “more nimble” system, and remove the risk to taxpayers, if one ever truly existed.

“If we’re going to keep it local, we have to do it this way,” McEvoy said, adding:

“Even large nonprofits will send revenue away from Colorado Springs.”

In arguing for the change, McEvoy said the current situation is too cumbersome. He cited the burden of having multiple groups approve budgets, salary changes and personnel issues. All of that can make it difficult for the hospital to move as quickly as it needs to.

A good example of that: In 2008, when the system found itself mired in auction-rate debts as the market collapsed, it had to come to terms with a lender to refinance the bonds, then get approval both from its board and from city council. While sorting through that mess, Memorial had to pay millions of dollars in interest payments.

McEvoy noted that every time Memorial tries new marketing techniques, has to negotiate salaries, hammer out contracts with doctors, it’s done in the public eye. Its competition, Penrose-St. Francis Health Services doesn’t have to do so and can use Memorial’s information as a benchmark in its negotiations.

“If we move to a nonprofit, we’ll still be transparent,” said Carm Moceri, chief operating officer for the system. “But we won’t be doing all our negotiations in front of our competition. It’ll make a difference.”

Memorial’s plan goes far beyond a simple governance change.

McEvoy envisions Memorial becoming a regional hospital — not huge, he cautions –but reaching out to create partnership as far away as Kansas.

“And we can’t do that now,’ he said. “One city council member asked me why we’d ever want to care for anyone outside of Colorado Springs.”

McEvoy understands why — a larger payer mix is necessary for the hospital to stay competitive, and to maintain cash reserves. Currently, Memorial relies heavily on Medicare, Medicaid and Tricare reimbursements, which don’t fully cover the costs of care.

“Health care reform is a train bearing down on us,” he said. “We have to be able to create these partnerships and we need to do it now.”

Should it get the council’s approvals, many details — items such as board structure and possible lease agreements with the city — will have to be negotiated, McEvoy said. Council member Sean Paige has suggested Memorial might pay a “substantial” sum to lease what is essentially city property.

“We’ll talk about it,” McEvoy said in the interview. “But the city has to realize that Memorial provides a valuable service — health care for the indigent — that equals $70 million a year. If we have to pay a substantial lease on top of that, we won’t stay in business.”

McEvoy’s vision includes revamping Memorial to deliver health care in an integrated manner, meaning using high-tech methods to link doctors, patients and the hospitals.

“We know that if you integrate services, you can cut costs and raise quality. It’s proven,” he said. “That’s how we plan to do this. There will be some initial investment, but we’re mostly concerned with creating the relationships with the physicians. That’s a key step.”

About 30 cents of every health care dollar is wasted on duplication of services, he said. Ending that waste through integration will make more money available to launch marketing plans to draw in more patients from surrounding areas, he said.

“We’ve found that some people skip over us and go straight to Denver,” he said, “simply because they don’t know we’re here.”

Hospitals also must do more to reach out to doctors, he said, because health care reform requires bundled payments — a single payment to doctors, hospitals and all caregivers when a patient enters a hospital.

That added pressure to contain costs means McEvoy is anxious for the citizens’ commission to wrap up its work, and for the proposal to pass voters, a necessary step before any governance changes can be made.

“We were hoping to have this conversation in April,” McEvoy said.

Amy Gillentine can be reached at 719-329-5205 or at amy.gillentine@csbj.com. Friend her on Facebook.