With collapse of partnership plans, questions loom for Savannah’s Memorial hospital

From Jan Skutch at the Savannah Morning News, Novant Health withdraws from Memorial partnership deal:

Novant Health Inc. officials this afternoon informed Memorial University Medical Center officials they were terminating negotiations on the long-anticipated partnership agreement that Memorial officials have said was a “make or break” deal for the healthcare provider’s future.

“I regret to announce that, after months of negotiations, Novant Health has decided to terminate negotiations of a transaction that would have allowed Memorial to fully join our organization,” Novant President/CEO Carl S. Armato told Memorial officials. “Unfortunately, discussions became more complicated after the Memorial Board approved the (agreement) and the (Chatham County Hospital Authority) became directly involved in the discussions.[…]

The proposed partnership would have infused $295 million in cash into Memorial over the first 10 years of the agreement and guaranteed $164 million in bonds supported by the Chatham County Commission in 2012.

Memorial has faced financial struggles in recent years, including an operating loss of about $25 million last year. Novant has been seen by some as a savior, but many of us have wondered how Novant is able to make the numbers work over the next couple of decades.

Again from the SMN this afternoon:

Then on April 15, the Chatham County Hospital Authority unanimously approved a non-binding letter of intent designed to ensure that the proposed partnership protected safety net services in a move toward final agreement. That action allowed the authority to send to Novant an outline of amendments to the 40-year lease that would include assurances that key services – including Level One trauma care and neo-natal care – would be maintained throughout the term of the lease.

So did Novant have plans to make changes to core services? Is that how the numbers worked? Not according to Novant president Carl S. Armato, who wrote:

The MSA [Member Substitution Agreement] included a $295 million commitment to fund capital projects to grow and expand several services at Memorial, including the Children’s Hospital of Savannah; ambulatory expansion in Pooler, Georgia; expansion of heart and vascular services; and additional critical care beds. It also included a commitment to guaranty repayment of the Memorial’s bond debt and to continue critical service lines, such as trauma and neonatal care.

According to Novant, the collapse of this partnership is primarily because of overreach by the Chatham County Hospital Authority, which just two days ago was applauded for its efforts by the editorial page of the Savannah Morning News in Memorial-Novant deal: Guarantee critical health services:

But any long-term agreement with Novant must include, in writing, a guarantee not to cut or diminish Memorial’s Level One Trauma Unit, its Neonatal Intensive Care Unit, and its commitment to indigent care and to medical education.

Unfortunately, Novant has so far not made this promise in writing. That’s disappointing, as Novant appears to be an organization that is committed to serving the poor and critically injured. It’s not that complicated.

Indeed, authority chairman Don Waters said the authority has been waiting since April 28 for a written commitment from Novant, which for some reason has been reluctant to agree to a guarantee in writing.

So here we are. Memorial’s financial future is clouded with all sorts of issues and questions. Georgia’s rejection of the Medicaid expansion has obviously impacted Memorial’s bottom line, and state voters’ rejection of a special tag fee for trauma care has had an impact too. (Memorial actually gave $400,000 to support the referendum campaign.)

How will the cash-strapped medical center respond now? I’m sure lots of Memorial employees are asking that question around their dinner tables tonight.