Thursday, November 10, 2011

Weigh in on Memorial

Posted By on Thu, Nov 10, 2011 at 11:16 AM


In case anyone out there has been sleeping under a rock and doesn't know that city-owned Memorial Health System is about to slip into another's hands, here's their chance to learn more about what's going on.

From 5:30 to 7:30 p.m., next Thursday, Nov. 17, the Memorial Health System Task Force will host an e-Town Hall Meeting at Colorado Springs City Hall, according to a press release.

The meeting will provide citizens an opportunity to take part in the community discussion and ask questions about the lease process involving Memorial Health System. A formal presentation begins at 5:30 p.m. Citizens can submit their questions about the process in any of the following ways:

— Attend in person at Council Chambers, 107 North Nevada Avenue. Those wishing to speak at the meeting may sign up in person from 4:30 to 5:30.
— Watch the meeting live on SpringsTV, cable channel 18, or online at
— Phone in comments to 385-5961.
— E-mail ideas and comments to

You can submit questions in advance by phone or e-mail. Task Force members will also take questions from citizens at the meeting.

Here's a short version of the background on this issue:

In 2009, a citizen Sustainable Funding Committee suggested the city consider changing Memorial's governance and ownership. Its findings:

Memorial Hospital System

Current Status
The Memorial Hospital System (MHS) is owned by the citizens of Colorado Springs.
It is widely believed to be currently well managed and governed.
MHS has been self sustaining as an enterprise for many years.
There is a legal and likely a “moral” obligation for the General Fund to possibly fund shortfalls in the MHS revenues if they occur
The extra revenues for MHS do not flow back to the General Fund
The land and improvements owned by MHS are not assessed property taxes, nor is there a Payment in lieu of taxes (PILT) paid by MHS
MHS employees are City employees and have benefits associated with the that status
MHS contributes a small amount to the shared services program at the City.
Memorial Hospital is subject to City Council structures with a Board that operates independently but appointed by Council.

General observations
Most cities of comparable size to Colorado Springs do not own a hospital. Many large cities’ own and operate “safety net” hospitals; many smaller cities subsidize hospitals to gain access to that service.
Two hospital systems are the primary providers of service in El Paso County. Most communities our size are not served by just two systems.
The hospital/health care industry is a competitive business with for profit and non-profit systems operating throughout the country. It is not a monopoly
Health care is a targeted sector of our economy for political regulation and is undergoing substantial change. It is critical to continue to have strong management.
The industry is fast paced, complicated and capital intensive requiring skilled management and active leadership by its governing bodies
The health care industry is not on the decline in our country as are other sectors (manufacturing, commodities, etc.) but is a growth industry with significant cash flow
MHS has additional potential to be an economic engine in the community.
The current economic market will likely impact the potential and/or viability of any sale.
Motivating factors for a recommendation
This business is complex, competitive and growing. We may not be a community that needs a municipally owned system as a “safety net”.
Our community appears to be able to sustain a health care system without a municipally owned hospital. Other systems may be willing to provide these services.
The factors that went into the initial purchase of the hospital system have changed. If given the opportunity today, it would not be a business the City would necessarily need to get into.
There are significant emotions in the community toward the hospital
Significant cash is not delivered to the general fund.
There is risk that the general fund could be impacted by competitive difficulties for MHS, lack of credit availability, over-arching changes to the regulatory environment (e.g. universal health care), etc.
There are numerous ownership models of reducing risk and unlocking capital. Some of these include:
— Change to non-profit, 501 (c) (3) status with a governing board
— Joint ventures with other hospital systems
— Sale to for profit or a non-profit system

Further questions
What are the benefits and/or liabilities of keeping the current ownership? There is downside risk to the City budget.
What kind of structure should be pursued to protect the City from budget implications?
Is there a potential for PILT from MHS and what are the positive and negative impacts of that?
What are the social and other costs to the community if the City were not in the hospital business? As an enterprise, MHS currently reinvests 100%. Could a new structure result in exporting capital out of the community?
What are the social benefits to the City in having MHS?
What is the competitive industry and other risks associated with the various ownership structures?
What is the impact of Colorado law on the sale of hospital assets? Does the Hospital Transfer Act relate to a municipally owned system? Must proceeds remain in health care (e.g. a foundation for uncompensated care), or are proceeds available to the General Fund?
What community economic benefit could a change in structure realize for City residents?

Changes to the governance and ownership of MHS should be explored to accomplish at least the reduction of risk to the general fund. It is recommended that the Council initiate a process to examine the options in more detail toward an end of changing the ownership.
The process should go as quickly as possible with a deadline established in order to minimize disruption to current employees and to the market place.
Significant capital ($250 — 400,000,000) could be realized from an outright sale of the system, but there are many complicated health, community and other issues that need further study and community discussion.

Subsequently, another citizen panel met for nine months and spent about $400,000 delving into the issue before recommending Memorial be converted to a nonprofit agency. The City Council accepted the recommendation and put together a task force to figure out the process of a conversion. Then Mayor Steve Bach and several new cCuncil members were elected, and the process was disrupted and reshaped with the new goal of leasing Memorial.

Last week, voters approved removing a provision in the City Charter that allowed the council to impose a property tax to fund any operational deficit, a provision that was never imposed during the city's 50-plus years of ownership of Memorial.

Outstanding issues include what to do about the Public Employees Retirement Association demand that Memorial pay up to $247 million to remove its employees from the plan. Memorial maintains it owes nothing, just as it owes nothing if a nurse, X-ray tech or janitor it employs resigns or is fired.



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