Another hospital is trying to save itself by becoming something that it's not. Physician-owned Columbus (Ohio) Community Hospital plans to regain its financial footing and emerge from bankruptcy protection by shedding its for-profit status and converting to a not-for-profit.
The shift could save Columbus Community almost $500,000 a year in rent and sales tax and allow the hospital to prop up its balance sheet with donations, said Chief Executive Officer Gary Lehman. It also would make the city's only independent hospital attractive to not-for-profit healthcare systems that might be seeking a merger, he said.
The 26 physicians who own Columbus Community voted last month to relinquish their equity position so the hospital could reorganize as a not-for-profit corporation. The doctors will retain some control of the not-for-profit's board, though the majority of seats will be held by nonphysician community members, Lehman said.
The plan is part of a recovery strategy that has been under way since October, when Columbus Community backed out of a contract with Cambio Health Solutions, a Brentwood, Tenn.-based turnaround firm. "We decided to go it alone," Lehman said.
The status change, which requires approval from Ohio's secretary of state and the Internal Revenue Service, should be completed within four months, he said.
Columbus Community's doctor-owners bought the full-service hospital from CHM, a Cincinnati-based management company, in August. Soon after, the hospital filed for Chapter 11 bankruptcy protection (Aug. 28, 2000, p. 2).
Though an audit of its 2000 financial results isn't complete, Columbus Community expects last year's operating loss to range from $900,000 to $1.2 million, compared with a loss of $1.7 million in 1999.
The facility owes $1.5 million to three-hospital Mount Carmel Health System in Columbus and $3 million to Fifth Third Bank, also in Columbus. It has $4 million to $6 million in unsecured debt.
Securing not-for-profit status would exempt Columbus Community from paying 5.5% in state sales tax on its $5 million in equipment and supplies. It would allow the hospital to enjoy a big reduction in its lease with the South Side Health Association, a not-for-profit foundation that owns the building and land. The hospital's lease, which now runs about $14,000 per month, could drop to as little as $1 a year.
Those savings would go a long way toward limiting how much more the hospital is forced to downsize, Lehman said.
Already, Columbus Community has reduced its number of acute-care beds to 24-down from the 60 it was using when it filed for Chapter 11. Its full-time workforce has dropped to 335 from 420.
In addition, the conversion would make it easier for Columbus Community to merge with other not-for-profit hospitals. Today, only three of the state's 175 hospitals are for-profit, down from 12 in the mid-1990s.
"That's the way healthcare is going-everyone being part of a system," Lehman said.