Greenwood Leflore Hospital is projected to be losing more than $7 million per year by the end of the decade because of changes related to Obamacare, a consultant’s report predicts.
So the owners of the publicly owned facility are weighing their options to see if the time is right to sell.
The Leflore County Board of Supervisors and Greenwood City Council both voted Thursday to solicit bids for the 208-bed hospital, which can be rejected.
A 10-person committee will write a request for proposals that will stipulate what conditions they want on potential buyers. That could include a mandatory amount to be spent on renovations or charity cases, for example.
The committee will consist of two members each from the City Council, Board of Supervisors, Hospital Board, hospital administration and medical staff.
Alex Malouf, chairman of the Hospital Board, said he hopes they’ll have the request for proposals ready in five or six weeks.
A public hearing will also be held. It’s required by state law when a public hospital is being considered for sale.
If the city and county receive and vote to accept a bid, the people of Leflore County would have 30 days to get 1,500 signatures to put the decision to a vote.
The hospital is the county’s top employer, with nearly 1,000 full-timers.
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The 32-page report by Horne CPAs &Business Associates of Ridgeland said the hospital is well-managed, provides quality primary patient care and is financially stable.
But it lacks many specialties, and certain segments of the population — speaking of those with private insurance — are likely to travel to Memphis or Jackson for specialists based on perceptions.
The people Horne interviewed for the study — which included hospital officials, doctors, business people and elected officials — said they felt safe with the level of care at the hospital, but they frequently mentioned aesthetics and comfort of the rooms. The hospital knows that need but hasn’t had money to pay to fix up the rooms.
The report avoids making a recommendation about what to do. Instead it gives three options — two of which face serious barriers to implementation.
One would add a physician as sixth member to the existing Hospital Board. The stated reasons are because the medical staff wants a vote and because the current swing vote, Gladys Flaggs, feels a lot of pressure on controversial issues.
But adding a medical staff member would be difficult because of ethics law stipulations not allowing them to benefit financially from the hospital. And at least two City Council members — David Jordan and Carl Palmer — decried the idea of having an even number on a board and said a board member who can’t take the heat should resign.
The second option, turning operation over to a community-based nonprofit corporation, has several substantial barriers. First, no such organization currently exists, and it would have to be put together in time to respond to the request for proposals. More importantly, it would have to raise enough private capital to buy the hospital — roughly $100 million — for what would be a nonprofit enterprise.
So the realistic options are to stay the same or sell.
If Horne had made a recommendation to sell, it would have been required by law to give an appraised value of the hospital, according to Margaret Williams, a Jackson attorney hired by the city, county and hospital.
Barry Plunkett, a health care consultant with Horne, said during a meeting with physicians and others at the hospital Thursday evening that doing so would guarantee that no bidder would go above that price.
Dr. Dick Meek criticized Horne for being paid a lot of money, roughly $40,000, without giving what Meek said they were hired to do — an appraisal of what the hospital’s worth.
Plunkett said they weren’t hired to do an appraisal but rather to do a “41-13,” referring to state statute spelling out the requirement for an analysis by a CPA or law firm prior to selling a publicly owned hospital.
Malouf then said you can calculate a hospital’s value at 8.8 times its EBITDA (earnings before interest, taxes, depreciation and amortization). That would put Greenwood Leflore Hospital’s value at about $104 million.
He said there’s also about $40 million in the bank that wouldn’t come with the hospital, although $10 million would have to be used to pay down debt.
The advantage of selling, according to the Horne report, would be that it would afford the hospital the potential capital resources for plant renovations and improvements and should promote savings because of shared overhead costs.
Although the report emphasized it doesn’t have a “crystal ball” to predict regulatory and economic changes, it does highlight potential problems for the hospital under Obamacare.
State payments that make up for what the hospital loses from uninsured patients are going away starting in 2014 under the health reform package, which puts many uninsured patients on Medicaid. This past year the hospital got $7 million from that money.
Because the payments have accounted for most of the hospital’s profits in recent years, it’s expected to start making much less. A $1.6 million profit is projected for 2014 followed by a steady decline reaching a $7.1 million loss by 2019.
Those figures factor in an estimated $5 million more per year the hospital expects to get from currently uninsured patients who will get Medicaid under Obamacare.
But the financial situation could be even worse if the state doesn’t implement the expanded Medicaid program. States were originally required to do so as part of the health reform law, but the U.S. Supreme Court ruled participation is optional.
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Malouf, chairman and CEO of Greenwood-based John-Richard, gave a businessman’s perspective to the City Council during a frank discussion Thursday.
He said the hospital is in good financial shape. It has about $30 million in the bank and made a $3.2 million profit last year. And he said the hospital has good administration and good doctors.
But trouble looms to the east, in Malouf’s opinion.
He said it’s 99 percent certain that Grenada Lake Medical Center will sell soon to a private company, possibly Baptist of Memphis or Health Management Associates of Florida. That means the small hospital — which averages an average daily census of only about 30 compared to 105 at Greenwood Leflore — could get major upgrades that would draw residents from Grenada, Montgomery and Carroll counties, Malouf said.
The problem for Greenwood Leflore Hospital is that all its projected growth is in the hills to east, according to a study the hospital previously had done, not the dwindling Delta regions to the north, west and south.
The threat, according to Malouf, is that Greenwood Leflore Hospital becomes an island — only treating Medicaid patients from Leflore County while everyone with options travels to nicer facilities.
“We could run it for a long, long time. But whether we could keep it cutting edge, have specialties here and do all of that, that’s questionable,” Malouf said.
Jordan questioned the need for the Horne study, saying the Hospital Board could have given a report to the City Council on the hospital’s status. That drew a rebuke from several of Jordan’s colleagues, including Council President Ronnie Stevenson, who said Jordan was part of the 7-0 vote to commission the study.
The city vote was 6-1 with only Jordan opposed to going forward with getting bids. He said he needed more information.
Most of the other council members — as well as supervisors — said they haven’t made their minds up about selling but feel an obligation to do what’s best for the citizens of Greenwood and need to know their options.
Councilman Johnny Jennings urged Jordan to make his decision based on what the evidence says, not politics.
Earlier Thursday morning, the Board of Supervisors voted 3-0 with Robert Collins, Phil Wolfe and Wayne Self in favor of the same thing. Anjuan Brown and Robert Moore were absent.
• Contact Charlie Smith at 581-7235 or csmith@gwcommonwealth.com.
