Memorial vote won’t come until November

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The millions of dollars required to move its employees from a public pension plan to a private one could scuttle any plans for a change in ownership for Memorial Health System.

Actuaries at the Public Employees Retirement Association estimated the cost of covering retiree benefits as $246 million — much higher than the $30 million to $40 million estimated by the Memorial Citizens’ Commission, which made the recommendation last year to make the system an independent, nonprofit system. Memorial’s own actuaries placed the figure even lower, around $20 million.

The larger-than-expected figure, combined with campaigns to slow the process, led the joint City Council-Memorial task force on Monday to delay a public vote on the matter until November instead of placing it on the April ballot.

“It’s orders of magnitude larger,” Jim Moore, chairman of Memorial’s Board of Trustees, said of the pension obligation. “We need this room (until the fall) to talk to PERA, to see if we can come to an agreement. If we can’t, then there’s no alternative. Memorial will have to be a city-owned hospital.”

The PERA figures includes $217 million for actual retiree benefits, plus an additional $28 million for retiree health benefits.

Memorial employees cannot remain in the public pension plan if the city no longer owns the hospital. The $246 million would have to be paid to PERA in a single, lump sum payment, even if the hospital is purchased by another system or spun off as a nonprofit.

The PERA figure was just the “latest data point” that led to the decision to delay the public vote until the November election, Moore said.

HealthOne, one of the largest hospital systems in Colorado, launched an advertising and direct mail campaign in December to halt the vote on what to do with the hospital system. HealthOne wants to buy Memorial and expand its services from Denver – where it has seven hospitals – to Colorado Springs. 

“Outside interests definitely muddied the waters,” Moore said after the decision was announced. “And as we talked to community leaders and to the public, we realized people just didn’t understand the benefits of the nonprofit, or even why we need this change. This give us a chance to continue the conversation.”

It’s a conversation that Memorial can now be fully involved in because there won’t be a measure on April’s ballot. State law forbids city employees from campaigning on ballot issues affecting the city. Memorial’s leadership would have been muzzled once the City Council voted to place it on the ballot. Now, they can talk until it’s placed on the November’s ballot – probably sometime in September – if the decision is made to move forward.

“We decided we needed more time to talk to people,” said Moore, who is also on the task force. “We want to continue the conversation.”

Memorial spokesman Brian Newsome said Memorial also wanted time to research the numbers used by PERA’s actuaries to come up with the $246 million figure. It’s a huge sum for a system whose operating revenues in 2009 totaled $542 million.

“Memorial believes the legal and actuarial assumptions that PERA used in reaching its calculation require additional diligence and examination,” he said. “And we will be working closely with PERA in coming months in search of a workable resolution.”

Bob Lally, who chaired the citizens’ commission that spent nine months researching the future of Memorial, was shocked by the PERA number.

“When we researched it, we were estimating in the $30 million to $40 million range,” he said. “This is so much larger — even selling it to a for-profit now, that would wipe out any benefit to the city or to a foundation – it would bring it to zero.”

Under state law, any dollars generated in selling to a for-profit would have had to go to a health care foundation, not the city’s coffers.

Lally said the commission’s work was finished. The commisison will be dissolved Wednesday.