Nestled at 10,152 feet of elevation in the Rocky Mountains of Colorado, St. Vincent Hospital is a 25 bed Critical Access Hospital serving the rural area of Lake County and North America’s highest city of Leadville, Colorado.
The mission of St. Vincent General Hospital is to provide the best possible continuum of healthcare services to meet the health needs of persons in Lake County and surrounding areas. These services will be provided in a quality, cost-effective and accessible basis, and achieve a balance between community needs and available resources. We will reflect the caring and noble nature of this mission in all that we do.
Hospital Board Votes To Negogiate With Centura
Leadville, Colorado – January 9, 2015
At a special meeting on January 8, St. Vincent Hospital Board of Directors voted to negotiate a potential partnership with Centura Health.
The board has heard proposals from Centura Health, Swedish Health with Rotella Holdings and New Journey Healthcare outlining their participation for preserving St. Vincent Hospital.
Updates will be available at regular board meetings and on the hospital website, leadvillehospital.org. The next regular meeting of the hospital board is Thursday January 22 at 5:15 pm in the hospital conference room.
If you would like email updates about the future of St. Vincent Hospital, send your request to email@example.com. Or contact Karen Rinehart with questions at 719-486-7135.
***Updates regarding the future of St. Vincent Hospital. From St. Vincent Hospital Board Secretary, Dennis Johnson***
As you probably know by now, the hospital board voted to pursue a partnership with Centura. I sent a very brief email advising people of that last week. Centura’s written proposal was also circulated. Since sending my earlier email, I have had questions about the other proposals and why we chose Centura. For those who have not reviewed the Centura proposal, I will summarize it for you and tell you how I expect matters to progress in the near future. I will also provide some insight into the board’s reasoning in selecting Centura. Please remember, I am not speaking on behalf of the entire board. I am giving you only my personal impressions and thoughts.
In addition to the proposal from Centura, we received proposals from Swedish Hospital and New Journey Healthcare LLC. Denver Health was going to submit a proposal but declined at the last minute, stating that they still might be available for discussions in the future. I investigated all the organizations as much as I could in the time allowed. All of the organizations appeared to be reputable. It was clear to me that they were all run by very successful, astute business people. Following are summaries of the three proposals.
The proposal submitted in the name of Swedish Hospital was actually presented by Jonathon Rotella from Beaver Creek. Mr. Rotella has had success in establishing hyperbaric and wound care centers and wanted to open one at St. Vincent’s. This is a discreet medical service and not a hospital. However, Mr. Rotella’s proposal suggested he would provide a full service hospital in Leadville. Mr. Rotella offered to arrange loans from Centennial Bank to St. Vincent’s so that we could fix the heating system right away. He also offered to manage the hospital. Swedish Hospital was part of the group assembled by Mr. Rotella, but not the primary participant. Swedish Hospital’s facilities are primarily located in the Denver Metro area. They have affiliation agreements with rural hospitals and provide specialty clinics and telemedicine services for rural hospitals, but they don’t have a physical presence close to Leadville. Mr. Rotella was requesting a management fee of $600,000 per year, plus an undetermined percentage of gross revenues. Since the hospital’s gross revenues are well over $10 million a year, this would probably have amounted to a substantial payment in addition to the $600,000 per year. This would cost a lot more than Quorum. My concerns with this proposal were two fold. One, although Mr. Rotella had considerable success with hyperbaric care, I did not see a track record of managing rural hospitals. Second, the proposals he had for loaning us money and paying a management fee appeared to be a lot more than we could afford.
NEW JOURNEY HEALTHCARE
Albert Schwarzer of Ft. Worth, Texas submitted a proposal on behalf of New Journey Healthcare LLC. New Journey is a Texas company newly formed for this project. Although Mr. Schwarzer has many years of experience in health care, he has formed separate corporations or LLC’s for each project, making it difficult to research his past performance. Mr. Schwarzer said he had owned or managed 8 rural hospitals in Texas and Oklahoma in the past, although he is not currently running any hospitals. One hospital which Mr. Schwarzer managed in the past was Liberty Dayton Community Hospital in Liberty, Texas. According to local newspaper reports, one of his companies bought the hospital in 2002 and it was set to close in 2009 because it was deep in debt. The local newspaper painted a negative picture of the closure. I don’t know if that newspaper gave a fair account of the situation, so I didn’t rely much on that information. However, it did appear that there was controversy surrounding those events. Let’s just say that, in the short time I had to research this company, I could not confirm a track record of success with rural hospitals. I’m not saying Mr. Schwarzer doesn’t have a good record. He appears to have had considerable success in health care. I just couldn’t confirm that to my satisfaction in the time available, and he didn’t provide that information to us. Since time is of the essence in our situation, I had to make my decision based on the information available to me.
