For Memorial CEO Dr. Larry McEvoy, there's only one viable way for Memorial Health System to keep providing roughly $70 million a year in uncompensated care amid declining reimbursements.
That would be to make Memorial an independent nonprofit, which would also free it from public disclosure requirements and the onus of City Council oversight and politics.
A tax-exempt 501(c)(3) organization would relieve taxpayers of any obligation whatsoever — a City Charter provision allows Council to raise property taxes to cover deficits — and assure that decisions guiding Memorial would be made locally. Money in excess of expenses would be pumped back into the system.
It's been years since tax money went to the hospital, and Memorial generally has performed well financially. It reported net revenues, which would be considered profits by a private business, of $15.2 million last year.
Memorial's plan from McEvoy and top-level hospital officials was outlined for reporters Aug. 27 under an embargo agreement. It was to be presented publicly Wednesday evening to the Citizens Commission on Ownership and Governance of Memorial Health System. The commission has been studying options such as selling, merging with another nonprofit, or doing something else. It's due to submit a recommendation to Council by December, in time for an April ballot measure. Any ownership change would require voter approval.
McEvoy wants the hospital system converted to a nonprofit whose self-selecting board could steer the $400 million system toward integration, an approach that strives to bring physicians and clinics under one umbrella to control costs and put all caregivers on the same page. It's essential to control costs, McEvoy says, because as health reform takes root, government payers and insurance companies will reimburse hospitals with flat fees for services. Such "bundling" leaves the hospital to determine who gets how much.
McEvoy says Memorial has a hard time contracting for doctors, goods and services, which could help control costs, when contract terms and other records must be made public. Doctors and companies don't want competitors to know the deals they've made, he says.
As a nonprofit, Memorial wouldn't have to expose those deals and also could expand to outlying areas, such as Lamar and Trinidad, that now send patients needing higher levels of care to Denver. Such outreach isn't likely under city ownership, with Councilors inclined to limit service to city residents. The hospital also could enter into joint ventures and expand into the health insurance business, offering coverage to outsiders.
McEvoy wouldn't say during the media briefing whether Memorial is willing to pay to cut ties to the city. Also unclear is whether or how Memorial would report to the community. Nonprofits must only file annual federal Form 990 reports, which include some financial information and salaries of top personnel.
The system doesn't want to be under the thumb of Councilors, who lack health care expertise, McEvoy says, because it complicates quick responses to industry changes. At present, Council approves Memorial's annual budget and debt and appoints the board.
"Does the City Council person drive better care at the bedside?" McEvoy asks. "The answer they'll say and the nurses will say is, 'No, they don't.'"