Memorial CEO wants hospital to become independent nonprofit

Finally, said Memorial Health System CEO Dr. Larry McEvoy on Wednesday, it was time to address “the elephant in the room”: What does Memorial’s leadership want to happen to the hospital?

The Citizens' Commission on Ownership and Governance of Memorial Health System has spent months examining options ranging from leaving the city-owned hospital as-is to selling it to the highest bidder. McEvoy argued that turning the hospital system into an independent nonprofit would give Memorial the flexibility to grow and compete while still providing the care to everyone the community has come to expect.

“We think that the best of both worlds is a community-driven nonprofit that keeps the care and the decisions local,” McEvoy told a packed audience at the Westside Community Center in Old Colorado City. “There are some things you should never, ever give up, and this might be one of them.”

An independent nonprofit would be overseen by a community board and would plow profits back into care, McEvoy said, while eliminating any risk that the city would be stuck paying for the hospital’s mistakes — a concern that prompted the creation of the commission.

Selling the hospital, he argued, would mean that decisions would be made somewhere else and for the benefit of investors. On the other hand, McEvoy said, the current city ownership adds another layer of review that slows down decisions and limits the scope of its ambitions.

“It’s not necessary at best, it gets in the way at worst,” he said.

The commission has praised the independent nonprofit option in previous meetings and seemed impressed by McEvoy’s pitch.

“That was a masterful presentation and very attractive for this community,” said commission member Paul Dougherty.

City councilman Randy Purvis said he thought it was a good proposal and one voters will support it if they’re sure Memorial will continue to serve everyone in the community.

“It’s a community asset and I think it should remain a community asset,” he said.

Christine Fisher, a Memorial employee at the meeting, said she supports the nonprofit proposal, but worries that Colorado Springs voters are reluctant to change.

“They’re more likely to vote ‘no’ for a change than to vote ‘yes’ for it, whether it’s the right thing or the wrong thing,” she said.

Former commission chairman Steve Hyde, a health care consultant who stepped down from the board in May, said he agreed with McEvoy’s analysis of the challenges facing Memorial and the need for a new approach to health care, but that he’s concerned about an independent Memorial’s financial stability and access to the capital needed to make the plan work.

“The strategy he outlined, while necessary, is a very high-risk strategy,” Hyde said. “What’s the financial backstop if they stumble?”

McEvoy said that Memorial has already discussed the potential for changes with its bond ratings agencies and that they were not concerned about the switch. And, he said, if Memorial can grow as projected, its access to capital will improve.

With the changes being imposed by health care reform, McEvoy said, Memorial needs to achieve a larger scale, on the order of more than $1 billion a year from its current $600 million, to be successful. To do that, he said, Memorial needs to become a health care destination, forging partnerships and attracting patients from throughout southeast Colorado.

If it can do that, McEvoy said, it will also create new jobs and economic growth for Colorado Springs.

Memorial’s leadership projects that, over the next five years, hospital revenues will grow from the current $582 million to $697 million if nothing changes. If it becomes an independent nonprofit, the leadership believes revenues can grow to $911 million. Current commission chairman Bob Lally said the commission hired an outside consultant to review Memorial’s numbers and found them credible.

McEvoy said he was open to restrictions on the transfer, such as guarantees to provide care to all comers and to a potential lease payment to the city, although he said too large a payment would detract from patient care.

Arlene Stein, chairwoman of Memorial’s board of trustees, and Jim Moore, vice-chair of the board, said the board supports McEvoy’s plan and believes it is the best option for the hospital.

The Memorial commission will make its recommendation to the city council in November. If the council approves the recommendation, any change would go to voters in April, 2011.
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