Memorial Medical Center in Las Cruces, N.M., converted from a public to a private not-for-profit facility April 1 -- a move officials said will allow greater flexibility in dealmaking.
A new not-for-profit corporation formed by the hospital's old management team is leasing the 222-bed hospital from the city of Las Cruces and Dona Ana County, which co-own the hospital. Memorial Medical Center Inc. is paying the city and county $7.2 million annually under the 25-year lease agreement.
The corporation also has assumed $18 million in long-term debt and agreed to perform at least $3 million a year in indigent care, the level previously performed by city and county.
The transfer of the hospital management came after 17 months of negotiations and public hearings. The Dona Ana County Commissioners, the Las Cruces Councilors and the New Mexico State Board of Finance all approved the conversion.
The existing senior management team of the hospital supported the conversion and created the new not-for-profit corporation. The same community board that oversaw the hospital as a public facility is running the new corporation. The hospital's management team remained intact but now works for the corporation rather than the city or county.
The hospital has been solidly profitable, with net income of $9.7 million on revenues of $126.2 million for the fiscal year ended June 30, 1997.
However, the hospital's apron strings to the city and county could have jeopardized that prized financial position in the future, backers of the privatization said.
For example, the New Mexico Constitution bars public organizations from entering joint ventures with private corporations. Officials said the prohibition could have proved troublesome as managed care made greater inroads into the region.
"We're now looking at what type of integration strategy we can pursue," said Steven Smith, the hospital's president and chief executive officer.
Smith said preliminary talks have begun with the region's two independent practice associations, 102-physician Dona Ana County Medical IPA and the 100-physician IPA of New Mexico.