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Al Bendeck of Tech will make the verbal proposal in response to the
district's recent request for proposals to take over management when
Quorum Health Resources' contract expires in January.
Written proposals were received in August from Methodist Hospital
Systems and Odessa Medical Center. Board chairman Raul Garcia asked
directors to study the proposals for action at a later meeting.
Board meetings are held in the hospital classroom and are open to the
Accountant Dan Painter, in making his annual audit report to the board
recently, said that runaway expenses and a loss of revenue due to three
physicians leaving town caused the hemorrhaging.
Larry Skiles, bond consultant with Rauscher-Pierce-Refnes Inc., told the
board they could not refinance 1975 bonds to increase cash flow this
year because of the poor financial condition.
In drawing up a proposed budget for 1996, finance officer Mike Hathorn
and chief executive officer Carolyn Riley cut expenses and revenue
projections, with a bottom line that would not increase the tax rate.
However, Hathorn called the proposal a "dream sheet," and board member
Jeannette Alligood agreed.
"I don't see where anything has changed in this budget from when the
bonding people were here and said to cut expenses and raise taxes if the
hospital is to be in existence," Alligood said.
"At the first workshop, the board chairman said we were shirking our
duty by not raising taxes, and in the second meeting he changed his mind.
"The budget has absolutely no margin for error, and we are setting
ourselves up for real problems in the next year if we don't raise taxes,
because we haven't cut expenses substantially."
She said the current administration has done a good job controlling
expenses, but if a major piece of equipment breaks the hospital will be
in trouble. And the proposal does not include $30,000 to pay for use of
a mobile mammography unit that chairman Raul Garcia said is available.
"I don't want to raise taxes, because I pay taxes too, but I believe we
have to," Alligood said. "We have to have a hospital."
She said that part of the reason government agencies get into trouble is
that they apply a political solution to a financial problem.
"What Congress has done, it looks like we may be doing," Alligood said.
"Nobody wants to make tough choices so they make easy ones and get in
big time trouble."
And if the federal government cuts expenses like they are considering,
they will not bail out Reeves County Hospital, she said.
"I don't necessarily agree with all the cuts on the county level, but I
certainly applaud their efforts at doing something; that they have the
courage to control spending," she said.
Alligood said the hospital district could raise taxes 2 cents per $100
valuation without the threat of a rollback election.
Because improved real estate was devalued by 5 percent this year a
homeowner or business would see little difference in their ad valorem
taxes at that rate, said Carol Markham, Reeves County Appraisal District
For example, the tax on a house valued at $10,000 would be $35.50 at
35.5 cents per $100 valuation (last year's rate).
With the new value of $9,500 (reduced 5 percent) and a tax rate of 37.5
cents per $100 valuation, the tax would be $35.63 - an increase of 13
Markham said that land values remain the same, so owners of lots and
grassland would pay a higher tax at the 37.5 cent rate.
Copies of the proposed budget are on file in the administration office
at Reeves County Hospital. The board has set a public hearing for 6 p.m.
Tuesday in the hospital classroom.
The board will consider proposals from Methodist Hospital Systems of
Lubbock and Odessa Mecical Center in their regular meeting Tuesday.
Tuesday's agenda includes awarding a bid for indigent care
pharmaceuticals, consideration of the quality assurance and risk
management plan, the state Medicaid program, financial report, a plan
for radiology coverage and consideration of three doctors for the
consulting medical staff for emergency room, cardiology and opthalmology.
Regular meetings are at 6 p.m. in the hospital classroom. All meetings
are open to the public.
Budget matters originally scheduled for Tuesday will instead be
considered in a special meeting at noon September 18. That agenda calls
for a public hearing on the proposed budget, budget adoption and setting
the tax rate.
A non-restrictive affiliation with Odessa Medical Center Hospital or
close ties with Lubbock Methodist Hospital Systems' rural health care
network are choices the Reeves County Hospital District board of
directors will consider Tuesday.
Lubbock Methodist proposes to provide managerial services for Reeves
County by hiring an administrator approved by the board of directors,
plus educational programs for the board, physicians and employees,
physician recruitment and data processing hardware and software.
Medical Center's open-ended proposal offers to provide services in any
areas identified by the Reeves County Hospital board of directors. RCH
would hire its own administrator.
Such services may include laundry, dietitian consultation, bio-medical
testing and repair, bed loan program and fire alarm systems.
