Koster gives green light to I-70 Medical Center sale

The I-70 Medical Center in Sweet Springs opened late in 2005 as a nonprofit operation. The hospital board reached an initial agreement last summer to sell the facility to HMC, a for-profit group. Approval from the state attorney general's office was required before the sale could be completed.
(Geoff Rands/Democrat-News) [Order this photo]

"We're satisfied on our end," said Travis Ford, spokesman for the Attorney General.

HMC President Larry Arthur said he hopes to have the sale completed by the end of February.

The sale has been pending since July 2007.

HMC will be taking on all of I-70 Medical Center's assets, including buildings, real estate, equipment and all receivables, according to a press release from the Attorney General's office. The company will also assume all of the center's debt, which was reported by The Marshall Democrat-News Tuesday, Sept. 9, 2008, as $10 million.

HMC will place $250,000 in a scholarship fund for Sweet Springs residents who wish to go into the health care field, build an 8,000-square foot medical office in Sweet Springs and, within 18 months, open a clinic in Alma. The company was also to open a clinic in Concordia within six months of the sale, but, said Lab Director James Noble, that clinic was built shortly after the decision to sell to HMC was made.

According to the press release, other terms of the sale include:

--Requirement of HMC to use the facility only as a community hospital. Should the company cease to operate the hospital or sell it for any other purpose, the community will have the opportunity to buy the center back "at fair market price determined on the basis of the property's use as a hospital;"

--Requirement of HMC to participate in the Medicare and Medicaid programs for no less than 10 years;

--Requirement of HMC to provide a charity care and community benefit at the same levels as did the seller, that level being $360,000 per year, with an adjustment for inflation, which HMC must continue for as long as it owns the hospital;

--Requirement that HMC make additional payments of up to $150,000 to the scholarship fund should the company employ anyone trained using scholarships or loans from the scholarship fund, or if HMC sells the hospital for a short-term profit;

--A provision for the Attorney General to enforce HMC's commitments to build the medical office building and clinic in Alma.

The reason the hospital is being sold, according to Noble, is that without an influx of cash, the Medical Center would not be able to continue serving the citizens of Sweet Springs and surrounding areas.

This lack of funds is, in part, due to the way in which grant money from the United States Department of Agriculture was allocated, and in part, because of underpayment by Medicare.

In order to get funding from USDA, Noble explained, the new hospital had to be functional within 10 years of the previous critical access hospital's closing.

"By December of 2005, it would have been too late," he said. The center opened Nov. 15, 2005.

USDA initially stated it would give a grant of $9 million for the $10 million project, but those parties interested in building the I-70 Medical Center would have to raise the remaining $1 million "because they wanted buy-in," said Noble, to ensure the commitment of the community.

When that amount proved difficult to obtain, USDA looked at the area's demographics and lowered that amount to $500,000, approximately $485,000 of which was actually raised, said Noble.

Much of that $485,000 came from outside the community, said Noble, such as a doctor in Lexington who donated $20,000 and HMC, which donated $10,000.

"USDA generously said, 'That's close enough,' and they accepted," Noble said.

What was not understood prior to construction was that the money raised was meant to get the hospital started by hiring personnel, purchasing equipment and the like.

"So, what we found out is that probably, we actually needed about a million-and-a-half more dollars in capital, actually. $2,000,000 would probably been more like it," said Noble.

It was decided to go ahead and try to make it work, and the management staff of the center did what most people do during financial hardships.

"We started shuffling stuff around," Noble said.

As a new hospital in an area that hadn't had one for 10 years, the center didn't have a pre-existing client base, making their costs per patient per day were very high for the first several months.

"They [Medicare] reimburse us for our exact costs, plus, they give us a whopping one percent to upgrade equipment and do everything we need to do," said Noble. "...Our cost per patient at that time was like $4,500, $5,000 a day, and the average for a critical access hospital is $1,500 to $2,000 a day."

Once Medicare noticed how high the center's costs to serve each patient each day were, it began to pay the center more, though none of this pay was retroactively applied.

Once the hospital's client base increased, costs per patient per day went down, but Medicare's payments stayed the same for some time.

"We realized, 'Medicare is paying us more than our actual costs are today,' but by that time, our bills had been so high we took and used that money to pay vendors and stuff back pay for what we owed," said Noble. "So, when we came around to the first year's period, where we had to send our audit reports in to Medicare, well then it was obvious Medicare had overpaid us approximately one-and-a-half million dollars, the cost that we really needed to begin startup. That million-and-a-half dollars has haunted us from the very beginning."

Medicare then ordered the hospital to repay that amount and cut off payments completely.

"As dedicated as we are to the area and the people, if you don't have enough money to grow and add businesses and services, you're going to end up dying -- it's like a bad Monopoly game. ... So we really needed an influx of cash from some source," Noble said.

That source turned out to be HMC.

Some have accused HMC of mismanaging the hospital in order to "pick the low-hanging fruit," said Noble, but he doesn't believe this is so.

"A few individuals have been against it, they've been very vocal about it, but most of the community is in favor of it. After all, it was about having a hospital here in the community, it wasn't about who controlled that hospital, it was about, is that hospital here in our community and is it going to take care of our citizens, and with us being here, we're going to fulfill the original purpose, which was to get a hospital in the community. We're reaching out and beginning to affect places like Concordia now, hopefully, we'll have that clinic in Alma."

Contact Geoff Rands at marshallreporter@socket.net

Related stories:
I-70 Medical Center sold to HMC/CAH:
www.marshallnews.com/story/1449224.html
Sold? I-70 Medical Center board member says hospital sold; CEO says it's premature to comment:
www.marshallnews.com/story/1448210.html
Support for I-70 Medical Center strong, but opinions divided about proposed sale:
www.marshallnews.com/story/1454915.html
Closing delayed, but HMC officials think hospital sale will be approved:
www.marshallnews.com/story/1459701.html