Local Non-Profit Health System Throws in the Towel

Shannon Health System sold out yesterday to Triad Healthcare, a spin off from HCA in one of their past profit making machinations. Sure Shannon’s Len Mertz and Triad’s Dennis Shelton are selling the measure as a merger, but if approved, the bottom line shows San Angelo will cease to have a nonprofit community hospital in our midst. The 400 bed facility plans on changing stripes refitting its over 100 doctor physician clinic, emergency helicopter capable trauma center and 2,000 employees.

Why would this nonprofit with its rich history and substantial support from the Shannon Trust be taking such action? As a past employee, I expected Shannon to be the last to fall but it isn’t by a long shot. One serious look at the Bush healthcare tea leaves gives some indication. The number of uninsured has grown by some 7 million on the Bush watch to nearly 47 million people. This problem is particularly acute in West Texas as some 28% lack health insurance.

Bush’s signature program to stem the bleeding is a band aid on a lost limb. High deductible health plans combined with health savings accounts began in 2004 and in two years now cover 1.17 million people. From 2004 to 2005 the number of uninsured grew by 757,000.

With one third of companies not contributing one dollar to their employees HSA’s, medical debt for people under such plans has grown rapidly. Triad Healthcare, a party to the merger, reported disappointing earnings for the third quarter for this very reason, more unpaid medical bills. Companies like Triad have been known for limiting their exposure to such accounts, but any hospital with an emergency room is vulnerable.

The merger talk makes clear the new for-profit private entity will be 55% owned by Triad, despite their bringing fewer assets to the table. In their presentation Triad’s CEO noted the nonprofit nature of the Shannon Trust remains the same and that the hospital will still provide emergency care to indigents as is currently required by law. What Denny Shelton didn’t say is several measures have been proposed by members of Congress allowing hospitals to restrict access to any level of care based on unpaid bills.

While such proposals haven’t passed, Congress’ clear bias towards for-profit hospitals can be seen by the summer 2005 House Ways and Means Committee hearing on the unfair advantage community hospitals have as they don’t pay taxes. It happened that Chairman Bill Thomas received $30,000 in for-profit hospital donations in 2004, $15,000 of it from Triad Hospitals, Inc. The merger removes this concern in San Angelo as the new entity will pay local property taxes.

Having the merged entity as a privately held company shelters it from SEC reporting requirements. Behind this shadow, the public is unaware of key operational aspects. They don’t even have to make public their earnings. The 55% contribution to Triad will be rolled up into a division or company wide report so one can’t even extrapolate backwards as to its profitability.

Triad has clear expectations in that area. With the $38 million hit they just booked as increased self pay medical debt, they need to grow revenues and profits by adding facilities. Denny threw out a vision of keeping people home for care, thus growing the employee base over time. Yes, some wealthy folks go out of the area for cancer treatment and cardiac care, but most already stay home for care. As an asterisk he suggested any position reductions until that happened would “short term” in nature.

Triad will cut jobs and maybe even services to make up for their new $2 million local tax bill. Historically for-profit hospitals have fewer trauma designated facilities and air ambulances than their nonprofit counterparts as these are expensive. What will happen to Shannon’s AirMed?

So many questions popped into my mind as I read the article. What will happen to Legacy Health Insurance? The President’s plan has health insurers competing against each other while hospitals and doctors compete on price. What happens when there is only one entity for all this? With one local charge master, patients will need to check prices at out of town hospitals to fulfill the President’s vision (which runs contrary to Denny’s plans).

What happens to all Shannon’s Community Health and Wellness grants awarded to an integrated nonprofit community hospital system? Will the Feds take back their $3 million abstinence grant as the system becomes for-profit? Many awarding agencies only give to 501©3’s or nonprofits with similar status. The new entity will not be eligible for funds from the San Angelo Health Foundation. If the will isn’t changed, two foundations with roots as local nonprofit hospitals will have millions but no inpatient facility to support.

San Angelo’s Community Medical Center sold out to HCA in 1995 as then CEO Robert Butler didn’t have a vision for managed care. Now our Shannon Health System is selling out because it doesn’t have the will to endure the Bush health care “blanket party” while remaining true to its mission. Asking the court to amend the will of J.M and Margaret Shannon seems strange. If the Shannon’s could talk with us now, what would they say? Would they be surprised that health care in the U.S. is returning to the pioneering days where people are left to struggle on their own, saddled with high medical bills they can’t afford?

The other question is what will the community of San Angelo do? This is the third time a nonprofit hospital sold out. St. John’s did so in the early 1990’s when it sold to Quorum Health Group, the proceeds went to the Sisters of Charity of the Incarnate Word of San Antonio. I worked for Quorum in Atlanta, Georgia at the time. Community’s sale funded the San Angelo Health Foundation which has done much good but is limited in the health care uses of its significant financial assets. Now another community asset is slated for transformation. How will our community truly benefit? While the deal is a rational response to the Bush health care agenda, it’s hard to see from here how San Angelo and West Texas will benefit.

When Dr. Dan Stultz took the job as President of the Texas Hospital Association, I took heart that he would be fighting for nonprofit community hospitals on a statewide basis. Little did I know we wouldn’t have any left in San Angelo.