HealthOne CEO wants a shot at Memorial

Denver hospital giant HCA-HealthOne has waged a public relations offensive in recent weeks seeking to persuade the City Council to delay a decision on Memorial Health System’s future and open up the process to other potential bidders for the city-owned hospital.

HCA-HealthOne president and CEO Jeff Dorsey spoke with The Gazette to explain the company’s position on Memorial and what it’s trying to accomplish with its media campaign.

Dorsey complained about the how the Memorial commission reached its conclusion. The commission is a citizens’ panel that spent nine months studying options for Memorial before recommending that the hospital be turned into an independent nonprofit.

HCA-HealthOne, which expressed interest in acquiring Memorial early in the commission’s process, expected that at some point it would get the chance to make a formal offer for the hospital system, Dorsey said. That chance never came, as the commission relied on an independent consultant to lay out pros and cons for selling to a for-profit hospital company rather than taking individual proposals.

“We were honestly fully expecting with the commission to have an opportunity to present an offer or to potentially participate in some of the dialogue and analysis that they were going through,” Dorsey said.

Reached by phone, Memorial commission chairman Bob Lally said the commission chose to hire an independent consultant to provide a report on a sale or merger so it could get a neutral look at what the tradeoffs involved would be rather than simply getting a sales pitch. He said he was confident the commission’s report fairly evaluated selling the hospital.

“(HealthOne) wouldn’t have given us any negatives, we needed to know on a balanced basis what it means to go from a city-owned to a for-profit or not-for-profit,” Lally said.

Dorsey called the commission’s analysis an interesting “academic exercise,” but said it failed to really explore the possible benefits of a sale — including a potential bidding war for what he called “a wonderful health system.”

“When it came to whether there were any benefits to selling the hospital, I felt that that was treated rather lightly in the conclusion,” he said. “Opening this (process) up could produce some pretty exciting results.”

However, Dorsey wouldn’t commit to making an offer for Memorial or say what HealthOne thought the hospital was worth (the commission’s estimates were that Memorial would fetch roughly $400 million on the open market, before accounting for millions in liabilities, but money from a sale would have to go into a health care foundation under Attorney General John Suthers’s ruling on the state’s Hospital Transfer Act).

“I’m not sitting here saying I want to buy Memorial,” Dorsey said. “I want to have the opportunity.”

He did say that HCA-HealthOne was open to negotiating power-sharing arrangements like a lease or a joint venture, as part of an offer and also commitments to providing charitable care, noting that HealthOne provides hundreds of millions in charity care in the Denver area.

“We’re not ever trying to manage out of our commitment to the community,” he said.

Asked to respond, Memorial CEO Dr. Larry McEvoy countered that as an independent nonprofit, charitable care and local control would be central to an independent Memorial’s mission.

“Memorial will put an indefinite commitment on the table and a firm commitment for as long as we’re around,” McEvoy said.

Dorsey agreed with Memorial’s leadership that city ownership leaves the hospital ill-suited to adapt to health care reform and a rapidly changing health care landscape, but he argued that setting up Memorial as a standalone nonprofit would leave it without the resources to meet those challenges.

“Size does make a difference,” he said. “So much of it has to do with leverage.”

Memorial’s leadership has laid out a plan for Memorial to grow into a regional health care provider, which McEvoy argues would provide enough size to meet those challenges.

“There are a couple ways to survive in health care,” McEvoy said. “One is to become big and massive and corporate. Another is to become community-based and innovative.”

Dorsey wouldn’t say whether HCA-HealthOne would continue to campaign against the proposal if the City Council votes to put it on the April ballot, a vote that is scheduled for Jan. 25.