West Volusia (Fla.) Hospital Authority has signed a letter of intent to exclusively negotiate a 40-year lease of its 138-bed hospital in Deland with Memorial Health Systems, a two-hospital system based in Ormond Beach, Fla.
The agreement anticipates that final approval will be made by both hospital boards in late July with the lease becoming effective Oct. 1, a Memorial Health spokeswoman said.
Memorial Health was chosen over Adventist Health System-Sunbelt, Orlando, Fla., and Columbia Park Healthcare System, a division of Columbia/HCA Healthcare Corp. in Orlando. West Volusia reviewed five proposals to lease the hospital.
Under the terms of the lease, Memorial will pay West Volusia nearly $1.2 million a year, which will cover the authority's debt-coverage payments. The payments could be lower, however, if the authority refinances its debt.
The lease also calls for Memorial to provide $26.4 million for equipment and facilities funding over the first 10 years of the lease and an additional $3 million loan for working capital this year.
As a public hospital district that receives property taxes to support its hospital, West Volusia also would be able to cap its $4 million tax subsidy in fiscal 1995 and reduce it by $1 million a year until taxes are eliminated in 1999, according to the proposed lease.
The authority and the new corporation to be formed to lease the hospital will equally share operating profits. Memorial has estimated West Volusia would generate a 5% operating margin on operating revenues of about $45 million a year, the lease said.
Last year, West Volusia board members considered several reorganization plans, including one that would have converted the public hospital to an independent, not-for-profit organization.
Instead, West Volusia decided to choose a not-for-profit partner that would allow it to become part of a managed-care network and gain access to a larger organization's capital, said Claire Watson, Memorial Health's director of public relations and business development.
Memorial Health was formed in 1988 by Memorial Hospital, Ormond Beach, which opened in 1967. The system acquired Coastal Community Hospital in 1989 and changed its name to Memorial Hospital-Flagler. The three hospitals, including West Volusia Hospital, would compete against four other hospitals in Volusia and Flagler counties.