Not-for-profit VHA Southwest Community Health Corp. lobbied to keep a tiny county hospital in Texas out of the hands of a national for-profit hospital chain, but in the end it was the hospital's failing financial health that killed the deal.
Brentwood, Tenn.-based Community Health Systems decided last week it no longer was interested in leasing 39-bed Ward Memorial Hospital, a county-owned facility and the only hospital in rural Monahans, Texas, population 8,000.
"There's a lot of things we found in due diligence that made us not want to do the deal," said Bob Hardison, a vice president in charge of acquisitions for CHS.
Hardison said Ward Memorial's problems are financial, and CHS' decision to back away from a lease had nothing to do with growing local opposition to the proposed deal.
CHS knows how to handle public relations problems, Hardison said. "We would have mounted a campaign . . . to win the hearts of the people there."
Ward County officials had hoped to lease the hospital to CHS, but those plans got jumbled when 1,100 voters signed a petition demanding a May 2 referendum.
Voters will decide whether the hospital should be leased to another party. The outcome is binding, said Ward County Judge Sam Massey, who serves as county administrator.
A driving force behind the local opposition was Dallas-based VHA Southwest Community Health, a new not-for-profit company that aims to acquire, lease or manage tax-exempt hospitals in New Mexico and Texas to keep them from becoming for-profit.
VHA Southwest Community Health came together last year with contributions of $15 million from VHA Southwest members and Irving, Texas-based VHA, the nation's largest alliance of not-for-profit hospitals. VHA Southwest is a regional network of national VHA members.
Now that a lease to CHS is out of the picture, VHA Southwest Community Health hopes to step in with a management agreement for Ward Memorial.
VHA Southwest Community Health has proposed to set up a limited liability corporation with 270-bed Memorial Hospital and Medical Center, Midland, Texas, to manage Ward Memorial. Midland is about 60 miles from Monahans.
"We would bring the expertise, the tertiary-care physicians and regional support to Ward Memorial Hospital," said Michael Williams, VHA Southwest Community Health's president and chief executive officer.
Williams said his organization lobbied against leasing the hospital to a for-profit by speaking to community groups and working with local citizens who also opposed such a deal.
The prospect of leasing the hospital to a for-profit company caused quite a stir, with many hospital employees opposed to such a deal.
"I'm terribly biased in favor of not-for-profit," said Christopher Hall, M.D., a pathologist on staff at the hospital. "I don't think that healthcare is well-served by having for-profit medicine."
Massey said he didn't understand the brouhaha over leasing the hospital.
He said he sees no difference between for-profit and not-for-profit hospital companies.
"I don't care whether they're for-profit or not-for-profit," he said. "It's just all terminology. I don't believe anyone's wearing a halo; they're all here for the dollars."
VHA Southwest Community Health wanted to lease the hospital too, but county officials weren't interested because for-profit CHS offered more money, Massey said. He said the offer from Williams' group to lease the hospital came in after CHS' proposal.
While both offered $5 million for a 30-year lease, VHA Southwest Community Health asked for a larger annual subsidy from the county, Massey said. He said CHS also talked about throwing in $3 million for equipment and accounts receivable.
Ward County put the word out late last summer that it was looking for companies interested in leasing the hospital to stop its financial drain on the public coffers.
Last year, Massey said the county subsidized the hospital to the tune of $1.2 million, which includes a loan to buy computer equipment, and this year it has budgeted for another $800,000. In 1996 the hospital had net income of almost $262,000, which included a $780,000 county subsidy, on net revenues of $7.2 million.
Massey said the county is no longer interested in leasing the hospital.
Instead, it plans to keep the hospital under county control and try to get its financial house in order.
Massey said the next step is for the hospital's six-member board to decide on a new administrator or a management contract for the hospital.
The hospital has an interim administrator because its former administrator resigned earlier this year, Massey said.
A management contract with VHA Southwest Community Health is something the hospital board can consider, Massey said.
"That's a possibility," he said. "That means there's one less for-profit hospital takeover in Texas."