Mayor Summers and City Council Need to Act Like Responsible Landlords
Here is where we are on the hospital situation:
- The Cleveland Clinic (CCF) is in breach of the Definitive Agreement (DA) and has committed tortious acts that have caused damage to Lakewood’s assets
- Lakewood Hospital Association (LHA) is in breach of its Lease with City.
- LHA trustees, including the 3 City’s ex-officio trustees (Summers, Madigan and Bullock) have breached their fiduciary duties by failing to adhere to the charitable mission of LHA and failing to competently oversee CCF.
- CCF and LHA want out of their obligations under the Lease and DA.
- Under the circumstances, the City as the Landlord has both the right and the duty to seek alternative tenants to operate a hospital and/or buyers for its buildings and equipment.
- Mayor Summers and City Council have failed to:
a. Demand that LHA and CCF comply with the relevant agreements and restore services and patient volumes taken away by CCF. b. Seek alternative tenants in a professional manner and failed to conduct any professional or public bidding of its assets, i.e. they have made no effort whatsoever to maximize the value of the assets or advertise the hospital for lease or sale.
- No rationale Landlord would let the “volunteer” trustees of the defaulting tenant and the defaulting CCF control the search for a new tenant and/or the liquidation and sale of the City’s assets. To make matters worse, the defaulting volunteer trustees are led by Tom Gable who is also a CCF trustee—this just makes no sense.
- Instead of fulfilling their legal duties, City leaders chose to negotiate exclusively with LHA and CCF—i.e. the parties who caused the problems in the first place.
- Sources say that the City leaders are close to a deal that is roughly equivalent to the original LOI reached back in January, 2015---a “deal” worth far less than $50 million when the public assets have been valued at $120 million.
In exchange for this “deal" Lakewood will be asked to surrender:
1. Public money and property valued by LHA’s expert at $120 million.
2. The largest employer in Lakewood—about $990,000 in income annual payroll taxes.
3. $7 million per year in charity care for our underserved.
4. Over $ 1 million per year in rent through 2026--$11 million.
5. $5 million in annual capital improvements to the Hospital--$55 million through 2026.
6. Valuable legal rights against CCF that could be worth more than $100 million at settlement.
7. Economic Activity that the hospital impacts estimated at over $250 million annually.
Additional results of the hospital closure “deal” will be as follows:
1. Lakewood businesses will close,
2. jobs will be lost,
3. homes and business properties will be foreclosed,
4. property values will drop,
5. tax revenues will go down,
6. the elderly will suffer,
7. crime will rise,
8. the underserved will be even more underserved,
9. tax increases will be sought, and
10. schools will suffer.
To make matters worse:
1. CCF will be the sole provider of healthcare in Lakewood---they have already shown their lack of respect for Lakewood and the health of its citizens.
2. The people who have caused this calamity and pressed for this "deal”—an insiders’ club----will be in control of a majority the "benefits" flowing from the “deal.” The City gets virtually nothing for its assets valued at $120 million and the loss of its largest employer.
What Should City Leaders Do?
Set Clear Goals:
- Maximize Value of Assets.
- Maximize Prospective Jobs, Tax Base and Economic Impact in repurposing, re-leasing or selling the assets.
- Provide best possible healthcare for citizens, including the underserved in relation to the repurposing, re-leasing or sale of assets.
The Simplest Solution is also the least Risky and provides the Highest Return:
- Pursue and Explore Third Party Options—Begin a City Council Led Request For Proposal bidding process for a hospital, surgical center and/or FHC/ER. Immediately entertain the Surgical Development Partners’ offer for the Westlake Columbia Road medical facility and engage with them on their vision for acute care hospital and outpatient surgery center in downtown Lakewood..
- Pursue Claims Against LHA, CCF and LHA Trustees for the breaches.
Acceptance of the “deal” amounts to a self-serving burial of the failures of all of those involved. Any Council member who votes for such a corrupt “deal” will be breaching their own fiduciary duties and exposing City to severe financial losses and legal liabilities that are easily avoidable. They will be joining and supporting CCF's agenda.