MEMORIAL University Medical Center — more commonly known locally as "Memorial Health" or just plain "Memorial Hospital" — has been in financial trouble for quite some time.
That’s not news.
What is news is that an agreement was finally made last week with a deep-pockets suitor to come in and solve the problem.
What remains to be seen is if this solution will create even more problems.
In the $710 million deal, HCA will purchase outright all assets and debt of Memorial Hospital.
Note this isn’t just a management agreement; HCA is literally buying the hospital.
While on the surface this seems like a great deal — part of the sticker price, we’re told, will go to pay off outstanding bonds — if you scratch the surface you see a few potential issues come up.
Issues that, frankly, have received scant attention in the generally fawning regional press coverage of the deal.
The chief issue seems to be that Memorial University Medical Center by current charter must remain a non-profit 501c3 organization.
Multiple agreements between the governing hospital authority and the Chatham County Board of Commissioners set out in detail the need for this non-profit status to remain intact.
A key line in the covenant agreement specifically says the hospital “shall not operate its facilities for profit.”
However —and you probably already saw this coming — HCA isn’t a non-profit.
HCA is a for-profit corporation, one of the nation’s largest in the field and arguably the fastest-growing.
So right off the bat, there’s the issue of the overnight switch of Memorial Health from a non-profit to a for-profit hospital.
And this is important: While HCA has taken over many hospitals, Memorial Health would the first non-profit safety-net facility in its expanding Georgia portfolio. We will be in uncharted territory if the deal goes through.
For example, just to pose one question: Will the “new” Memorial Health have to pay property taxes, a cost that would likely be passed on to patients?
In short, Memorial Health will be a guinea pig of sorts — probably not the best position to be in for the area’s main safety-net indigent care hospital and the main regional Trauma Center.
(A previous proposed deal with Novant Health Inc. to save Memorial fell through last year. However, Novant Health is itself a non-profit.)
It seems that, at a minimum, the charter will have to be changed. I’m no expert, but I strongly suspect this isn’t as easy as just getting together over coffee and crossing out a few lines with a Sharpie.
There is the other, more arguable issue of HCA itself. Though the company has been touted as “the gold standard” in glowing local news reports about the Memorial takeover, the truth is that HCA has a bit of a checkered past and something of a reputation as a corporate raider.
Controversies have included a nearly $2 billion fraud settlement with the U.S. Dept. of Justice in 2000 (called the “largest Medicare fraud in history” by some admittedly non-neutral observers) and a $95 million fraud settlement in 2005, among a laundry list of others.
Those more partisan-minded might find it problematic that the most notable public figures associated with HCA are Mitt Romney, former Senate Majority Leader Bill Frist, and Florida Gov. Rick Scott, who was CEO of HCA during the abovementioned multi-billion dollar case.
Some observers worry about the status of indigent care at Memorial after HCA takes over. I’m told one of the deal-breakers in the Novant deal was that the County specifically didn’t want Novant to assume all debt, wanting to maintain some leverage to insist that indigent care continue to be funded and addressed.
HCA, however, is indeed assuming all debt. One hopes that a well-spelled out indigent care requirement, along with the requirement that Memorial remain a Level 1 Trauma Center, will remain intact in the new deal as promised.
Also of potential disruption is the possibility that the purchase by HCA could violate both the Loan Agreement and the Bond Agreement, in which $164 million worth of bonds were issued by the Hospital Authority, underwritten by taxpayers.
The Bond Agreement clearly states that Memorial Health’s assets “may be deemed subject to a charitable trust which prohibits payments on Obligations issued by or for the benefit of others.”
Am I a lawyer? Nope.
Were entire teams of lawyers certainly consulted before this deal was signed off on by all parties? Yup.
So hopefully my concerns about this purchase will remain just in my head, and in this column.
But meanwhile, the deal is rapidly approaching the end of its 60-day due diligence period. We should all pay attention to make sure Memorial isn’t going from the frying pan into the fire.