New Journey’s proposal was interesting and had potential, but it was also very open ended and I was unsure where we would end up after further negotiations. Mr. Schwarzer proposed a lease agreement where he would pay the hospital some undetermined amount in return for operating the hospital. He would keep the profits and bear the losses. Proposals like this frequently end up being similar to purchase agreements. He was suggesting a full service hospital. He was going to advance $750,000 as part of his lease payments so that we could fix the heating system in the hospital. Mr. Schwarzer concluded he could operate a full service hospital in Leadville after a quick analysis of this market. My concern was that he might find out he was wrong and not be able to do it. (Lake County is a very difficult market for health care.) Although New Journey was going to be responsible for losses, the financial strength of a new company like this is cause for concern. Mr. Schwarzer said he could provide a letter of credit to alleviate those concerns, but we did not know the duration or terms of such a letter, so my concerns still remained.
Another concern with New Journey was the lack of a physical presence near Leadville. They are trying to open small facilities in southeastern Colorado, but have no real presence nearby.
Overall, I felt that this company had potential, but I felt it was too much of an unknown under our present circumstances.
Centura Health submitted the most detailed proposal, probably because they are most familiar with our market. They understand the challenges of health care in Lake County and have proposed two phases to solve our problem. In the first phase, which would last 4 to 6 months, Centura would immediately take over management of the hospital to stabilize it and to give them an opportunity to conduct an in-depth analysis of our market, our building, and our community needs. Within approximately 4 months, Centura would present a plan for health care in Lake County. Implementation of this plan would be phase 2. Centura can provide access to capital because of their relationship with the US Department of Agriculture, State agencies, and private lenders. Centura might invest their own money in facilities here. Also, Centura will immediately prepare a disaster plan so that if our boilers shut down we can keep the emergency department open while this planning process unfolds. This disaster plan is in lieu of immediately spending $1 million or $2 million to fix our building before we know if we want to keep using it or build a new facility.
Initially, I was concerned that Centura’s proposal did not involve any initial investment of money on their part and that they were effectively asking for a free right of first refusal. In other words, they could examine the situation and, if they didn’t like it, they could walk away. In response to these concerns, Centura adjusted their proposal so that they will provide all hospital management services and planning at no charge for the first four months. For months five and six they will be paid only for the direct costs of the salaries and benefits of the CEO and CFO (which we normally pay anyway). After 6 months, hopefully we will have new contracts in place. Receiving management services for free will be a real saving to the hospital and will cost Centura quite a bit of time and money, so I was satisfied that they will have a strong incentive to make this work. They can still walk away, but I know that they will be trying hard to succeed.
Centura has a physical presence in areas close to Lake County, so we will have a support network with them. They have employees at St. Anthony’s in Summit County who live here, so that might assist with staffing at St. Vincent’s. Centura is well known and well established, so they are the least risky.
This matter was taken very seriously by the board. After reading all the proposals and listening to the presentations, the board went into executive session for over 2 1/2 hours where the pros and cons of each proposal were discussed and debated in depth. Many view points were expressed, but it’s fair to say that every board member wanted to choose the organization that was most likely to ensure survival of the hospital in some form. Because the hospital is currently in such a precarious position, I was looking for the proposal that offered the least risk going forward. We don’t have the luxury of trying an overly ambitious plan and starting over again if it doesn’t work. I felt we needed the safest solution to get us through this crisis. If we stabilize the situation, then it might be possible to increase services and build back up. But first we have to survive.
We were fortunate to have proposals from very good organizations. I personally felt Centura offered the safest course of action and was the most likely to succeed. While Centura has openly discussed providing a full range of health care services in Lake County, they have been cautious in their written proposals. I think they know what they are facing in Lake County and they don’t want to make promises they can’t keep. While it is possible that this won’t work in the long run, that possibility exists with all three organizations. Even though I believe that each presenter was making a good faith prediction of their ability to provide a full service hospital, there is a definite possibility that the realities of this market would force them to reevaluate their positions down the road. Ultimately, if any one of these organizations concluded that it was not economically feasible to proceed, we would not be able to force them to do so. I decided that, if any organization can make this work, it is Centura.