"It has always been the philosophy of Medical Center Hospital to assist
any of our referring facilities in any way possible," said MCH
administrator J. Michael Stephans.
The board will also consider pharmaceutical bids for indigent care
program, hear a report from the joint conference committee, review and
consider a quality assurance/risk management plan, consider joining the
Intergovernment Initiative, consider a plan for radiology coverage,
consider consulting staff and clinical privileges for Rickey L. Gross
M.D., emergency room physician; Brian Mohr, M.D., cardiology; and Alan
Daniel Smith. M.D., ophthalmology.
The board meets at 6 p.m. in the hospital classroom.
Methodist Hospital Systems and Medical Center Hospital in Odessa had
submitted differing proposals.
"We have here apples and oranges; not two like we requested," said board
chairman Raul Garcia. "One is for management, and the other is for
affiliation with Odessa Medical Center. I don't believe that we have an
option from what to select. I would like to submit we reject all bids
and ask for re-submission from interested parties, to be reviewed two
weeks from today."
Garcia said the board could not make a choice from "just one submittal
that meets the standard of what we asked."
Jeannette Alligood said that people who wanted to respond did so and met
the terms of the board's request for proposals.
"It is not their fault nobody else did. To reject them because no one
else responded is not fair."
Methodist Hospital's response indicates they are concerned with the
board's wishes and know how to meet deadlines, Alligood said.
"The problem I have is consideration of this magnitude, we need a
choice," Garcia said. "We are not pressed for time. We have time to ask
for re-submission. If no one else is interested, then that will be
something we face when the time comes. We don't have to accept anything
from anyone. I would like for the board to have a choice."
"What happens if we reject and request again and only get one proposal
again?" Alligood asked.
"The time will come when we have to do something, but at this point we
don't have to do either one," Garcia said.
Marcella Lovett said that RFPs were sent to Odessa Medical Center,
Shannon Medical Center in San Angelo, Texas Tech, Midland Memorial
Hospital and Lubbock Methodist.
"Only two responded. Where would we go beyond five?" she asked.
"I don't know. A re-schedule would like anyone to respond to our needs,
and that's what we would do. Give anyone and everyone to come in an give
us a choice. If not, we will consider it when the time comes," Garcia
He made the motion to reject all proposals and ask for re-submittal form
all interested parties. Chel Flores seconded.
"I think it is very unfair whenever they have had their opportunity and
don't submit," Lovett said. "I don't understand."
"That's what I think would be fair to the board to have an option from
where to choose," Garcia said.
Attorney Scott Johnson said the requests for proposal could be changed
slightly to give hospitals a wider latitude in making their proposals
and still have a basis for comparison between bids.
Alligood said it is unfair to those who have already submitted a
proposal because other hospitals have access to it. She suggested that
board members not discuss contents of the proposals.
Johnson said the proposals are public record. "To the extent that the
law allows us to protect these bids, we can sure try to do it," he said.
Garcia called for a vote on the motion, and Flores and Jesse Prieto
voted "yes," with Alligood and Lovett voting "no." Garcia broke the tie
by voting "yes."
"This is the most unusual proceeding we have ever been involved in,"
said Jim Bullard for Methodist Hospital.
"We have gone to a lot of time, energy and work. We came here tonight to
make a presentation. We are greatly concerned that we are now not on a
level playing field. It is obvious all the energy we put into this is
available to all people. Maybe it was even structured that way.
"Based upon that, we are withdrawing our proposal to manage your
hospital. We have no desire to participate or to be parties to things
that we think...We still beleive in the West Texas spirit where we do
things on handshakes, up front and fair. We don't see it this way,"
He offered to share their proposal with anyone else making a bid.
"They can't live up to what we can do. We have a lot of hospitals,"
Bullard said. "I don't see these proceedings as being on a level playing
field to us. We will decide later if we want to re-submit. I won't tell
you now whether we will choose to respond or not. It is something we
will take very seriously."
Garcia said he had checked to ensure that the board's action is within
"I'm not saying it is against the law," Bullard said. "But we withdraw
our offer to work with you."
Bullard and four associates then left the meeting, taking video and
computer equipment they had set up for their presentation.
Bullard said this morning that he was disappointed they were not allowed
to make the presentation after being invited by Garcia to do so.
