After a months-long assessment of OCH Regional Medical Center, consulting firm Stroudwater Associates’ report states supervisors should “explore transactions as soon as is practical” while the hospital continues to improve its sustainability in case a sale or lease option isn’t available.
Supervisors heard the report Monday and passed a resolution calling for public hearings on the matter. Dates for those hearings were not set, but hospital administrators and legal counsel contend such an action could constitute the next step required by law before a sale or lease can legally occur.
If the county follows statute for moving forward with a sale or lease of the medical facility, the first public hearing could come three weeks after a notice is first published. Monday’s motion, however, did not include language citing a possible transaction.
A lack of service scale, weak market positioning and margins, outmigration and quality scores versus cost position are all “compromising OCH’s future trajectory,” Stroudwater’s report states, but investments in satellite clinics and systems needed for new payment models, operational improvement and the development of aligned clinical services in specialty areas could mitigate risks associated with the hospital’s long-term viability and success.
Obtaining proposals for the hospital, which Stroudwater consultant Jeffrey Sommer estimated could draw bids between $20 million and $60 million, would allow supervisors to make a true determination of OCH’s future.
Supervisors did not entertain questions from the public during Monday’s presentation. While District 5 Supervisor Joe Williams said the county should request transaction proposals soon, District 3 Supervisor Marvell Howard said he wanted to first hear public input on the report and potential upcoming process.
“As far as being competitive and sustaining growth over time, we got a warning light that came on with that presentation,” said District 2 Supervisor Orlando Trainer. “I’m not concerned about what we could lose. I’m concerned about what we could have and what we could gain. With that information, we might be able to find a way to stay afloat — you can do that indefinitely — but we won’t gain more of the market without a substantial investment. If the hospital can’t do that off its own revenues, it’ll have to come from the citizens of this county. It’s pretty cut and dry as far as I see.”
Hospital response
OCH Chief Executive Officer Richard Hilton said he was surprised supervisors took what could be perceived as the next step toward pursuing a transaction moments after receiving the day’s report.
“My gut says there’s a strong interest of putting this hospital up as a partner with another system,” he said. “We have not operated a hospital from a benchmark comparison of the top 100 small hospitals in the country. We’ve operated based upon what we can do for the community. Any time you use benchmarks, there are strengths and weaknesses to that.
“With outmigration, the fact is you have a large hospital 23 miles to the east of us and Tupelo to the north of us. People will go get services where they want to go,” Hilton added. “In-patient admissions are going down, but they’re down everywhere. When you take our in-patient census … and you add swing beds and other overnight stays, you’re talking an additional 40 to 60 patients in those beds you have to staff and cover for.”
If supervisors request proposals for a transaction and decide to move forward with either a sale or lease, the board “must adopt a resolution describing its intention … which shall include the owner’s reasons why such a sale or lease is in the best interest of the persons living in the area,” per state law.
The revenue generated from such a deal must first be applied to OCH’s $24.8 million in outstanding debt obligations.
A petition signed by 1,500 qualified Oktibbeha County voters could block a board-approved deal and send the issue to the ballot box.
Carl Smith covers Starkville and Oktibbeha County for The Dispatch. Follow him on Twitter @StarkDispatch
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