By Estella R. Fullmer
For Hometown News
NEW SMYRNA BEACH -- Bert Fish Medical Center leaders, in a workshop April 2, compared three proposals for a strategic merger that would strengthen the hospital financially and aid in better service to the public.
In December, BFMC received a proposal from Halifax Health and two from Health Management Associates. The offers were very strong, according to Craig Bair, BFMC's Marketing Director, and he thought the board is facing a tough decision.
The four-hour workshop broke down each proposal in a side-by-side comparison, allowing board members to review and discuss a 109-page document developed by attorney James J. Kennedy, of Carlton Fields. "Basically the bottom line between the two proposals is the Halifax offer will give you less money but more control and the HMA offer will bring you more money but less control," said Mr. Kennedy during his presentation.
Halifax Health has offered about $71 million in a lease transaction structure. Its proposal's key points are that Bert Fish will retain its name, Halifax will become the sole corporate member of BFMC, the existing lease between Southeast Volusia Health District and BFMC will remain in effect with certain modifications and amendments made to the Interlocal Agreement, BFMC will have to modify its by-laws and articles of incorporation to reflect the Interlocal Agreement with Halifax Health, BFMC will continue to hold all licenses and certifications, the lease term will be an initial 25 years with options to renew and Halifax would continue to extend sovereign immunity to BFMC Inc.
Health Management Associates has two offers, one as a lease and one as a joint venture. Under the lease transaction, it proposes about $84 million. The exact figures depend on an up-to-date evaluation of Bert Fish's assets. HMA proposes that Bert Fish will remain the name of the organization, HMA will acquire, through a long-term lease, the operations, plant, property, equipment and inventory of BFMC. All other assets will be retained by the hospital district. It proposes to pay BFMC $50.2 million up front with the remainder of the $84 million being derived from the assets and operations.
Using the lease proceeds, the hospital district will pay off all long-term debt, capital leases and interest-bearing debt, and fund defined pension plans. All liabilities will be retained by the hospital district under this proposal. It will be a 30-year lease with a 30-year renewal. The new partnership will be a tax-paying Florida corporation.
Under HMA's joint venture proposal, it would create a not-for-profit or a for-profit subsidiary of the hospital district. Bert Fish will remain as the name of the hospital. It will be a Florida taxpaying corporation with 80 percent owned by HMA and 20 percent held by a non-profit subsidiary of the hospital district.
The district will receive cash from HMA and lease BFMC's assets and operations to the joint venture. The corporation would have an eight-member board of directors with four from HMA and four from the district subsidiary and be responsible for capital calls and spending. HMA will have the right to break deadlocks on the board of directors. HMA will manage the corporation under contract and charge about 5 percent of net revenue as a management fee. Both parties will have to agree upon several operating and financial details prior to closing.
"Our real issues are not going to be dollars, but to sit down with each and compare their philosophies and goals and determine which one we want," said hospital district Commissioner Ferdinand Heeb, "We need to have a real dialog with each one and sit down face-to-face and ask those questions."
Mr. Kennedy assured Mr. Heeb that would likely be the next step in the process.
The workshop identified several areas of concern for the BFMC board and resulted in a list of questions for both organizations to answer prior to any decision being made. Among the questions were clarification on the liability tax reduction to the community and how the board members are going to be appointed. "I have a great concern agreeing to 50/50 when I don't know who those 50 percent will be," said Harold Card, a hospital district commissioner. Others also questioned how the numbers of $71 million and $84 million were determined. Representatives from both organizations stated the numbers were approximate and were a best determination from the information provided on Bert Fish's assets at the time the proposals were generated. They stressed the final numbers were likely to be different but should be close.
As to current physicians and employees at Bert Fish, both proposals claim that there would not be any immediate reduction or changes. Both would require all employees to sign a code of conduct statement. HMA's proposal hinted it may increase the number of physicians, nurses and some staff positions after an evaluation of the needs and operation of the hospital. Board members asked for more details concerning any reduction in full-time employees from both organizations.
Both proposals state the hospital will continue to provide its current services for patient care and an affiliation with Orlando Health concerning the transfer of patients. Halifax proposed to extend additional services offered by its corporation and feels oncology care is important for insured and non-insured patients. It does not believe the merger would affect managed care and embraces the affordable care act. Bert Fish would have access to Halifax structure and expertise. Shared overhead expenses would have to be negotiated as would a quality improvement program.
HMA promised to provide best-contracted results for a nationally managed care platform that will enhance Bert Fish's current program. It proposes to devise a team to discuss alternative payment options for uninsured patients.
The board will review the workshop information and then meet with each organization before coming to a decision. "There are a lot of details to look at and questions to be answered before a decision can be made," Mr. Kennedy said. "It is a tough decision and I don't envy you," he said to the board of directors.