Hospital affiliation proposals outlined

Proposals from three health-care companies - including two plans calling for a new hospital - were unveiled by Carson-Tahoe Hospital officials on Tuesday, along with seven alternatives to affiliating with the firms.

The proposals from the firms Sutter, Triad and Universal are slated for discussion at the hospital's annual strategic planning session Wednesday. They are being considered to help meet the hospital's future financial needs.

A projected $90 million is needed for capital projects over the next 10 years just to stay competitive with other major Northern Nevada hospitals, Chief Executive Officer Steve Smith said. To ignore this capital need would mean the siphoning off of lucrative services to larger health-care entities, and ultimately strangle the hospital financially, he said.

Here are highlights of the three proposals:

- Triad, a for-profit company based in Dallas has proposed a joint venture with for-profit status. Under this agreement, Triad would own 80 percent of the hospital and the county about 20 percent with no proceeds of sale to the community.

It's possible the county's ownership could be further diluted by capital requirements. If the county is required to come up with capital for improvements, it could forfeit part of its ownership share in lieu of payment.

In exchange for 80 percent ownership, Triad would finance a new, 125-bed hospital, but no timetable was given and the question remains as to the impact on present projects under construction.

Community cash flows would be structured to address additional health care needs, which reduces the risk to Triad. The for-profit status of this organization would provide additional real estate and sales taxes for the community.

- Sutter, a non-profit health care provider based in Sacramento, proposes a merger creating a non-profit organization called Nevada Capitol Regional Health Systems.

In a six-month period Carson-Tahoe would work with Sutter to plan a replacement hospital at a new site, to be completed in five years. The current site would be leased from the city for services such as behavioral health, skilled nursing and rehabilitation. Carson-Tahoe is protected because it could back out of the agreement up to the point when the non-profit corporation is formed. The merger organization would accept debt, working capital and leases of the existing hospital, and board designated funds would be transferred to a community foundation for community health care. A local governing board would be appointed to oversee the funds.

Employees would no longer be eligible for PERS, the state employee retirement system.

- Universal, based in King of Prussia, Pa., is a publicly traded, for-profit hospital founded in 1978. It proposes an outright sale for $105 million. Proceeds of the sale would remain in the community, but hospital cash flow and control of these funds would move to Universal. The funds would be set aside for additional health care needs, as well as a buy-out of PERS retirement.

The organization promises a new, 150-bed facility on a mutually agreed site with consolidation of behavioral health and rehabilitation services within five years. Current services would be retained, and Universal would assume all leases, management contracts and physician contracts.

A new board of trustees would be appointed by Universal, and the current board would serve in an advisory capacity with reserve powers such as discontinuation of services or expansion of existing services. A portion of the purchase price would be used to buy out the existing pension plan for vested and non-vested employees.

Alternatives to affiliation include:

- The hospital could remain independent. Currently it has a debt capacity of between $15 and $20 million for replacement and new projects but would have to concentrate on increasing its revenue base, such as cash reserves, to meet capital needs. The city would continue to be the safety net for the hospital, meaning taxpayers would bear the brunt of any indebtedness.

- Carson-Tahoe could remain independent if Carson-Tahoe Hospital Foundation, a fund-raising organization, could significantly increase its fund-raising.

- The hospital could turn to taxpayers for support. The debt service on $30 million in general obligation bonds would increase property taxes between $50 and $150 per year for 20 years on a home with an assessed valuation of $100,000.

- The hospital could remain independent but sell certain non-core services or facilities, such as Minden Medical Center. Money from the proceeds of the sale would be used for capital needs in replacement or expansion of the hospital's core services, but patients needing special services would need to go elsewhere.

- The current facility could be organized as a nonprofit corporation. As such, it would be required to pay the county to lease the facility - about $25 million. The current board could become part of a community board to govern the organization, and the corporation must care for the indigent, accept working capital and assets, transfer patients, staff and employees, and assume all debt. Employees could no longer be in PERS.

- Carson-Tahoe could become a district hospital that would cross county lines. The move would give the hospital a larger tax base but would require special agreements and changes to legislation. It may be difficult to get voters in other counties to assume the added liability.

- The hospital could remain in public hands but another entity would handle the operations. This step is usually considered when a hospital is in financial distress, and can be used as an intermediate step to a partnership arrangement.

Carson-Tahoe Hospital earnings

Fiscal year 2000-2001 $6.8 million, estimated

Fiscal year 1999-2000 $9.6 million, estimated

Fiscal year 1998-1999 $6.5 million

Fiscal year 1997-1998 $8.2 million

Source: C-TH finance department

What's next:

What: Carson-Tahoe Hospital's annual strategic planning session

When: 6 p.m. Wednesday

Where: Carson Nugget, second floor convention area, 507 N. Carson St.


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