Portage County Commissioners voted today to approve the lease agreement that will result in the conversion of Robinson Memorial Hospital from county-owned to not-for-profit status. The hospital board of trustees first proposed the conversion of Robinson Memorial to not-for-profit status on August 9, 2011.
Stephen Colecchi, FACHE, President and Chief Executive Officer, stated that “this is a very significant day in the history of Robinson Memorial Hospital. The conversion to not-for-profit status will provide the hospital with the best opportunity to maintain its long term financial viability while continuing to meet the healthcare needs of the residents of Portage County and the surrounding communities.”
The Portage County Commissioners voted on March 13, 2012, to approve the conversion of the hospital to not-for-profit status subject to the negotiation and execution of a lease agreement between the County and a newly formed not-for-profit corporation that will operate the hospital. The not-for-profit corporation has been formed under the name of Robinson Health System, Inc.
Robinson Health System, Inc. will be governed by a fifteen (15) member board of directors. The initial board of directors will consist of the ten (10) current members of the Robinson Memorial Hospital board of trustees and five (5) new board members. According to Colecchi “the increase in the number of board members will result in a broader community representation on the hospital board.”
The County Commissioners also requested that a nationally recognized healthcare consulting firm be engaged by the hospital to provide recommendations and background information to the Commissioners regarding conversion of public hospitals to not-for-profit status.
The Camden Group was the consulting firm selected by the County Commissioners. The Camden Group presented its detailed report to the County Commissioners on June 26, 2012. In its report The Camden Group agreed with the recommendation of the hospital board of trustees that a conversion from public to not-for-profit status is appropriate and justified at this time.
According to Colecchi “the County Commissioners wanted validation of the conversion to not-for-profit status and The Camden Group clearly supported the recommendation that was made by the hospital board of trustees. The vast majority of the most successful hospitals in the country operate as not-for-profit hospitals. There is a reason that the number of governmentally-owned hospitals in the United States have declined by 40% over the last 30 years. It is not an ownership model that makes the most sense in the current business environment.”
Some of the reasons in support of the conversion to not-profit-status include the following:
- A full range of physician alignment options to allow Robinson to effectively manage physician shortages and recruit and retain the physicians necessary to best serve Portage County and the surrounding communities. These options would include the ability to employ physicians at market-competitive compensation/benefits rates and to enter into other contractual and business arrangements with physicians, such as co-management agreements and joint ventures.
- Ability to offer employees a more competitive benefits plan.
- Ability to develop for-profit ventures or enter into for-profit arrangements with other parties in order to provide additional services to the community.
- Optimized access to capital including the ability to utilize a wide range of alternative financing mechanisms available to nonprofit hospitals and health systems.
- Flexibility to invest in a broad range of investment alternatives, including stocks and corporate bonds.
The lease agreement will be effective immediately but the hospital will not begin to operate as a not-for-profit hospital until such time as the application for tax-exempt status for Robinson Health System, Inc. is approved by the Internal Revenue Service.
According to Colecchi “the application for tax exempt status will be filed immediately now that the lease agreement has been approved by the County Commissioners. We expect IRS approval to be granted by July 1, 2013 and we have targeted that date to begin operating as a not-for-profit hospital.”
Colecchi stated “we would like to thank the County Commissioners for their leadership on this very important matter. Over the past year they have spent a considerable amount of time in reviewing the merits of the conversion to not-for-profit status. They have made a very important decision necessary for the future growth and success of the hospital.”