We will now begin working with Centura to finalize the terms of a letter of intent and eventually a detailed contract. I expect Centura to be taking over management of the hospital very soon. There is no guarantee that this will work, but there is certainly reason to be hopeful. Denny.
On December 18, Centura Health made a presentation to the hospital board about a possible relationship with St. Vincent Hospital. The next day, Centura made a similar presentation to a group of interested citizens at a meeting of the county’s health care advisory committee. This is to report on those meetings. Please remember I am not speaking on behalf of my fellow hospital board members, but giving you only my personal account and impression of what is happening.
By way of background, Centura is one of the largest health care organizations in the State. It manages numerous large and small hospitals throughout Colorado, including St. Anthony’s in Summit County and Lakewood. Historically, Centura has been a management company (similar to Quorum), but recently it has begun exploring partnerships, joint ventures, and equity relationships with hospitals in the State. St. Vincent’s has had an affiliation agreement with Centura for a couple of years, so we are familiar with them. We already know they are an excellent organization and that they present considerable potential for St. Vincent’s — if they enter into a meaningful contract with St.Vincent Hospital.
At the public meetings, Centura gave a persuasive presentation of the potential they bring for health care to Lake County. They discussed the possibility that they would invest their own capital in a health care delivery system at some point in the future and become true partners with St. Vincent’s. Overall, Centura painted an optimistic picture and made it clear that they are interested in working with St. Vincent’s on possible long term solutions. My impression was that people in both audiences were favorably impressed and optimistic about our future after listening to Centura.
While there is no doubt that Centura could potentially offer us a lot, I have had two personal meetings with Centura where the discussions have focused on the realities of our situation. Centura has made it clear to me that they will not commit to come here on a long term basis unless they believe they can do so in an economically sustainable way. At this point, their interest is based on general information only. It is important to note that they have not yet made their own internal determination on economic sustainability. They recently told me it’s “going to be tough.”
What Centura has offered at this point is a general, preliminary arrangement where they would come and manage St. Vincent Hospital and make recommendations about how to go forward. They would expect to be paid for this. They showed us a management contract last spring that was very similar to Quorum’s contract, but possibly more expensive, so a management agreement would not necessarily save us money. A preliminary arrangement would not necessarily constitute a long term commitment by Centura, but would only be a commitment to analyze the situation and see if anything could be worked out for the long term. We might only be giving Centura a right of first refusal. If they decided our situation is not economically sustainable, they could walk away in several months, and we would be in a worse situation than we are now.
I believe Centura is acting in good faith and I don’t believe that Centura intends for this to happen. But it could happen, and the board has to try to make our position more secure. I have clearly expressed this concern to Centura and they understand. Centura has promised me they will work on some terms that will show their commitment at the very beginning of the relationship. In turn, they want some sort of commitment from St. Vincent’s that we will stick with them, and not choose some other provider. That seems fair. I plan to be working with them directly over the next couple of weeks on these issues.
Meanwhile, we expect to see presentations from Swedish Hospital and possibly a couple other investors or organizations. Some of them have indicated that they may be bringing money to the table. I don’t know exactly what that means, but it is certainly something we want to explore. Because we are under time pressure to make a decision, the Board has established a deadline of January 5 for other interested parties to submit their proposals.
Some people have urged us to act immediately, and I understand that. We are skating on thin ice right now, and we all know it. However, the hospital board has a fiduciary duty to consider more than one proposal, so we are trying to obtain other proposals on an accelerated basis to fulfill our duties as board members and deal with this situation as quickly as we can. And, fiduciary duties aside, I personally believe it is important to choose right the first time because we might not have time to try two companies.
Additionally, I would like to remind Lake County citizens that our emergency room is open and fully staffed and our ambulance service is in full operation. I have heard recent accounts of people driving to Salida or Frisco under emergent circumstances because they believed these services were closed.
I’ll keep you advised as things progress.
Have a very happy holiday. Denny.
I know rumors are circulating about the hospital, so here is an update.
We hope to keep the emergency room open until March 31, or longer, until we can obtain funding and/or find a partner to keep emergency medical services available without interruption. This can only occur as long as we have the money and are able to provide adequate staff, and as long as we have heat in the building. The boiler has stopped twice since Thanksgiving — once for several hours. Last week, a number of nurses gave notice that they had accepted employment elsewhere, so staffing has now become a problem. There was some concern that we might have to close the emergency room at the end of this month due to staffing concerns, but it now looks like we will be able to go past that date. Hospital management is making every effort to retain nurses or to find them elsewhere. While we hope that we can keep emergency services going forward, everyone should be aware that this could change quickly. If we can’t run the emergency room safely with adequate staff, we will close it. And if we are unable to heat the building on a long term basis, we will have to close.
