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Complications galore as hospital options weighed

Photo: An aerial view of the expansive campus of Indian River Medical Center.

When consultant Jamie Orlikoff speaks to the new collaborative committee studying the future of Indian River Medical Center, his expert advice and analysis will be eagerly awaited.

The last time Orlikoff came to Vero two years ago, he kept an audience of 40 hospital leaders riveted for seven long hours. Some of them heard him speak again last month in Seattle, when a group from IRMC visited Virginia Mason Health System; Orlikoff is vice-chair of the board.

Orlikoff, national adviser on governance and leadership for the American Hospital Association, was listed among the 100 most powerful people in healthcare in Modern Healthcare magazine.

This time, he’ll be tasked with giving local hospital leaders advice of a more existential nature: how to approach the stupefyingly complex issue of whether to remain a stand-alone taxpayer-owned hospital or somehow become part of larger system.

It’ll be another long day for Orlikoff and his listeners; the committee expects to schedule him for morning and afternoon sessions.

And the people who’ll be listening include some indisputably sharp minds, among them, IRMC Board Chairman Wayne Hockmeyer, a Ph.D. entomologist who founded the biotechnology firm MedImmune which sold to AstraZeneka for $15.6 billion in 2007; and Allen Jones, treasurer of the Hospital District Board who retired as a senior vice president of Merrill Lynch.

In the weeks immediately after Orlikoff’s visit, the collaborative committee will interview three or four consulting firms, with plans to select one by March 20.

Once chosen, the consultant will launch into high gear; the committee wants results by September, even though one prospective consultant let it be known a more typical time frame would be 18 months.

“I think they’re going to find there are about five options, but two or three are going to be discounted relatively quickly,” says Ann Marie Suriano, executive director of the Hospital District. “The quick part is identifying the options. Then there’s ‘Here’s what we’re going to do.’ It’s making that happen that’s going to take some time.”

A sale would require a vote by the taxpayers. Unless a special referendum is called, that vote wouldn’t take place until 2018.

As head-spinning as it all may seem, it won’t be the first time Vero’s community hospital has had a committee investigating its status. That would have been back in 1940, when the Chamber of Commerce took under its wing the extraordinary efforts of registered nurse Garnett L. Radin, whose entrepreneurial story fills pages on the hospital’s various websites.

In 1932, as a 29-year-old from Nebraska, Radin had opened a tiny private hospital – the county’s first – at the corner of Old Dixie Highway and 12th Lane. The only hospital for 70 miles, it had 21 beds and five bassinets. Patient rooms were $5 a day; $4.50 for semi-private.

When that first committee’s work was done, the Chamber agreed with its conclusion: Garnett Radin needed some help, in the form of a non-profit hospital association. That way, even though Nurse Radin continued to own and operate the hospital, people could make donations to it. The volunteers of the association helped in other ways too; they got city water lines extended to the hospital, for example.

In 1943, when Radin left to join the Navy, the association leased the hospital from her for $100 a month. When the war ended, and it looked like Radin might not come back to Vero, the association bought the hospital from her. (She did return, and went back to work as its superintendent.)

Vero was growing relentlessly and the hospital was moved to the Navy’s former Dispensary at the airport. Then the city donated some land on 25th Street, north of downtown. With $400,000 in grants and donations, a 35-bed hospital was built in 1952. It became the smallest accredited hospital in the country.

Almost from the day it opened, the facility was overcrowded. To finance expansion, Gov. Leroy Collins established a public hospital district in 1958, appointing five trustees to its board. Two years later, the hospital was conveyed to the Indian River Hospital District, a taxing district created by the legislature with a publicly elected board.

It was that same entity that built the hospital at its current location in 1978. And it is that same entity that owns the hospital today, a concept not all taxpayers realize: the hospital facility is theirs – although a separate company runs it.

That company, Indian River Memorial Hospital Inc. (a holdover from before the hospital changed its name in 2007), gets nothing when its lease expires. That will happen in 2034 unless the lease is renewed, or the hospital sells, or some other event occurs in the intervening years, like bankruptcy.

One wrinkle the collaborative committee must consider with the help of Orlikoff and the consultants: The expansions and improvements at the hospital that were paid for with donations to the Indian River Medical Foundation don’t necessarily revert to the District if the hospital sells.

As Allen Jones summarized in a recent report of the District-led summary of assets, “If IRMC were sold to a for profit corporation (or other buyer not approved by the Foundation), an amount equal to the remaining value of the capital assets not yet depreciated would be deducted from the net proceeds of the sale, and returned to the Foundation.”

Jones’ reference to depreciation concerns an agreement between the District and the Foundation to depreciate over 30 years capital assets donated by the Foundation to the hospital. The agreement came about because of donor concerns that gifts could end up in a for-profit corporation.

Since that December 2007 agreement, $70 million has been distributed to the hospital by the Foundation. As of last fiscal year end, that amount after depreciation stood at $43.7 million. That kind of pay-back prospect could well be Strike One against any notion of selling to a for-profit hospital chain.

And that isn’t all. A provision of a Florida statute that “was a surprise to learn of,” Jones wrote, states that if a county, district or municipal hospital sells, the governing board has to put half the proceeds of the sale into a “health care economic development trust fund” under the control of the County Commission. The other half of the proceeds must go to funding indigent care.

County commissioners – not the Hospital District – would be trustees of the fund. Furthermore, funds from the proceeds would have to be distributed in consultation with the Department of Economic Opportunity to “promote job creation in the health care sector” through new or expanded health care business development, health care services of health care education programs, or “commercialization of health care research.”

The Hospital District was apparently not made aware of this state law when it was enacted soon after Gov. Rick Scott took office. Scott is a vehement opponent of hospital districts and public hospitals in general. He made his considerable fortune as founder of Columbia/HCA, a 340-hospital for-profit chain at the time he resigned under pressure as CEO in 1997 in the midst of a huge Medicare and Medicaid fraud investigation.

As for Garnett Radin, she died in 1987 at the age of 85. She is buried in Crestlawn Cemetery, just down Old Dixie from her where her original hospital once stood – it burned down in 2006. The building she bought with her own money – $22,000 – was actually built to be a hotel, one that never opened.