"We are tremendously disappointed," Bullard said. "The board had
expressed to us a desire to make this a quick decision. We are quite
disappointed they chose to change their approach."
He said the decision has not yet been made whether to re-submit the bid.
The proposal was the best they could make, and it would be difficult to
change it, he said.
"Our cards are played already, and it is not a level playing field," he
Methodist Hospital charges nothing for the services they offer, but asks
for reimbursement for the salary of an administrator, whom they provide.
An affiliated hospital then becomes part of a 28-hospital network with
access to any of the other members.
Although Lubbock Methodist provides a high level of health care beyond
the local hospital, it is not a requirement that patients be referred
there, Bullard said.
"It is something we believe we have to earn. Our facility is one of
quality care, and we could earn that."
RCH previously was affiliated in a non-management relationship with
Methodist, and some of the benefits included administrator meetings,
board retreats and education seminars and personnel training.
Ray Mason, community liaison, said RCH used their training for neo-natal
intensive care for Dr. Eunice Anderson, and several nurses trained in
obstetrical care - all free of charge.
Local training was also provided by Methodist staff, he said.
"Some facilities utilize them greatly, and some don't, but they are
there for the asking," Mason said.
Methodist also provides air ambulance service through AeroCare. RCH has
utilized that for the past three years.
Other bidders were Rediger's and Professional Pharmacy.
Leo Hung of Professional Pharmacy asked if the hospital would be willing
to pay his additional charge for late-night service when Wal-Mart
Pharmacy is not available.
Board chairman Raul Garcia said that the hospital's business is done
during the day when Wal-Mart is open. Wal-Mart's bid included seven-day
per week service during business hours.
But he said other pharmacies would be paid for whatever service they
Both Rediger's and Professional Pharmacy offered 24-hour service and
delivery, but their prices were higher than Wal-Mart's on a majority of
the medications listed.
Chel Flores made the motion to accept Wal-Mart's bid, but attorney Scott
Johnson advised him to withdraw the motion and abstain from voting
because he works for Wal-Mart.
Garcia made the motion, Jesse Prieto seconded, and Jeannette Alligood
voted "yes." Marcella Lovett abstained.
Carolyn Riley, hospital chief executive officer, suggested the contract
with Wal-Mart be for 12 months, and the board agreed. Should they fail
to meet contract specifications, the board could cancel the contract and
seek other providers.
The board adopted amendments to the quality assurance plan, to include
risk management. Riley said the hospital has had a safety program, but
it was not formalized as a risk management plan.
Riley explained a letter to the commissioner of Texas Health and Human
Services regarding the district's option to establish an
intergovernmental initiative with surrounding counties.
She said the letter keeps the district in the driver's seat in forming
such an alliance.
"If you don't do it, the state will do it for you," she said.
The board approved the letter for Garcia's signature.
Dr. James Cam presented the names of three doctors for approval as
consulting medical staff, and they were approved: Rickey L. Gross,
emergency room physisian; Brian Mohr, cardiology; and Alan Daniel Smith,
Riley said she had no recommendation on radiology coverage.
Savings from Quorum Health Services corporate purchasing programs was
$12,985 in August, Riley said. A quorum-owned hospital has shared their
radiation protection program with RCH, and a sister managed hospital has
provided copies of their safety policies and procedures as related to
The legal firm of Fulbright and Jaworski has been contacted to assist
Dr. Kai-wood Ma in obtaining his Texas license.
The hospital's new incinerator has been installed, Riley said.
She met with representatives from Smithers Transportation Test Center to
discuss healthcare services for their employees. A plan similar to the
one currently in place at Anchor Foods will be developed.
Dr. Richard Burton met with the medical staff in late August to address
some concerns regarding mercury. The staff stressed the use of safety
precautions for individuals working with mercury, Riley said.
Mike Hathorn submitted his resignation as chief financial officer,
effective September 30. He is moving to Del Rio to take a similar
Andy Epps, Quorum representative, said they will provide a replacement.
The board has called a special meeting for noon Monday to hear public
comment on the proposed budget, to adopt it and set a tax rate.
The board meets at 12 noon Monday for a public hearing, adoption of the
budget and setting the tax rate.
With an estimated $5.27 million net operating revenue and $6.26
expenses, the budget calls for tax revenue of $1.46 million.
Chief finance officer Mike Hathorn calculated that amount could be
raised by setting the tax rate at 35.50 cents per $100 valuation - the
However, board member Jeannette Alligood said that estimated operating
revenues are based on an increase of patient days over this year, and
that may not happen.
