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HomeMy WebLinkAbout1998-09-17 Work Session NEW HANOVER COUNTY BOARD OF COMMISSIONERSBOOK 26 WORK SESSION, SEPTEMBER 17, 1998PAGE 693 ASSEMBLY The New Hanover County Board of Commissioners held a Work Session on Thursday, September 17, 1998, at 10:00 a.m. in the New Hanover County Administration Building, Room 501, Wilmington, North Carolina. Members present were: Commissioner Buzz Birzenieks; Chairman William A. Caster; County Manager, Allen O’Neal; County Attorney, Wanda M. Copley; and Clerk to the Board, Lucie F. Harrell. Members absent were: Vice-Chairman Robert G. Greer; Commissioner Ted Davis, Jr.; and Commissioner Charles R. Howell. Vice-Chairman Greer and Commissioner Howell had other commitments. Commissioner Davis was involved with a court case. Chairman Caster called the meeting to order and reported the purpose of the Work Session was to hear a brief status report on the activities of New Hanover Regional Medical Center. He welcomed the Trustees from the Medical Center and other Administrative Staff. STATUS REPORT ON THE ACTIVITIES OF NEW HANOVER REGIONAL MEDICAL CENTER Dr. Bill Atkinson, President/CEO, advised the Board that Pender Memorial Hospital was now interested in negotiating an alliance with the Medical Center. The Medical Center is interested in this alliance, and as events occur, the Board of County Commissioners will be informed. The Medical Center is now the 7th largest hospital in the State of North Carolina. The growth in New Hanover County is clearly out-stripping the ability of New Hanover Regional Medical Center to maintain the needed facilities and services. Financially, it is imperative for the Medical Center to be aware of its ability to pay for current and future projects. The goal of the Medical Center is to provide as much health care as possible because it is economically responsible for the area. As new physicians move into the area, patients are drawn to the community, and this places a demand on the Medical Center. The Medical Center’s concept is for the hospital to provide care for anyone in need, which includes a heavy load of indigent patients at approximately $11,000,000 to $14,000,000 per year with a predication of $19,000,000 for the next year. The Medical Center has greatly improved on its documentation of indigent care versus bad debt. A report is being prepared on indigent care to reflect the figures for each county in the surrounding region. Once the report is finalized, a copy will be forwarded to the Board of County Commissioners. The Medical Center must take advantage of any opportunity presented to make proper use of medical space in the community, such the Cancer Center which will greatly benefit the community and region. With the current demand for services, the acquisition of Cape Fear Memorial Hospital presents an opportunity to acquire additional space without having to construct new space. Cape Fear Memorial is currently operating at less than 50% of its potential while the Medical Center does not have enough space to provide the services needed by the community. The Construction Committee is working with a 30-year old facility that has some significant problems. For example, when the original project was planned for expansion of the cafeteria, the cost was projected at $450,000 with completion of construction within 90 days. When breaking through the walls, asbestos was found and now, two and one-half years later, the expansion has exceeded $3,000,000 and continues to grow. This is typical of every renovation project in the main building; therefore staff feels the demand should be removed from this building to other locations with concentration on proper use of the existing space in the main building. NEW HANOVER COUNTY BOARD OF COMMISSIONERSBOOK 26 WORK SESSION, SEPTEMBER 17, 1998PAGE 694 In addition to completion of current construction projects, it is felt that $95,000,000 will be needed for additional capital projects to keep up with the current demand. With the acquisition of Cape Fear Memorial Hospital, a large amount of space will be added and the $95,000,000 figure should be significantly reduced. The question to answer is how the space in Cape Fear Memorial Hospital will be utilized. A group of physicians has recommended providing services to women and children in one location. This is an excellent idea, but no decision has been rendered on how the space should be used. The Medical Center will be working closely with physicians in the community and neighboring counties to participate in discussion of needed services and construction projects. When Cape Fear Memorial Hospital is purchased, this asset will be transferred to New Hanover County. In the short-term, Cape Fear Memorial will have to be operated as a separate business to address reimbursement issues with Medicare and Medicaid. As additional hospitals are considered, other entities such as Hospice will come on line later during the process. The existing Board of Trustees at the Medical Center will become the parent board appointed by the New Hanover County Board of Commissioners. The parent board will be given another name to be more representative of crossing county boundaries. The number of members for the parent board will have to be increased to include representation from the medical institutions located in other counties. There will be a single president over the entities, and each medical institution will have an administrator and chief operating officer under the existing command