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Capella health care proposes 50-year OCH lease

 

Okitbbeha County Hospital is pictured in this Dispatch file photo. The hospital has drawn interest from Capella Healthcare, which owns or operates 13 hospitals in seven states.

Okitbbeha County Hospital is pictured in this Dispatch file photo. The hospital has drawn interest from Capella Healthcare, which owns or operates 13 hospitals in seven states. Photo by: Dispatch file photo

 

Carl Smith

 

Capella Healthcare Vice President for Acquisitions Doug Johnson confirmed Friday the for-profit group is exploring a 50-year lease agreement for Starkville's OCH Regional Medical Center. 

 

Capella made the offer in an April 23 letter to the Oktibbeha County Board of Supervisors, Johnson said. He did not disclose how much the Franklin, Tenn.-based company offered. 

 

"We like the community, and we feel like we have an opportunity to grow and expand on the scope of services," Johnson said. 

 

Any potential transaction would have to address hospital debt. In 2008, county voters approved an almost $28 million bond for physical expansions and renovations. 

 

OCH CEO Richard Hilton said he was unaware of the offer until he was contacted by the Dispatch Friday. Hilton declined to comment on the situation until hospital trustees meet later in the month. 

 

Hospital business is not scheduled for Monday's regular county meeting, and it is unknown when supervisors will discuss the matter. 

 

"(Capella) really became aggressive in regard to their proposal; they've been after us for some time," Board President Orlando Trainer said. "This is an issue that was never off the radar screen or taken off the table." 

 

Hospital transaction rumors surfaced last year, and the county went through lengthy public discussions on the issue. By law, the county is required to perform a comprehensive analysis of the hospital's financial standing before it can proceed with any sale or lease. Supervisors estimated the study would cost about $35,000. 

 

Trainer argued last year that even if the board did not move to sell or lease the hospital, a thorough financial analysis would at least identify the strengths and weaknesses of the county-owned institution. 

 

Supervisors John Montgomery, Joe Williams and Trainer voted to pursue requests for proposals of such an analysis, but Montgomery later declared he would not support a deal after he independently met with OCH administration and reviewed the hospital's finances. 

 

"I will tell anyone that we have great opportunities for the future of our county. It would be unwise not to look at those opportunities," Trainer said. "With everything going on in lieu of the health care dilemma we're in, we have to look at everything we're doing. Will it be controversial? Yes. I'm just one supervisor, though." 

 

Even if supervisors approve a transaction down the road, county voters could force the matter to a referendum. OCH supporter and former Starkville alderman Frank Davis procured approximately 2,000 signatures last year as supervisors mulled a possible transaction. That number is well over the amount needed to force the issue to polls. 

 

Davis said he was aware of the new OCH offer and said his supporters again rally around the hospital. 

 

"What I'm hoping is that our three supervisors will stay with us," he said. "Three beats two every time." 

 

Capella Healthcare was founded in 2005, according to its website. It owns or operates 13 general acute-care hospitals in seven states. 

 

The company reported a $9.7 million dip in first quarter earnings this year. Capella took in $187.2 million in revenue during the year's first three months, compared to the $196.9 million it received during the same quarter last year. The company cited the industry-wide rural floor settlement and Oklahoma's Supplemental Hospital Offset Payment Program as the causes for the decline. Revenue and expenses related to those two items were $13.6 million and $5.1 million, respectively, the company's website states. 

 

"Our first quarter results reflect solid progress on our strategic initiatives in spite of the continued significant challenges that our industry is facing," said Dan Slipkovich, Capella chairman and CEO, in the May 3 first quarter report. "Our hospital leadership is doing an excellent job as they continue to improve quality, enhance constituency satisfaction and manage costs." 

 

That same quarterly report showed admissions were down about 1 percent, while emergency room visits and in- and outpatient surgical procedures increased for the entire system compared to the same 2012 time-frame. 

 

On March 3, Becker's Hospital Review reported Capella lost approximately $14.1 million in FY 2012 and a similar figure in the previous fiscal year.

 

Carl Smith covers Starkville and Oktibbeha County for The Dispatch. Follow him on Twitter @StarkDispatch

 

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