In the expense column, no provision is made to replace major equipment
that could break, she said. She feels that an increase of 2 cents on the
tax rate would help to ensure the hospital's continued operation.
Quorum Health Resources has told the board they will not renew their
management contract when it expires in January.
Quorum's managment fee is $138,000, and salaries of the chief executive
officer and finance officer total $157,000, Hathorn said.
Hathorn said he included $120,000 in the proposed budget for CEO and
finance officer salaries as hospital employees, plus a 20 percent
increase in health insurance costs and benefits for the two.
Methodist Hospital proposed a management plan that would require no
management fee, but they would choose the administrator with board
approval. The board rejected that offer Tuesday and agreed to solicit
Another high-dollar item is contract nursing, for which the 1995 cost is
about $284,000. Hathorn said he decreased that by $68,000 in the
proposed 1996 budget.
Expense increases include 4.5 percent in supplies to account for
inflation and in meetings and travel.
Dr. Kai-wood Ma's income guarantee of $75,000 is included, along with
$7,000 moving expense and $7,500 stipend and living expense for his OB
Physician recruitment fees of $25,000 is included for the last quarter
of the new year, plus $15,900 in administration for physician recruiting
and $14,000 moving expense for a CEO and CFO.
Hathorn said the labor budget is conservative and includes minimal
The board had previously solicited proposals for management but rejected
the bid offered by Methodist Hospital Systems of Lubbock in the last
meeting because it was the only proposal that offered a management
Board chairman Raul Garcia asked the district's attorney, Scott Johnson,
to amend the proposal solicitation to include an affiliation agreement
without management - as offered by Medical Center Hospital in Odessa.
Medical Center chose not to re-submit their proposal, and Methodist
withdrew their bid.
Jack Mangan, regional coordinator for Midland Memorial, said they did
not repond to the first request because it was for management, which
they choose not to provide.
"We are in favor of affilition," he said. "We have two other cities we
are affiliated with: Crane and Kermit. We feel that with affiliation we
can give you what you need or want as far as expertise or direction. At
the same time you can maintain independence and control.
"If you are dissatisfied with management as it is now, then who is to
say you will be satisfied with us coming in to manage Reeves County
Hospital?" he said.
Quorum Health Resources Inc. has said they will not renew their
management contract when it expires in January.
Midland Memorial's goal is to keep RCH open and viable, he said. "It is
not our desire to usrup everything into Midland. We have our hands full
running Midland; we don't have time to run Pecos."
Mangan said the board knows what Pecos needs, and with affiliation could
ask for help in any area, from recruiting doctors and personnel to
in-service education to clinics.
"We have a 330-bed hospital with everything from soup to nuts," he said.
"We did 150 heart bypasses last year. We are in a position to provide
whatever help you might need."
Garcia said the board will "look into this" and be in touch.
The board authorized a $150,000 line of credit at Security State Bank,
pledging $300,000 in accounts receivable as collateral. Any draws would
be repaid by tax funds before Feb. 28, 1996.
Marcella Lovett and Jeannette Alligood objected to banking resolutions
with SSB and First National Bank naming Sheila Apps, director of
nursing, as a signatory along with Garcia and vice-chairman Jesse Prieto.
"I would feel a lot more comfortable with someone from administration on
here," Lovett said.
Garcia said that Apps replaces chief financial officer Mike Hathorn, who
is moving to Del Rio. An interim CFO will fill that position Thursday.
Hathorn said that assistant administrator Iris Rives could be designated
in his place.
"The only time you use it is for funds transfer," he said. "I took the
tax fund out of First National and took it to Security State on my own
signature. The check is made out "for deposit only."
"Let's put someone from administration just for looks instead of
Sheila," Lovett said.
"I would much rather wait on the new CFO and put him on, rather than do
all this changing around," Garcia said.
Garcia made the motion to accept the resolution with Apps as signatory
"until the new CFO appears and we know who he is."
Chel Flores seconded and the motion carried 3-2, with Lovett and
Alligood voting no.
Administrator Carolyn Riley reported that the process to secure a Texas
State License for Dr. Kai-wood Ma is progressing slowly, with Jan. 2,
1996 targeted as a starting date for his practice.
