If Memorial Health System is converted to an independent nonprofit, as recommended by a citizen panel and strongly advocated by upper management, it expects to be liberated from city politics.
But along the way, the health system may also be liberated from something else: the need to share information regarding salaries, lawsuit settlements, deals with doctors groups and much more, with the media and the public.
To date, Memorial has vowed that if it does turn into a nonprofit, it will keep citizens in the loop. A spokesperson has stated that accountability won't change much, if at all. CEO Larry McEvoy has said the hospital intends to keep the community informed about health care quality in particular.
But a nonprofit board might not be legally bound to comply with the wishes of voters or the city, and the hospital wouldn't have to adhere to government disclosure laws by holding open meetings and responding to open-records requests. So reassurances aside, there's no way to guarantee that a "community nonprofit" will be as accessible to the community as a city-owned enterprise.
Consider it one potential casualty of forced efficiency in a brave new healthcare world.
"It isn't about secrecy," says Martha Barton, CEO of Pikes Peak Hospice & Palliative Care and member of the citizens panel. "It's about running a business."
A host of details, from who will serve on the board to what kind of reports to the public will be required, will be decided by a task force made up of City Council members and Memorial trustees. They next meet Jan. 4, and ballot language must be finalized soon after; Jan. 25 is the last day for Council to adopt referred measures for the April 5 ballot.
In 1993 and again in 2000, citizen panels reviewed Memorial's ownership and governance, and noted city ownership was the best way to assure oversight.
'Freedom to fail'
The first report, by Citizens' Goals, stated that selling Memorial would put accountability in "serious jeopardy" because "no anonymous, nonprofit board of directors or for-profit shareholders can be held accountable to the community and its needs in the same manner as the Board of Trustees of a public-owned hospital."
In 2000, the Memorial Hospital Ownership/Governance Strategic Planning Committee, appointed by then-Mayor Mary Lou Makepeace, recommended the hospital have a structure "that ensures it remains publicly accountable." It didn't study a nonprofit option, however.
Most recently, in November, the nine-member, Council-appointed Citizens' Commission on Ownership and Governance of Memorial Health System called for making Memorial a nonprofit, saying that if "appropriate protections" are applied, "accountability to the citizens of Colorado Springs will differ very little, if at all, from that currently provided." Periodic reports to the community, the commission said, should cover charity care, care quality and financials.
Now, the ballot-writing task force is trying to hash out what will be presented to voters, since they'll get the final say on Memorial's ownership model. The issue of accountability hasn't yet been discussed in depth, though several Councilors say no Council members should be on the hospital's board.
As Councilor Sean Paige has put it, "If we're going to set it free, set it free. But again, that's also freedom to fail."
Not only will making Memorial a nonprofit shield its inner workings from the eyes of media and citizens, it will also remove it from the watch of the City Auditor's Office, whose 16 employees constantly monitor city operations and report findings to the public.
Since 2007, city auditors have audited Memorial 25 times, covering payroll, construction projects, security, cash disbursements, investments, workers' compensation, the cafeteria, purchasing cards, uncompensated care, the pharmacy, materials management, travel and training, patient billing, financial reporting, IT backup and contract review. In the past two years, it dedicated 31 percent of its resources, or about $465,000 a year, to Memorial.
The health system covered that cost — and the cost of Council scrutiny and other services from the City Attorney's Office. This year's payment totals $585,373. And the city's loss of that money, Councilor Randy Purvis notes, could lead to layoffs.
Memorial spokesman Brian Newsome says the hospital hires outside auditors, and that would continue as a nonprofit. He also says scrutiny comes from bond rating agencies, the Joint Commission accreditation agency and the Centers for Medicare and Medicaid Services, to mention a few. One audit involved a checklist of "literally thousands of requirements," he says.
Fluff and folly
Purvis, an attorney and member of the task force, says nonprofits' annual reports often consist of "a lot of fluff." When it comes to Memorial, Purvis prefers to give city officials "some sort of access to the books, the details of what's happening, what business lines are being expanded, payroll numbers."
Ken Barela, a local businessman and former Fountain mayor, goes further, saying he and several other community leaders think more consideration should be given to keeping Memorial the way it is. "This is about accountability and control," Barela says.
Barela, formerly associated with Pikes Peak Behavioral Health Group, says he worries that an unelected nonprofit board would be swayed by management. "At the end of the day, it's the CEO making recommendations of who they want in those positions," he says. "Nonprofits aren't known for their due diligence in terms of looking at the details."
But even local government oversight doesn't guarantee wise leadership. Consider:
• The hospital lost $40 million in 2008 and 2009 in financing that used auction rate securities, a "folly," according to former Memorial trustee Allan Roth.
• There were cost overruns and other mistakes with construction of Children's Hospital and Memorial North in 2006 and 2007, with combined construction budgets of $184 million.
• And in 2007, it surfaced that Memorial trustees were jumping from their trustee seats to high-paid Memorial staff jobs.
Larry Singer, a Chicago consultant who advised the citizens commission, notes that roughly 85 percent of the nation's hospitals are nonprofits. And they're required to file volumes of information with agencies ranging from state licensing boards to the federal government. Health care is the nation's second most-regulated industry, he says, behind nuclear power.
"The amount of data that's starting to come out from institutions — and it's only going to be increasing under Medicare payment schemes — is phenomenal," Singer says.
The reason it's important to get away from government ownership, he says, is so Memorial can swiftly create partnerships in the new environment of bundled reimbursements, wherein one Medicare patient payment is shared among a hospital, doctor, anesthesiologist, rehab clinic and other providers.
"That's what's driving a regional strategy and integration between doctors and hospitals," he says. "Public hospitals are not viewed as competitive and agile enough to undertake the integration strategies that are required."
Newsome says an undisclosed number of physicians have spurned Memorial's advances, because they don't like being linked to city politics or having their salaries revealed. Suppliers, he says, "tend to bristle at the news that their contracts and pricing will be public."
While Memorial and nonprofit advocates argue that giving Memorial nonprofit status is urgent, Purvis can't guarantee a measure will make the ballot, given that so much remains fuzzy. There simply might not be enough time to address accountability and other issues before the late January deadline for ballot writing.
"This is a community that likes to know the details," Purvis says, "and if those aren't available in a clear and understandable manner, we may be asking for a 'no' vote. If you don't know where you're going, it's harder to sell people on why you have to go there."