We have three major organizations who are willing to talk to us about coming to Lake County — Centura, Swedish and Denver Health. We are inviting them to make a presentation about what they might do here and how we can work with them. This will probably take place before Christmas. At this point, neither organization has said they definitely are willing to come here, but they are willing to take a serious look at the situation, so that is encouraging.
There was a meeting last week with representatives of the hospital and a number of people, including representatives of the BOCC, the United States Department of Agriculture (USDA), Dougherty Mortgage Company, and Centura. The hospital had been asking for financial assistance from each of these organizations for a long time without success. However, this was the first time all of us were in the same room together and it made a difference, particularly since we are in a crisis situation. While there were no firm agreements or commitments, it appears that real money might be available for hospital services if we can come up with a workable plan. This may depend on whether Centura or Denver Health decide they want to come here and, if so, whether the organizations with money (USDA and Dougherty) believe the plan is financially feasible. The good news is that these organizations seem to be willing to work hard to find a solution, so there is hope.
In the short term, we have to take care of the ambulance and possibly fix the emergency room. No final decision has been made about whether the ambulance will stay at the hospital or be moved to the County or the Fire Department. However, yesterday the county commissioners approved a resolution saying that they will subsidize the hospital for its losses in running the ambulance. This should increase the possibility that an ambulance service will continue in Lake County, regardless of the final structure.
We are attempting to get funds to replace the heating system in a small part of the building that will allow us to run the emergency department. As you might recall, we have a $1 million DOLA matching grant to fix the heat in the whole building, but we don’t have the $ 1 million to match it. We are now asking DOLA to split that grant in half so that we have can have a $500,000 matching grant to fix the smaller part of the building. The county commissioners voted yesterday to contribute $250,000 to this project, meaning that we need another $250,000 if DOLA agrees to modify the grant. The hospital can probably come up with the other $250,000 by selling property in Buena Vista. Years ago, the hospital sold a small clinic in BV on contract. We had a balloon payment of about $340,000 due this year, but it was not paid. We started foreclosure proceedings which will end on January 28. We have been offered about $250,000 cash for the property, although there is no guarantee at this point that the buyer actually has the cash in hand. This amount is less than we are owed and quite a bit below fair market value, so ordinarily we would not accept this. Our fiduciary duty requires us to try to sell for fair market value in most circumstances. However, if DOLA modifies our grant to allow us to fix part of the heating system, we believe this would be an extraordinary situation which could allow us to accept that offer of $250,000 and fix the heating system, without breaching our fiduciary duty. Of course, we might not do this if Centura or Denver Health say they want to build a new facility. We don’t plan to spend a million dollars fixing the building unless someone will use it. On the basis of these considerations, the board voted to decline the offer of $250,000 on the property for now. If DOLA modifies the grant, and if it looks like somebody wants to use our facility for the emergency room, we can accept the offer immediately. Although there is no guarantee, we believe the offer will probably remain open for a while because it was made by the tenant who is currently in the building and he does not want to move his business.
Many hospital services have been discontinued and many will end in January. We have decided for now to try to keep the medical clinic open beyond its scheduled closure date, along with the emergency department.
Quorum’s contract with the hospital goes until September 15. The hospital board has asked Quorum to voluntarily reduce the scope of its contract with the hospital and the fees it is charging. Our intent is to keep Joyce Beck and Ric Eisenring working at the hospital for the foreseeable future, but to eliminate all but the most essential consulting services we receive from Quorum. We expect a response from Quorum fairly soon.
You may have read about the new health care advisory committee. This is a group of 11 citizens, health care providers, and local government employees who are meeting to discuss and share ideas and coordinate plans. It has no decision making authority, but really serves as a forum for exchanging ideas.
I don’t intend to bother you with regular emails, nor do I intend to write a newsletter about everything that is going on with the hospital. Rather, you will hear from me if major things occur that are not reported in the paper, or if I believe that significant inaccurate information is being circulated, either by the newspaper or through rumors. Remember, I said I would address significant misinformation, not all inaccurate information. That’s always going around town, as we all know.
That’s it for now. Thanks for your interest in the hospital.