Discussions are underway with an Odessa radiologist for five day a week
Hospital representatives acquired some much needed equipment at no cost
from the government surplus warehouse in El Paso, Riley said. Included
were office equipment, a stretcher, centrifuges and refrigerators.
She said the hospital is reducing staff through attrition. Only one
traveling nurse remains on staff, and she will be leaving at the end of
Dr. James Cam recommended Edwin D. Seaman, M.D. pathology and Alexander
Kovac M.D. radiology for consulting staff and clinical privileges, which
Hathorn presented the financial report, pointing out that accounts
payable of $302,000 is less than half that on the same date last year.
"It is looking better," said Alligood.
Riley commended Hathorn for the good job he has done over the past three
years and wished him well in his new job.
Garcia, Alligood and Riley will attend a meeting with county, city and
school district officials at 9 a.m. Tuesday to discuss tax collection.
The invitation came from Linda Gholson, school board president, and
county commissioner Dr. W.J. Bang.
Dr. Bang said the meeting was arranged after the county raised tax
collection fees to the city and hospital district and they began looking
for another tax collection agency.
"We have realized the hospital is considering removing collection
service to the school, which prompted the judge to re-evaluate the
situation and come up with a revised proposal," Dr. Bang said.
"The main purpose is to unify all tax collection service in the county,
including the school. By doing that it is obvious there can be a lot of
savings in cost."
If the hospital district switches to the school district, changing the
computer records will cost $10,000, he said.
"If the county keeps the city and hospital and adds the school district
in, it only costs $2,000. There's an $8,000 savings for taxpayers. All
entities would pay much less," he said.
Riley read a letter to the hospital from Virgil Ray Gage, chairman of
the Balmorhea EMS board, thanking them for support and pledging to
continue emergency services in the county.
The bill would also provide grants to rural communities to set up rural
health networks, similar to that Reeves County Hospital recently
considered with Lubbock Methodist Hospital Systems.
Under the "Rural Health Development Act of 1995," introduced by Reps.
Charles Stenholm, D-Stamford and Pat Roberts, R-Kan., a Medicare bonus
payment for rural health providers would be increased from 10 percent to
But that bonus would be restricted to doctors or primary care providers.
Hospitals qualifying as "Rural Emergency Care Hospitals" would be funded
to provide 24-hour emergency care where the need is great.
That would be welcome news for RCH, where 80 percent of revenue is from
Medicare and Medicaid patients.
Medicaid is also targeted for cuts in the Senate Finance Committee's
formula to allocate funds to the states.
Kay Bailey Hutchison, R-Texas, said Texas would net $5 billion less over
seven years under the Senate panel's verion compared with the formula
adopted last week by the House Commerce Committee.
"No one loses as bad as Texas," Hutchison said.
Medicaid pays health bills for low-income children and their mothers,
disabled children and adults and impoverished seniors, including many
nursing home residents.
RCH relies heavily on Medicare and Medicaid, said Carolyn Riley, chief
executive officer. Approximately half the patients are on Medicare and
20 percent on Medicaid.
Because Medicare and Medicaid have a cap on what they will reimburse the
hospital, much of gross patient revenue billed is written off, Riley
In 1994, gross patient revenue was $8.3 million, but $1.4 million was
deducted from Medicare and Medicaid patient bills and written off as
"It is illegal for us to try to collect from the patient," Riley said.
Mike Hathorn, chief financial officer, said the hospital received
$36,000 per month in Medicaid payments last year because it serves a
large percentage of under-privileged people.
Most of the obstetric patients are on Medicaid, he said.
Having a small hospital also helps, because rural hospitals with less
than 100 beds get a lump-sum payment from Medicaid at the end of each
year, based on costs, Hathorn said.
"When they are talking about saving money, they have cut payments to
hospitals and will probably impact physicians and patients even more,"
Riley said. "Co-payments and deductibles will go even higher."
Texas ranks 44th per capita in Medicaid spending at $2,800 per patient,
versus more than $5,000 in New York. The national average is near $3,900.
House Minority Leader Richard Gephardt, D-Mo., said lots of small rural
hospitals will close if the proposed cuts go through.
But if the GOP's efforts to reduce burdensome federal regulations are
successful, rural hospitals would benefit.
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Copyright 1996 Pecos Enterprise
324 S. Cedar, Box 2057, Pecos TX 79772
Phone 915-445-5475, FAX 915-445-4321