Negotiations to lease Greenwood Leflore Hospital to the University of Mississippi Medical Center appear to be on track, with only “two or three areas of potential disagreement” remaining to be resolved, according to the Greenwood hospital’s interim CEO.
“I remain optimistic,” said Gary Marchand following the regular monthly meeting of the Greenwood hospital’s board Tuesday. “We’re still actively engaged with (UMMC) if not every day of every week, two or three times a week. We have meetings scheduled here and there. They’re starting to interact with physicians that we might have under contract.”
The Greenwood hospital for the past three weeks has been evaluating a proposal it solicited to turn over its operation to UMMC by the end of this year. The Greenwood hospital is trying to hammer out a long-term lease that could be finalized before it runs out of cash. In August, according to the figures released Tuesday, the hospital lost another $2.8 million. It is presently living on borrowed money in the form of advance Medicare payments, which the hospital received at the beginning of the pandemic two years ago.
The hospital is jointly owned by Leflore County and the city of Greenwood. Any lease agreement would have to be approved by both the county Board of Supervisors and the City Council.
Both bodies this week authorized the hospital board to finalize lease documents with UMMC and bring them back for the county’s and city’s consideration.
Marchand said that based on his discussions with members of the Board of Supervisors and City Council, everyone seems to be in agreement on the desired end result. “Our meetings with the owners have been positive. We’re having transparent conversations. ... We’re all on the same relative page,” he said.
One issue of concern has been how one of the hospital’s retirement plans will function if it is leased.
Because of concerns about its sustainability, the defined-benefit plan has been frozen since 2012, meaning that no new enrollments or contributions have been allowed. The hospital, however, remains liable for paying out benefits to the roughly 1,200 current and future retirees who enrolled in the pension plan prior to 2012.
According to the latest audit, also released Tuesday, the pension plan is in its best financial shape in years, thanks in large part to a return on investment of nearly 17.4% for the 12 months ending Sept. 30, 2021.
However, as noted by Bill Felder, a CPA with the Ridgeland-based firm that annually audits the plan, the stock market has done poorly over the past nine months, which would negatively impact the fund’s performance.
As of the latest audit period, the pension plan’s unfunded liability — the amount, according to current projections, the fund is short of being able to meet all of its future obligations to retirees — is about $9.5 million, down from $14.2 million the year before. According to actuarial projections, the plan is almost 81% toward being fully funded, a better-than-average condition for defined-benefit plans.
Since 2012, the hospital has used a less generous and less expensive defined-contribution plan for retirement benefits.
Marchand said that UMMC, in its lease proposal, stipulated as expected that it would not assume any of the Greenwood hospital’s liabilities, including the pension plan. That leaves unanswered, at least for now, the question of what would happen on the unlikely chance that the pension plan did not have enough reserves in the future to pay out all the benefits.
A federal court decision in 2016 regarding a publicly owned hospital on the Gulf Coast held that its owners, in that case Jackson County, were not legally obligated to cover any shortages in the pension plan. That decision was upheld by the 5th U.S. Circuit Court of Appeals.
On Tuesday, the Greenwood hospital board met behind closed doors for more than 20 minutes with an attorney from Phelps Dunbar, the law firm that advises the hospital on regulatory matters, to discuss how a lease would impact the pension plan.
“That’s an important matter for the board, for our employees,” said Marchand. “It’s one of the matters of early concern for us in transition planning.”
As expected, revenues at Greenwood Leflore Hospital dropped significantly in August after a sewage leak caused the hospital to shut down all but its emergency room for three days. That was followed by the decision to leave closed the labor and delivery unit and the intensive care unit as well as to staff only a limited number of inpatient beds as further cost-cutting measures.
Total revenues in August were down almost $2.8 million, or 34%, from the same month the year before.
Expenses were also down, but not as much: $1.9 million, or 19%.
The result was a loss of $2.8 million, compared to loss of $1.9 million in August 2021.
For the first 11 months of the current fiscal year, the hospital has lost $15.6 million. The losses would have been much larger if not for $9.2 million in mostly federal coronavirus relief funds. Cash reserves ended the month at $9 million, down $1.5 million from the month before.
About $3.4 million of the reserves can’t be tapped, however, because they are either reserved for the hospital’s self-insured medical malpractice coverage or as security against a capital improvement loan. The remaining cash balance of $5.6 million does not cover the $6.2 million the hospital still owes in advance Medicare payments, which are being deducted in monthly installments out of reimbursements.
The August financials do not reflect the layoff of 40 employees in early September — the second round of layoffs implemented since May in an effort to buy time until the lease with UMMC can be completed. Without a lease deal, the Greenwood hospital will have to shut its doors, the administration has said.
The hospital received earlier this month a welcome amount of unexpected financial help from the federal government: $384,000 in additional coronavirus relief funds.
“We happily accepted it,” Marchand said.
- Contact Tim Kalich at 662-581-7243 or tkalich@gwcommonwealth.com.
