Manatee indigent health care trust fund: wisely spent or squandered?

skennedy@bradenton.comMay 26, 2013 

Ed note: First in an occasional series of reports leading up to the special election June 18.

By SARA KENNEDY

skennedy@bradenton.com

MANATEE -- The year was 1983 and the chief of the medical staff at Manatee Memorial Hospital was applying for staff privileges at a competing hospital.

His doctors were fleeing Manatee Memorial, which was running low on patients. They preferred what is now called Blake Medical Center, a newer hospital.

Bradenton's publicly owned hospital needed renovation, and the county didn't have the money, so officials began looking for a buyer.

They found a suitor in nonprofit Baptist Hospitals and Health Systems, of Phoenix, which in 1984 paid $44,264,075 for the venerable hospital located at U.S. Highway 301 and Manatee Avenue.

The money from the sale went into a health care trust fund.

Up to 75 percent of the interest earned on proceeds from the sale, or $3,576,789 in the first year, went toward health care for indigent patients.

The remaining interest was to be put back into the fund used for other health-related programs. By 2002, the fund balance had risen to a high of $61 million, according to a county spreadsheet charting the health care trust fund's entire 29-year history.

But by January 2012, it was down to $35.4 million. After the county spent more than $9.7 million -- and took in interest and other income - the fund's balance was $27 million at the end of the year.

County Administrator Ed Hunzeker expects the money will be exhausted by 2015, which has prompted a voter referendum June 18 to decide whether to approve a half-cent sales tax increase to continue medical care for the poor.

The special election has inspired a noisy debate: Was the money earned from the hospital sale spent wisely over the years, or squandered? Is a tax hike necessary and, if so, how should its proceeds be spent?

If the sales tax increase is approved by voters, the specifics of how the new revenue -- estimated at $23 million a year -- would be spent on health care has not been determined.

"The only Board-approved

decision was rolled out on April 9 in the Indigent Health Plan 2013," county spokesman Nick Azzara wrote in an e-mail Friday, referring to a seven-page document. "Beyond that, there will be an opportunity for a collaborative approach to providing care and there will be a process developed for receiving those proposals.

"Staff will continue to work with the stakeholders in developing the best possible process moving forward, looking at evidence-based practices and successful models from other communities as we shift from an emergency-room centric approach to a patient-centered model," Azzara's email stated.

Economy, care drained fund

From the first year until 2007 -- 23 years -- the health care fund did well under the supervision of R.B. "Chips" Shore, the Manatee County clerk of the circuit court and comptroller.

In 1994, the hospital was sold again to what is now for-profit Universal Health Services Inc., of King of Prussia, Pa.

The health care trust fund continued to perform well, reaching its high point in 2001-02 with a balance of $61 million and paying $2.4 million to Manatee Memorial for indigent care.

In 2007, it showed a balance of $57.4 million.

But it was in 2008 that the Manatee County Commission, in the grip of a severe recession, dissolved the original fund and transferred its monies to another entity.

The commission invaded its principal, increased the payout for hospital care, and took other actions that led to a dramatically faster depletion.

By early 2013, the successor account to the health care trust fund showed a balance of $27,028,846, generating $27,050 in interest.

"Interest rates started crashing, so we had to open it up to the principal because the markets went down, and we couldn't live off the interest anymore," said County Commissioner Carol Whitmore. "The commission did that, and also opened it to all three hospitals because it made no sense" to exclude Lakewood Ranch Regional Medical Center and Blake Medical Center.

The board also expanded health care to the poor, Whitmore said. That included providing dialysis, palliative chemotherapy and IV antibiotics, the latter to ensure other hospital patients would not be infected with highly contagious illnesses.

"The economy went into free fall, and the demand went up," Hunzeker said.

Some suggest that the money should have lasted indefinitely; others contend it did its job and there's no need for blame. Interviews with those who were part of Manatee's health care community at the time paint distinctly different pictures.

