Kudos are due the Memorial Health System task force for presenting viable competing bids to our community. By Dec. 27, the task force will recommend which bid (or pair of bids) balances our priorities for medical practice, affordable care, local control and contribution to the coffers of both the city and the local economy coffers. If City Council agrees, the bid or bids will go to the ballot for a 40-year lease of our Memorial asset.
Last week’s eTownHall served as a reminder that this decision is vital, strategic and complex. Beyond our local priorities, this decision must factor in an environment in which the national agenda and advances in medicine and technology are reshaping the entire health-care industry.
Where might things go from here? What have we learned about the bids and the process? How might we improve the outcome?
It’s OK to modify
Whether you have bought or sold a company, house or car, you know that negotiating after the initial offer is essential. That is even truer for Memorial. Not only are huge tangible stakes involved, but so is establishing the precedent by which other city enterprises, including the much larger Colorado Springs Utilities, are evaluated.
If completed in a manner that continues to refine the selection process, our approach and decision regarding Memorial will attract the attention of other communities facing a similar challenge, and cast Colorado Springs favorably in the national spotlight. The decision we face will have an overarching influence on future generations, just as the founding of Memorial had more than century ago.
We have now learned that all the bids feature a large degree of local control and decision-making, and support broad collaboration with community health partners. However, just how that would happen is not disclosed. Even so, indications are that the latitude given to Memorial will equate to, or be close to, its current model.
This opens up the prospect that the initial request for proposals (RFP) might be amended to allow the four bidders to submit a joint proposal with the Memorial team. Additionally, the amended RFP might stipulate that all intended collaborative partnerships be confirmed with a letter of intent, conditional on voters approving their joint bid. Such RFP amendments are common in major government procurements, and there is ample reason to consider that here.
We have also learned that each bidder has claimed its own marketing tagline for the value of their bid; tag lines such as: $2 billion in investment, $500 million upfront lease payment, 5 percent of profits, complete care for indigent patients, no layoffs, and so forth. This makes for a complex “apples and oranges” comparison. Yes, two apples are better than one apple; but is an apple better than an orange?
To sort out this dichotomy, financial modeling might look at the overall net present value of these bids. But whose cash flow needs to be optimized: the bidders’, city’s or patient’s?
How do the bidders plan to recapture their costs? Will it be through efficiencies, expanded government programs, changes to insurance or patient billing? Or will it be through other revenue enhancements embedded in each bid? Absent further quantitative analysis, we are left to select the financial package that feels the best, whether it be an apple or an orange.
The task force has outsourced financial analysis to the city staff. Without crisper assumptions that could be specified in an amended RFP detailing collaborative partnerships and projected sources and uses of cash, the city staff will be challenged to arrive at a meaningful “apples to apples” comparison. Any comparison may be better than no comparison, but likely there will be more questions than answers until the financial assumptions are specified and accepted.
Lastly, we have learned each bidder’s management team has a unique DNA of styles and personalities. Seeing each team in action for an hour at the eTownHall has either buffered or eroded our confidence in their abilities, as well as those of their direct successors, to manage and adapt to the challenges and unforeseen realities over the next 40 years. Any of us may access this DNA by visiting the “task force” link at the city of Colorado Springs home page, springsgov.com.
The city should, however, assist the voters’ assessment by incorporating video subtitles to provide the title and name of the speaker and the area or question addressed, as well as separately posting the PowerPoint presentations furnished by each bidder.
Looking back on our personal buying and selling experiences, we all recognize inefficiencies. With hindsight being perfect, we recognize there was an optimal time for clinching the deal. Clinching the deal too early may have meant we were stuck with a lousy price and terms and, possibly, a recurring set of nightmares for our haste; striking a deal too late may have meant the market or value had deteriorated. Such is the balance City Council has to consider in weighing the above suggestions.
This is the triage that the City Council needs to perform as organizations and citizens weigh in with our thoughts.
Bob Todd is a local resident with expertise in M&A negotiations and enterprise value improvement. He may be contacted via email@example.com.