At least three other hospital operators this week are interested in running Lower Keys Medical Center when the current operator’s lease expires in April 2029.
Representatives from Baptist Health, Mt. Sinai Medical Center and Tampa General Hospital spoke at the March 4 meeting of the Lower Florida Keys Hospital District board to express interest in taking over operations of Lower Keys Medical Center as of 2029.
The hospital’s current operator, Community Health Systems (CHS), which has run the facility on College Road since 1999, is also aggressively pursuing an early renewal of its lease. The company’s regional vice president, Drew Mason, also spoke to the hospital district board on March 4.
Mason promised that his company, CHS, would make significant investments into the hospital and its services, but only if the board votes to renew the lease immediately rather than when it expires in 2029.
The proposal includes $65 million in investments over the next five years, Mason said. That would include an upgraded emergency room, a major renovation to the hospital and patient rooms, expanded oncology and mental health services and upgraded equipment.
In addition, CHS has pledged to invest $100 million in additional capital upgrades over the course of the 30-year lease.
“And those commitments are not contingent on profits,” Mason told the board on March 4. “But this accelerated investment is only possible if the lease is renewed early. We respect the desire to consider all options, but a long and protracted process in which the lease decision lingers on and on will impact our ability to provide services, recruit physicians and maintain the confidence of the community.”
More than 100 community members attended the March 4 meeting and were encouraged by the possibility of improved health care services at Lower Keys Medical Center in the coming years whether under the same or a new operator.
This week’s presentations were only preliminary.
The board also heard on March 4 from health care consulting companies that would guide the board through seeking formal proposals, identifying the community’s health care needs and negotiating an operating contract in the best interest of the Lower Keys community.
The hospital district board is likely to choose a consultant at its April meeting, when it will also hire a law firm that specializes in health care to assist with the years-long negotiation process.
While CHS would prefer that the board renew its existing lease early and forgo the competitive bidding process, board member Erica Sterling, who is also an attorney, encouraged the board to pursue the hiring of a consultant and attorney.
“The consultants we heard from today said the competitive process is a good one and that hiring outside counsel is a normal thing to do,” Sterling said. “I think we need to do the normal things and I’d like to go forward with hiring an attorney and a consultant.”
Most of the seven other board members agreed with Sterling, while board chair Kathy Ovide has expressed hesitation in recent months in changing operators, pointing out that CHS, as a for-profit company, contributes a few million dollars a year to the community in the property tax it pays for the College Road property. She said that Baptist Health, Mt. Sinai and Tampa General are nonprofit organizations that are tax-exempt.
Representatives from those organizations assured the board on March 4 that their investment in the community and its hospital would far exceed the amount of property tax paid to the community.
Gino Santorio, president and CEO of Mt. Sinai, also pledged to the board that his company would invest “100% of net profits from Lower Keys Medical Center back into the facility and the community.”
The representative from Tampa General made a similar pledge, while Baptist Health’s spokesman assured increased investment in the community and hospital, but said it was too early in the process to discuss specifics.
What is the hospital district board?
The Lower Florida Keys Hospital District is a state-chartered special taxing district created in 1967 that exists solely to provide and maintain a hospital for the people in the district, which stretches from Key West to the Seven Mile Bridge.
The hospital district board is authorized to levy, and in the past has levied, a special tax within the district to fund the public hospital. That tax has not been levied since 1999, when the hospital district board decided to lease the hospital on Stock Island to a private, for-profit health care company.
The district is run by a board whose members are appointed by the governor.
At the March 4 meeting, Peter Batty, who chairs a community committee that acts as a liaison between the district board and the public, reminded the board members that they represent the people of the Lower Keys, not the governor who appointed them, and not CHS, which currently runs the hospital.
A video of the March 4 meeting is available at ohkw.org.
CHS rep meets with hospital task force members
Prior to the March 4 hospital district board meeting, city commissioner Sam Kaufman’s Hospital Task Force met Feb. 25 at city hall with former state legislator Ron Saunders, who now works for Community Health Systems as the communications director for Lower Keys Medical Center, which CHS operates.
Saunders listened to concerns about the local hospital from several community members, and told them, “It seems some issues weren’t being communicated to the folks in Tennessee (where CHS is headquartered), and I’ve had direct access to them to be sure they hear some of the community’s concerns and priorities.”
Saunders also acknowledged residents’ misgivings about an early lease renewal with CHS rather than going forward with a competitive bidding process to seek potential new hospital operators.
“CHS is the only entity that will step up and put up money in improvements and investments in the hospital over the next four years,” Saunders said. “They’re the only ones the lease can be renewed with now.”
But local Dr. Michael Klitenick questioned the company’s motives.
“If CHS gets an early lease renewal for the next 30 years, then our hospital becomes a valuable property. What’s to stop them from selling it off to someone else, whom we wouldn’t be able to choose?” Klitenick asked. “Also, why are they only willing to put money in when it comes time to renew the lease, when they should’ve been willing to do it for the past four or so years.”
Saunders pointed out that a renewed lease could include a “do not sell” clause to prevent CHS from selling the local hospital.
“There’s a way to protect against that,” he said, adding that CHS is not in violation of its lease or operating agreement.
“Could they have done more in recent years? Yes,” Saunders acknowledged.
Key West resident Spencer Krenke, who started the local health care advocacy group Our Hospital Key West, raised the topic of hospital profits and reinvestment of profits in the local community.
Krenke’s nonprofit group (ohkw.org) has been leading the charge to urge the hospital district board to conduct a competitive bidding process to see what other potential hospital operators are interested in running Lower Keys Medical Center when CHS’s current lease ends in 2029.
Krenke pointed out that Lower Keys Medical Center’s designation as a sole community provider hospital, meaning it’s the only hospital in the area, entitles it to Medicaid and Medicare reimbursement rates that are 2.5 times higher than hospitals that are not sole providers.
“Those reimbursements are about 50% of CHS’s revenue from Key West,” Krenke said. “Those higher subsidies were intended to help communities that suffer from a dearth of health care options, not enrich a company’s shareholders. Wouldn’t it be reasonable for the entirety of that subsidy to stay in a community that is geographically vulnerable. Do you know how much of that federal subsidy is staying in Key West?”
Saunders agreed to find out, and said, “I do think more should be invested back in the community.”
Kaufman agreed with Krenke, saying, “that subsidy could be used to pay for a new hospital facility, new equipment and more.”
He asked Saunders if CHS would be willing to commit to reinvesting the entire subsidy into the Key West hospital.
“If not, why would it not be in the best interest of our community to demand a competitive bidding process?”
Saunders did point out that as a private company, CHS pays $3.4 million a year in local property taxes, but added that he did not disagree with anything anyone was saying. He pledged to communicate the concerns and questions to officials at CHS.