"What saddens me is that we sold our hospital, and by the end of 2015, when because of a very poor decision made in 2008, we will have dissipated, in essence, $80 million in financial strength from the sale of our hospital," said Dr. Richard Conard, the retired founder of what is now Blake Hospital Center, who opposes the sales tax increase. "If the money had been left in trust, we wouldn't have this problem today."

He contends that the county's decision to begin spending the trust fund's principal was a turning point away from decades of economic stability.

Agreeing with Conard is Steve Vernon, president of Tea Party Manatee, who also opposes the sales surtax.

He contends the recent slide toward depletion "was a planned bankruptcy -- they essentially wanted to drain all the funds they possibly could as fast as they could in order to get more revenues and in a broader fashion be able to use those revenues to pay for 'health care services.'"

Others say the money was carefully monitored, wisely invested, and had lasted longer than anyone could have expected. "There was anticipation as the county grew, maybe those funds would not suffice forever, but I think they lasted a long time and did a lot of good, and also were used for capital projects," said Ray Fusco, chief operating officer for Manatee County Rural Health Services. "When the recession hit, it really killed the interest rate.

"Nothing lasts forever, and I wasn't in the room making the decision, obviously," said Fusco, who said the nonprofit he works for treats 90,000 patients a year, more than one-third of whom are uninsured. "When the hospital was sold, the population of Manatee was under 200,000; now, it's almost 350,000 or something. It hit bad economic times.

"I'm surprised it lasted that long," said Fusco, who supports the sales surtax proposal.

In 2009, county officials approved covering expanded psychiatric and outpatient services for indigent patients, a move that "likely will deplete its indigent health-care trust fund even faster," the Bradenton Herald reported at the time.

Officials estimated then the changes would cost the county more than $353,000 annually, meaning the trust fund could run out of money up to six months earlier than its projected depletion in 2015.

But the majority of commissioners voted for expanded coverage because they believed it was needed to help uninsured patients and the hospitals they were flooding.

Manatee Memorial Hospital provided an estimated $70 million in indigent care annually, of which only $5.6 million was reimbursed by the county, according to the archives.

The county official who currently handles the matter, Brenda Rogers, director of the county community services department, was out last week and unavailable for interviews, Azzara said.

Last year, she told commissioners that the fund established in 2008, with the dissolution of the original health care trust fund, was almost out of money to cover emergency room costs for uninsured and indigent patients.

From charts and graphs, Rogers showed then that if spending continued at the current rate, the fund would be used up by 2015, emphasizing that if the commission wanted to continue the program, it would need to come up with other funding.

Rogers also reported on a health care task force that found those without access to health care insurance were using the more expensive hospital emergency room services for problems better handled at a walk-in clinic or by a family physician.

Such emergency room visits had placed a financial burden on the hospitals in the county, even despite reimbursements from the county: The fund had about $26.5 million budgeted for 2012 expenses, and with annual expenses of about $9.5 million, the monies would be depleted by 2015.

In 2011, the county signed a three-year agreement with Manatee Healthcare System, which operates Manatee Memorial and its affiliate, Lakewood Ranch Regional Medical Center, and Blake Medical Center for indigent care estimated up to $9,033,820 annually, which included two hospital contracts and up to $1 million per year for physician payments, according to an agenda memorandum from the commission dated June 21, 2011. A letter in county records from Manatee Memorial's chief executive officer, Kevin DiLallo, said that "the heightened unemployment rate, depressed average wage and the lack of affordable insurance continues to shift more of the burden of care onto the shoulders of government and providers."

Although the burden is something the hospital "can ill afford," he said it recognizes that providing "almost $30 million in free hospital services a year alone is not enough: We must also make certain that we can attract quality physicians to our community that are able to bear the expense of providing services to the indigent, to that end, we will continue to provide financial support to alleviate their concerns."

Sara Kennedy, Herald reporter, can be reached at 941-745-7031. Follow her on Twitter @sarawrites.

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