The Citrus County Hospital Board looked this week to fill its financial coffers as it will ask Hospital Corporation of America to allow it to reduce funds in an escrow account linked to the lease of Citrus Memorial Hospital.
The answer by HCA will determine if millions of dollars changes hands. This is how.
The hospital board owns Citrus Memorial Hospital on behalf of the public and leases it to the health care conglomerate.
But during the lease negotiations seven years ago the hospital was in such poor financial shape that HCA required the hospital board to set aside millions of dollars from the lease payments in anticipation of any unforeseen expenses. On the seven-year anniversary of the lease (October 2021), HCA is required to release the money locked in escrow. HCA is allowed to hold as much as $14 million in escrow until then. There is $20.4 million in that account.
But the hospital board is looking to withdraw at least about $6 million now and the remaining $14 million if it can too and not wait until Oct. 31. Trustees are sending their hospital board lawyer, Bill Grant, to negotiate with HCA this week to get some, if not all, of that money, sooner than the October anniversary.
But when it comes to finances, just like politics, few things are simple.
Without getting too much in the financial weeds, here are some of the potential hurdles the board faces.
HCA claims the hospital is still on the hook for as much as $5.1 million to HCA, Grant told the trustees during their regularly scheduled meeting this week. That debt is due to old insurance claims and Medicare/Medicaid bills.
But Grant explained that most of those costs will go away when HCA and the hospital board recoup debts from Medicare and Medicaid. Other debts to private insurance, which help make up that $5.1 million, have also been settled, he said.
The reason for the push to get money now is because the hospital board needs it. Grant said it could be better invested to generate revenue.
The hospital board has $3.6 million it can easily get its hands on if it needs it. Other monies are in accounts tied to specific functions. Consultants recommended the board have $3.5 million in reserves to function and enforce the lease with HCA.
As much money as the hospital board has, or will get, it is also spending it.
It’s doled out millions for charities and more to help fund an assisted-living facility for veterans and promised potentially millions for a Baker Act facility.
It has also spent $2.4 million in legal fees in a federal lawsuit against Aon Hewitt. That is more than twice the amount the hospital board trustees originally allocated for the legal fight.
The council spent that money to try and recoup about $12 million, plus legal fees, in pension fund losses it claims were lost due to bad financial advice from Aon Hewitt Investment Consulting.
The hospital board’s consulting lawyers in the Aon Hewitt case told the hospital board that their expert witness estimated that Aon caused the loss of $12 million when Aon failed to monitor its own proprietary investments for the Citrus Memorial Hospital pension fund and failed to liquidate the investments when the cash was needed for the lease of the facility.
At the head of the federal lawsuit, which is now in its second year, is the Foundation Resolution Corp., which is the remains of the organization that operated Citrus Memorial Hospital before it was leased by the hospital board to Hospital Corporation of America
The hospital board had to loan the FRC $17.5 million to wind down the pension to ensure all the hospital’s employees were paid after the loss. Grant said the hospital board has oversight of the issues involved, but not control, but does have final approval to any settlements.
Hospital board lawyers’ expert witness is Kent Smetters, who is the Boettner chair professor at the University of Pennsylvania’s Wharton School and a faculty research fellow at the National Bureau of Economic Research.
As the lawsuit moves forward, both sides continue to discuss a potential settlement, though, Grant told the trustees. Meanwhile, the hospital board members this week agreed to push for a trail as early as April to settle the issue once and for all.
If the FRC recoups the money from Aon, it will hand that money over to the hospital board to repay the board’s loan to the FRC.
The board’s original intent was to turn that money over to the Citrus County Community Charitable Foundation to dispense to local charities and health-related programs. The hospital board created the CCCCF for that purpose. But now Grant said the hospital board should hold off writing one big check to the foundation if a settlement is reached.
That’s because the Florida House of Representatives is considering HB 1083. In essence, the bill, if passed, would require quasi-governmental bodies, such as the Citrus County Community Charitable Foundation, to meet some Florida standards. Those standards include contracting with an independent third party to conduct a cost-benefit analysis and submit annual reports to governor for approval.
That would result in quasi-governmental agencies to prove they serve a public function and the work couldn’t be done as well or efficiently in another way.
Grant said he is confident the bill will likely pass, if not this year, then the next.
While the hospital board members are hoping to sunset the organization in 18 months, and hand over its job to enforce the terms of the 50-year-long lease to another government entity, Grant said that could change.
“I’m not confident you’re going to sunset,” Grant told the trustees, but added that he would quit his post once the pension and Aon Hewitt issues were resolved along with some other minor issues.
During the past two years trustees have voiced their desire to sunset and that it was time for others to do the hospital board’s work.