Universal as potential Carson-Tahoe Hospital affiliate

This is the third in a series of articles on proposals by health-care entities Triad, Universal and Sutter to affiliate with Carson-Tahoe Hospital.

Universal Health Systems proposes to buy the Carson-Tahoe Hospital for $105 million.

Universal is a publicly traded, for-profit health care firm interested in establishing and maintaining leadership in mid-sized markets. The organization operates other hospitals in Nevada: three in Las Vegas, as well as Northern Nevada Medical Center in Sparks.

One of the major advantages to this proposal, according to Carson-Tahoe's chief financial officer, Ron Telles, is that Universal would bring Carson-Tahoe more state contracts and more volume.

The major disadvantage is loss of control. Under its proposal, a governing board would be appointed by Universal, serving in an advisory capacity. But Telles believes there is room for negotiation on that point.

"We have a very good management team and loyal physicians and employees," he said. "We are in a situation where we can dictate what type of control we will have."

In addition to owning nearby Northern Nevada Medical Center, Universal has ties St. Mary's Regional Medical Center in Reno.

"Universal does have a contract, a relationship with St. Mary's that they have agreed to honor," Telles said. "If we were to be put into the fold, we would be working with all entities. This a concern, but we feel it could be negotiated."

Like Sutter Health, this proposal would be non-binding for 180 days, allowing time to negotiate a definitive agreement as well as inform the community, medical staff, and employees.

And much like Sutter's proposal, Universal would build a 150-bed facility on a mutually agreed site, with consolidation of behavioral health and rehabilitation, within five years.

The organization would assume all leases, management contracts and physician contracts. Existing services would be retained and additional services would be evaluated over time, according to the proposal.

The proceeds of that $105 million sale, together with board-designated funds estimated at $34 million, would remain with the community, its use restricted to community health care needs.

According to the proposal, the money could also be used by Carson City to re-purchase the facility should Universal decide to sell. On the other hand, there are a number of expenses that would be deducted under the proposal.

-- The hospital's current bonded indebtedness totalling $25.2 million would be deducted.

-- Indigent care would be funded by Universal at current levels, but anything above that would be paid by income generated from the proceeds of the sale.

-- Also under the proposal, a portion of the money would be used to buy out the existing pension plan (Public Employment Retirement System) for vested and non-vested employees. The amount has yet to be negotiated and costs could fall anywhere between $5 and $30 million.

Tom Keeton, a Carson resident who has kept a close eye on the affiliation process, expressed concerns about the lack of any solid figures on the retirement system buyout.

"They're saying they will give us $105 million, but we (Carson-Tahoe and the city) have to deduct PERS (retirement) and any other expenses we incur," Keeton said. "Basically, (that fund) may be back to $50 million, or (approximately) five years worth of income.

"Our hospital is doing well. They say we might do worse. Forty-three percent of all hospitals (nationwide) lost money in 1999, but 56 percent made money. We're one of them, so why should we not make money in the future?"

Based in King of Prussia, Penn., Universal is smaller than Sutter. It ranked as the 21st largest health care system in 1999.

That same year Universal earned $77.7 million, as opposed to Sutter's $51 million. The organization operates 20 acute-care hospitals, 22 behavioral health facilities, and 25 ambulatory care centers across 19 states. It is the largest operator of psychiatric hospitals, ranked by number of beds.