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December 17, 2014

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UMC’s financial condition spurs talk of sale

It’s preliminary, but commissioners are looking at options for ailing hospital

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Steve Marcus

Kerry Sanchez, right, a senior clinical lab assistant, confers with medical technologist Mike Hollister as she prepares blood for testing last week in the University Medical Center transfusion services department. County commissioners are studying their options for the hospital.

With University Medical Center once again running tens of millions of dollars in the red, Clark County commissioners are considering ways to wash their hands of the public hospital.

It’s not the first time the county has broached the idea of divorcing itself from the hospital. Financial problems led the county to hire consultants who studied new organizational options, including a possible sale, in 2007. That study was presented to commissioners — and filed away.

But it was dusted off for a Nov. 9 meeting about UMC, where Kathy Silver, the hospital’s CEO, went over a list of options. Commissioners could set up a board that would be responsible for all governance and management of the hospital and its clinics but would report to the county, Silver said. Or commissioners could lease the hospital to another entity. Or they could transfer or sell it to a nonprofit organization. If they want to sell it to a for-profit, they would need a change in state law.

Commissioner Lawrence Weekly, chairman of the UMC board of trustees, said if he had to choose, he would appoint an advisory board that would report to the County Commission.

“We’d be making a real haphazard decision by just going to (the sale option),” Weekly said. Commissioner Susan Brager agreed.

Commissioner Rory Reid said an advisory board might be a “first step,” but he doubted that it would be enough.

Commissioners Larry Brown, Steve Sisolak and Chris Giunchigliani lined up more definitively against Weekly’s suggestion. Giunchigliani opposes giving power to people who aren’t elected, while Brown and Sisolak said it would do little to nothing to solve the problem.

All an advisory board would do is add “another layer of bureaucracy,” Sisolak said.

After the meeting Sisolak said he favors selling the hospital. But if too many of his fellow commissioners are opposed, Sisolak hopes the county can “lease it out, bring in not-for-profit operators or have the medical school take it over.”

Brown agrees that major change is needed because “UMC is becoming an obvious drain on all the other functions of the county.”

In the fiscal year ending June 30 the hospital reported an annual loss of $71 million. That same year the hospital provided $204 million in care for which it was never paid — an amount that has doubled from $102 million in 2005.

No one knows for sure how much it will lose in 2010. At the trustees meeting, Sisolak guessed $100 million.

But the county should not necessarily be looking at the bottom line when measuring the hospital’s value, said Tom Collins, the commissioner from the rural north. “I don’t think we treat the hospital the same way we do other county departments.”

Selling or putting a different entity in charge might save money for the county. But Collins says new management would seek lower salaries and good doctors would move away. “That would diminish all the good that (UMC) does, from trauma care to heart care to child care.”

But actual statistics on what happens when a public hospital goes private, especially research that addresses the bottom line, are hard find.

One study in 1999 looked at 52 acute care public hospitals that had been privatized, 37 to nonprofit organizations and 15 to for-profit companies. It found that on average, hospitals sold to for-profit companies cut the amount of care that went unpaid more than hospitals sold to nonprofit groups did.

But other than that, the Sun found little information that was on point.

A spokesman for the American Hospital Association said his group didn’t have much information about trends in privatizing hospitals. He referred questions to an association of hospital administrators.

That association referred the Sun to another.

When the Sun called Renown Regional Medical Center in Reno for background and the effect of Washoe County’s 1985 sale of its hospital to a private nonprofit corporation, the hospital responded with a one-paragraph statement. It said changing an organization is “very challenging” and “relies heavily on active cooperation from all parties involved.”

It also said Renown has “agreed to share lessons we learned during our transition from a public to private hospital” with Clark County commissioners and UMC.

That Reno sale was not without controversy. In 1995 a grand jury convened to look at the $12 million transaction. Though the sale was legal, an Associated Press story characterized the grand jury report as saying “the deal was not the best for taxpayers.”

At UMC, Silver declined to be interviewed for this story, saying it would be premature to discuss options for the hospital’s governance. Commissioners need to talk more first and give her their direction, she said.

Their next meeting about UMC is scheduled for Dec. 16.

They know that the proposed restructuring of the health insurance industry is a wild card. Those changes could either doom or save UMC depending on whom you ask.

Richard Tradewell, an adjunct professor in hospital administration at California State University-Long Beach, has written extensively on hospital privatization after working as a county hospital administrator in Los Angeles.

Any county hospital “on the edge now” is likely to see its financial woes grow if the proposed federal health care overhaul passes, Tradewell contends. He believes bringing millions more people into the health care system will result in decreased federal payments for that care.

The counterpoint to that, said Jon Summers, spokesman for Senate Majority Leader Harry Reid, D-Nev., who is shepherding the health care bill through Congress, is that hospitals will get something, whereas they got nothing before.

“There will be cuts in some payments, but the flip side is that the hospitals will also be compensated for the people they treat,” Summers said. “This will reduce the number of patients who get treatment without paying anything.”

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