UPDATE: Memorial Health System issued the following statement at 5:20 p.m. Wednesday:
Memorial Health System is considering taking legal action against the
Colorado Public Employee Retirement Association, or PERA, over its claims
that the health system would owe PERA as much as $246 million if it becomes
a private nonprofit.
Negotiations between Memorial and PERA appear to have come to a standstill.
During this critical time, in which the city of Colorado Springs is trying
ensure continued access to affordable and high quality care, it is
disappointing that a third party such as PERA would attempt to tie the
community’s hands in this way.
Legal actions are never the preferred method to settle a dispute, and this
consideration comes after Memorial has spent the past year making a good
faith effort to find a resolution.
Memorial, a city enterprise, believes it has fully met its obligations to
the state pension system and would owe nothing more if it were to
reorganize into a non-governmental entity. The state statute governing PERA
supports this position.
Despite this, Memorial tried to resolve this amicably. Most recently,
Memorial offered PERA $50 million in a last attempt to find common ground.
That offer was refused, and PERA made no counteroffer.
In 2010 a city-appointed commission conducted in-depth research into the
ownership of Memorial Health System. It concluded Memorial’s future is at
risk as a city enterprise, and it recommended changing Memorial into a
private, community-based nonprofit. In January, PERA estimated that it
would require $246 million if such a change were to occur. Such a figure
would kill the proposal and most likely any other options for Memorial’s
Over the past several months, PERA provided updated estimates ranging from
$150 to $191 million. PERA warned that those were early estimates and that
it would not provide a final, fixed figure until an organizational change
had occurred. This, too, would effectively kill the idea, since such
information would be needed in advance of making these decisions.
In the letter, McEvoy did offer to pay $50 million to settle the dispute, and the offer already has been rejected by PERA.
McEvoy notes in his Aug. 17 letter, obtained by the Independent, that there's no law that requires Memorial to pay to get out of PERA under the circumstances at hand. Because the city employees will be terminated and become employees of the new nonprofit operator, the city will have to pay PERA nothing, McEvoy advises PERA.
He also says that after PERA's initial demand of $246 million, the agency backed off and gave a price of $150 million to $191 million. Then, sometime in May or June, Memorial hired an actuary to come up with a figure, which wound up to be much less than PERA's lowest figure.
Still, in the interest of settling the dispute, McEvoy offered to pay $50 million, but the offer was only good until 5 p.m. Monday. PERA spokeswoman Katie Kaufmanis said the PERA board voted last Friday to reject the offer.
Read the entire letter here.