Task force considering leasing Memorial’s assets to nonprofit

The Colorado Springs City Council task force now charged with deciding the future of Memorial Health System has taken a turn – to leasing the assets of the hospital to a newly created, independent nonprofit system.

The move is a compromise between keeping it under city control and a total transfer of the assets to a nonprofit – something critics have claimed is “giving away” a city-owned asset.

It’s exactly how Poudre Valley Health System, one of the best hospital systems in the state, has been so successful. In 1994, the county-owned system became a nonprofit, leasing assets for 40 years from the county for a price of $300,000 a year.

Since then, PVHS has grown from 1,600 employees to more than 4,300. It has 20 clinics in Wyoming and Nevada, and recently launched a partnership with University Hospital in Denver.

All that growth – from $100 million profits to $1.2 billion in 2010 – isn’t possible for Memorial. Under city charter, it cannot grow beyond the city limits. However, the hospital still gets 13 percent of its patients from outside the city.

Rulon Stacey, CEO of PVHS, said the percentage of business Memorial gets from outside Colorado Springs  could easily grow to 40 percent, but only if the hospital changes governance.

“This is the biggest economic development issue going on in Colorado Springs today,” he said. “This is like the Dodgers deciding to relocate to Colorado Springs – that’s the impact of this.”

Under Stacey’s rosy forecast, “Hundreds of jobs and millions of dollars” are waiting beyond the borders of Colorado Springs for Memorial, once it is allowed to reach beyond those borders.

“But you don’t’ have a minute to lose,” he said. “Every day you wait, Centura is partnering with rural hospitals, we’re working on partnerships, everyone else is moving forward.”

The one thing the hospital system shouldn’t do, according to Stacey, who is also the chairman of the American Association of Health Care Executives, is remain the same.

“That’s not the answer,” he said. “It’s the easiest thing to do, but Memorial is already seeing declines (in patient volume and overall profit). Do something – sell it, turn it into a nonprofit. But if you do sell it, keep in mind that someone else is going to reap all those benefits.”

HealthOne in Denver, owned by HCA of Nashville, Tenn., has expressed interest in buying Memorial. That interest will remain, Stacey said, even if the city decides to lease the assets to a nonprofit.

“If this doesn’t work, there will always be an investor-owned system waiting,” he said. “It’s too good an opportunity.”

City council is considering asking HealthOne for a presentation about the pros anc cons of selling the system for a for-profit system. Kevin Walker, who has done some lobbying work for the group, said the system is unlikely to discuss its plan without a request for proposal.

“They are also in the middle of a transaction (to buy out its partner, the Colorado Foundation),” he said. “So, they aren’t going to want to talk without specific information on what you want to say.”

PVHS recently considered selling to a for-profit, investor owned system, or partnering with other health care agencies. The board eventually decided on a partnership with University, because they wanted to maintain local control of the health care assets.

The changing face of health care is one reason PVHS – despite its successes – looked for partners. That’s another thing that Memorial can’t do right now – partner with other groups. City law prohibits it.

The council’s task force is clearly interested in the lease option, instructing attorneys to draw up paperwork using the original transfer paperwork as a guide. Issues to be ironed out: will there still be a foundation? How much should the hospital pay in lease fees? And what happens if they fail to deliver either high-quality care of a firm bottom line?

The group next meets Friday at city hall to begin to iron out the details. If the full council approves the leasing option, it could go on the ballot in November.

But Stacey said, “Remember, your competition isn’t waiting.”

“I’d do this tomorrow,” he said.