structure consisting of a CFO and chief nursing officer, whether in-patient or out-patient. Existing marketing and planning personnel will serve across the entire system. Uniform policies for personnel and planning will have to be developed. Coordinated planning must occur on the issue of physicians. For example, physicians at the Medical Center must have board certification, whereas, at Cape Fear Memorial Hospital board certification is not required. These are the types of issues that will have to be addressed. Discussion was held on the structure proposed for the parent board. Dr. Atkinson advised the parent board will oversee the entire Medical Center system; however, each hospital will have a local advisory board. This will allow the community to continue to have local input. Mr. James P. Eyerman, Vice-President of Finance, presented the following information on the how the acquisition of Cape Fear Memorial Hospital would be financed: Property to be Acquired and Conveyed to New Hanover County ? Cape Fear Memorial Hospital: 141 licensed beds ? Medical Plaza: 3 medical offices located on Oleander Drive ? Outpatient Rehabilitation Facility located on Oleander Drive ? Six Residences located around Cape Fear Memorial Hospital ? Eight units on Wrightsville Avenue Other Property not yet Conveyed to New Hanover County ? 6 acres on Physicians Drive (OB/GYN Clinics): After the closing, this property will be conveyed to New Hanover County. ? Medical Office on Delaney Avenue (Women’s Health Specialties): After the closing, this property will be conveyed to New Hanover County. ? Medical Office on Shipyard Boulevard (MEDAC): Since the land was donated by Bruce Cameron, this property will not be conveyed to New Hanover County. Acquisition Price: $98,000,000 ? Originally determined as a 9.5 times multiple of 1998 budget earnings before interest, taxes, deprecation and amortization. NEW HANOVER COUNTY BOARD OF COMMISSIONERSBOOK 26 WORK SESSION, SEPTEMBER 17, 1998PAGE 695 ? The multiple will be approximately 8 times or less by closing based upon current operations of Cape Fear Memorial Hospital. Financing of Acquisition ? Bridge Loan: This loan will be for the period of time between closing and issuance of tax exempt revenue bonds. This loan is offered by NationsBank at a competitive rate in the amount of $98,000,000. ? Permanent Financing: Tax exempt hospital revenue bonds issued by New Hanover County will be used to acquire Cape Fear Memorial Hospital. The size of issuance may include additional capital items to be determined at a later date. Cape Fear Memorial Hospital Pro Forma Operating Statement Total Net Revenue$42,000,000 Operating Expenses 34,600,000 Depreciation & Amortization ($100 M - 30 yrs.) 3,300,000 Interest on Debt (Annual Average) 3,600,000 Operating Margin $ 500,000 Available for Debt Service$ 7,400,000 Estimated Average Annual Debt Service 7,000,000 Annual Average Debt Service Coverage 1.1 times Commissioner Birzenieks asked Mr. Eyerman when the conveyance of properties would occur. Mr. Eyerman said if the closing occurs on October 15, 1998, the property will be conveyed to New Hanover County within 24 to 48 hours. Mrs. Sylvia Rountree, Chairman of the Board of Trustees, noted that discussion has been held about extending the term of the lease from 5 years to 30 or 40 years. She recommended addressing this issue. County Attorney Copley advised that the lease would have to be the length of the debt service. If the County Commissioners desire to extend the lease beyond this period of time, the Trustees and Commissioners will have to decide on this matter. Attorney Dumay Gorham advised the original acquisition of Cape Fear Memorial Hospital will be financed with the interim loan from NationsBank. The bond transaction will follow, and the lease should be amended at this time. The proceeds from the bond transaction will pay the balance of the interim loan. Discussion was held on the total debt of the Medical Center after acquisition of Cape Fear Memorial Hospital. Mr. Eyerman responded that after the proposed bond issue, the debt service will be approximately $200,000,000. Discussion followed on the possibility of New Hanover Regional Medical Center acquiring the Brunswick Hospital. Dr. Atkinson advised the Medical Center will continue to work with the Brunswick Hospital Authority and Brunswick County Board of Commissioners to see if a long-term lease can be negotiated. Columbia continues to be interested in exiting North Carolina and it appears that Columbia has proposed an outside group to oversee the hospital. At the moment, no one is sure what will happen; however, it is the intent of the Medical Center to be at the table for negotiation if and when a decision is rendered by the Authority and Brunswick County Board of Commissioners. NEW HANOVER COUNTY BOARD OF COMMISSIONERSBOOK 26 WORK SESSION, SEPTEMBER 17, 1998PAGE 696 Discussion followed on the proposed by-law changes. After further discussion, it was agreed for Commissioner Birzenieks, County Attorney Copley and Attorney Gorham to work on the changes to the by-laws. County Attorney Copley urged both boards to discuss and decide on the term of the lease due to time constraints. Chairman Caster advised the Board would discuss the term of the lease on Monday, September 21, 1998. ADJOURNMENT Chairman Caster expressed appreciation to the Trustees and Administrative Staff for taking time to present the status report. The meeting was adjourned at 11:45 a.m. Respectfully submitted, Lucie F. Harrell Clerk to the Board