Has The Lakewood Hospital Association Failed Its Mandate?
Listening to statements made by the Lakewood Hospital Association (LHA) trustees and their third-party consultant Subsidium since the January announcement that the LHA and the Cleveland Clinic are pursuing a plan that would see Lakewood Hospital effectively shuttered and demolished in favor of a Family Health Center (FHC), one gets the impression that 1) the current challenges in health care delivery were not known prior to this year, 2) that the Cleveland Clinic's designs for West Cleveland were equally unknown, 3) the City of Lakewood will retain full control of the assets, and 4) that the Board is taking every measure to be transparent.
However, the facts tell a different story-- one that casts doubt on whether the LHA, a private not-for-profit formed in 1987 at the behest of the citizens of Lakewood, and tasked with providing the citizens of Lakewood access to high-quality, local health care, has fulfilled its mandate.
1) Health care trends today were known in 1996-- According to archives from the Lakewood Public Library, in February 1996 LHA trustees were considering a merger with Southwest General Health Center in Middleburg Heights and the now defunct Fairview Health System (which consisted of Fairview and Lutheran Hospitals) in an effort to remain competitive in a quickly consolidating health care market.
2) Cleveland Clinic's business strategy was public knowledge prior to the acceptance of the 1996 Definitive Agreement (DA)-- In as early as May of the same year, the Fairview Health System was dissolved after Fairview, Lutheran, and Southwest Hospitals signed on with the Cleveland Clinic and the LHA was already hard at work inking the 1996 Definitive Agreement that the hospital operates under today. However, much like today, there was stiff opposition from the citizens. In a November 28 op-ed published in the Lakewood Sun-Times, Dr. Patrick Carey presciently stated: “Allowing the Cleveland Clinic Foundation to acquire control of Lakewood Hospital after it has acquired Fairview and Lutheran Hospitals would grant the Cleveland Clinic Foundation (CCF) an effective monopoly over the provision of community hospital services in western Cleveland and its inner-ring suburbs. The Cleveland Clinic Foundation has announced its intention to make Fairview Hospital the anchor of its west side presence [emphasis added].”
3) Public assets will be transferred to private control.
Below is an itemization of the dollar amounts of the deal outlined in the Letter of Intent (LOI) negotiated by the Cleveland Clinic Foundation, the Lakewood Hospital Association, and the Lakewood Hospital Foundation, and their sources:
CCF/LHA* have $51 million, which is the balance of funds in LHA (Ms. Fry of Subsidium at Feb. 11 meeting) plus Unknown, which is the current value of the land, the physical plant, and equipment (Letter Of Intent: Part 2, Section E) plus Unknown: projected revenue generated from services provided by FHC –$34 million which is the investment by CCF to “construct, staff, own, operate and manage” the Family Health Center (LOI: 2A) – $3.5 million: total amount of rent payments to be paid by the LHA to the City during interim (Jennifer Pae's Economic Impact Study) and Unknown: the amount of money needed to run hospital until cessation of services. = $13.5 million
*Note: “LHA's wind-down and subsequent dissolution will occur under the direction of the President of the LHA, who shall be appointed by the Clinic... LHA will be the recipient of all revenues and incur all expenses whether direct or allocated, associated with the continued existence of the LHA, between the effective date of the 2015 Definitive Agreement and the dissolution of the LHA.” (LOI, 2E)
LHA Designated Private Non-Profit Entity = + $24.4 million: half on signing of 2015 DA and half upon completion of FHC (LOI: 2C)+128 million: $8 million in 16 annual payments and for an additional 15 years on the anniversary of the signing of the DA (LOI, 1D) +32.8 million: net worth of LHF (FY 2013 IRS Form 990 that all non-profits are required to file) = $185.2 million
City of Lakewood= +$8.2 million: sale of property on 850 Columbia Rd. (LOI: 2E) + $2 million: estimated revenue from sale of four acres on hospital property (LOI: 2E) +3.5 million: rents collected before shuttering of hospital - $1.5-1.7 million: estimated losses due to economic impact (Jennifer Pae's Economic Impact Study) = $11.9 million
As it stands now, the bulk of the value of the proposed deal will go to an as-of-yet unnamed private, non-profit determined by the LHA Board of Trustees, the same institution that allowed services that Lakewood Hospital provided to be transferred to Fairview.
4) The process will not be completely transparent even though it involves a public good:
The amount of “unknowns” above and their variety of sources illustrate the lack of a comprehensive and cogent presentation of the proposed course of action.
This was stunningly apparent at the February 11 meeting when LHA representatives stumbled over questions such as how much the land, physical plant, and extant equipment were appraised at. But perhaps this lack of clarity serves a purpose: “The parties will continue exclusive and confidential discussions about the terms of the potential arrangement and the best structure to achieve the goals stated above...” (LOI, 3)
Don't we owe it to ourselves, those who have gone before us, and those who will come after us to harness our collective creative potential and imagine all possibilities before settling on the one presented to us?