The fight over Memorial Health System’s future is shaping up to become a David-and-Goliath battle — but there’s no certainty the little guy will win this time.
The battle is pitting some of the nation’s largest health care systems against a single, grassroots group that wants to maintain local control of the hospital.
The Colorado Springs City Council sent out requests for bids to lease the system, and got back six proposals. As required, all the proposals are from Colorado hospitals, and all but one is part of a large hospital network, the newly created Memorial Health System Inc., a nonprofit created by community activists to lease the hospital from the city.
While it does not have millions to give the city, as HCA proposes — it does have the support of many health care community groups.
“We have the support of Peak Vista Community Health Centers and Colorado Springs Health Partners,” said Susan Loo Pattee, one of the forces behind the new nonprofit. “They’ve signed on, and have agreed to partner with us — creating a community-based health care system.”
The way she sees it, Memorial is owned by the residents now, because it’s owned by the city. Maintaining its independence keeps that ownership.
Memorial Health System Inc. has the backing of several community health and business leaders, including Kevin O’Neil, owner of Braxton Technologies and several other local businesses.
What the group lacks in capital, it makes up for in connections and in sheer passion, Pattee said.
“My family used to own Current,” she said. “And for years, it was one of the largest local employers headquartered here. People could come to Current for community needs. It was involved. When we sold it, that involvement ended. The headquarters was somewhere else. We want Memorial to be headquartered in the Springs.”
Keeping it here — and under local control — means that the system could spread from the Springs, partner with other groups, even contain a medical campus, Pattee said. The money would stay here, as would the jobs.
O’Neil specializes in moving businesses from other cities to the state. He talks about how health care is a different kind of business, however, and one that should remain under local control.
“You look at the numbers, and you can see where these groups would be interested,” he said. “There’s a lot of money. Mergers and acquisitions — it’s what I do, and this is a big economic engine.”
But that takes both money and jobs out of the Springs — and that’s not what O’Neil wants. So, for the first time, he’s taking the stage publicly to discuss Memorial and the new proposal.
Neither Pattee nor O’Neil will discuss specifics of the group’s plan, but they say they have the backing of much of the local community.
“We’ve talked to everybody,” Pattee said. “Hundreds of hours talking to the state pension plan, to Memorial employees, to the EDC , the Chamber of Commerce. And we believe the plan is one that will work for the city — and for Memorial. “
But those plans might not include Memorial’s current administration — or at least not all of them. Rumors are circulating that the Memorial Health System proposal includes resignations of Larry McEvoy, the CEO of the hospital, and Carm Moceri, its chief operating officer. Memorial would not comment on those rumors.
But even without McEvoy and Moceri — both of whom have come under fire from community leaders and city council — the group’s proposal has some stiff competition.
HCA/HealthOne is the only group that made their proposal public — in a public relations move that ensures it’s the proposal that gets the most public discussion.
Its 83-page proposal came with hundreds of pages of backup documents, all touting the system’s success and its ties with its parent company, HCA, which is the largest for-profit system in the country.
The Nashville-based HCA suggested it would lease the system for $500 million, and that the city would see $325 million once the hospital’s bonds were paid off. Under state law, that money would fund a health care foundation, according to Attorney General John Suthers.
The proposal also says it will retain all employees, for at least six months, while it conducts a study to see if they are all needed. The company also says it will spend $1 billion in capital — an amount equal to or greater than Memorial’s depreciation. And, it expects to pay $10 million a year in taxes. That money would go into city coffers.
But the big numbers only tell half the story, said Jay Patel, a local business leader who ran the same financials for the Memorial Citizens’ Commission.
“It’s a fun weekend in Las Vegas,” he said. “You’re selling a long-term asset for something that will only last for a short time.”
In good years, Memorial makes between $60 and $80 million in profit. Under that scenario, HCA has made back its initial investment in a mere six or eight years.
“That’s what you look for in business,” he said. “It’s golden. But what we’ll have in the Springs is a huge sucking sound — the sound of money and jobs leaving.”
Patel estimates that the for-profit will cut 700 jobs because they don’t want duplication with its headquarters — and those job losses will lead to others.
That’s because the health care jobs have a multiplier of 2.5.
“Small businesses that rely on contracts with Memorial, for things like uniforms, will lose those contracts,” he said. “They’ll all be centralized.”
But Patel points to something else — little known outside the world of hospital finances. Hospitals keep millions in escrow accounts designed to address problems — a government audit, needed capital. That money would immediately transfer to any organization that leases Memorial.
“There’s a lot of money in escrow, that you never see, to address emergencies,” he said. “They would get that money instantly. It would be gone.”
The HCA proposal also takes away Memorial’s investments and its cash-on-hand — and transfers it to pay off the city’s bond debt for the hospital.
“That’s money out of the local community,” Patel said. “Anyway you look at it.”
Centura Health is the parent company of Penrose-St. Francis Health System, which is located in Colorado Springs. Centura, in turn, is part of Catholic Health Initiatives, one of the largest nonprofit hospital systems in the nation.
Centura operates 13 hospitals and seven senior living facilities across Colorado. It employs 14,500 people and has more than 6,000 doctor partners. In addition to Colorado Springs, it has hospitals in Pueblo and Canon City.
Exempla Sisters of Charity is another Catholic health care group, based in Denver. It is the product of a 2009 merger between Exempla Healthcare and Sisters of Charity. It includes three hospitals in the Denver area and has more than 7,000 employees.
University of Colorado Hospital is also in Denver and is another nonprofit system. It is an academic, teaching hospital and includes five buildings. Some speculate that having the hospital lease Memorial will bring a branch of the medical school to Colorado Springs, an effort that task force member Phil Lane has been extensively involved with in his role as head of the Regional Leadership Forum.
Community Health Systems is a for-profit system based in Nashville, Tenn. The publicly traded company owns, operates or leases 131 acute care hospitals in 29 states. In 2010, it had revenue of $13 billion.