Representatives of LifePoint, the company considering a partnership with Yuma Regional Medical Center, will be making its first presentation before the Hospital District No. 1 of Yuma County. The district, a government agency with elected board members, owns the land and facilities of the main hospital at Avenue A and 24th Street and leases them to YRMC.
Ahead of the presentation, the Yuma Sun spoke to the CEOs of LifePoint and YRMC to find out more about the potential joint venture. The Yuma Sun also reached out to community members concerned with what the proposed transaction would mean for patients and the community.
The YRMC Board of Directors has been exploring forming a joint venture with LifePoint, which operates 84 hospitals in 29 states, including three in Arizona: Canyon Vista Medical Center in Sierra Vista, Havasu Regional Medical Center in Lake Havasu City, and Valley View Medical Center in Fort Mohave.
In the joint venture, LifePoint would buy a majority percentage of the hospital while YRMC would maintain a minority percentage. However, the governance of the board would be 50% each.
“While Yuma will have a minority stake, the board felt it was important to maintain a degree of ownership in the hospital, although it’s a minority stake, but then we’ll have equal voice on the board,” said Dr. Robert Trenschel, CEO and president of YRMC.
LifePoint has committed to a $300 million investment over a span of 10 years. The transaction would also include the formation of a foundation with another $300 million dedicated to the community.
YRMC, which is currently a not-for-profit hospital, would become a for-profit organization. This means that the hospital would start paying taxes, which Trenschel noted, would support education, roads and schools in the community.
Some community members have raised concerns over the proposed joint venture. “I think it is a terrible idea to sell our community hospital,” said Ross Wait, who spent nine years on the Foundation of YRMC and nine years on the YRMC Operating Board, most of that time as secretary/treasurer. He also chaired the strategic planning committee and was vice chairman for several years.
“I know the value of YRMC to our community and having local control is imperative if we want to have any say in the hospital and it’s operations,” Wait told the Yuma Sun. “YRMC is critically close to being sold to a for-profit Wall Street hospital chain whose only concern is the bottom line period.”
One fear among some community members is due to the fact that LifePoint is owned by Apollo Global Management. “The thought of giving Apollo Global Management control of Yuma’s medical monopoly should strike terror in the hearts of every Yuma resident,” former hospital district board member Danny Bryant said.
He also expressed concerns that becoming a for-profit hospital will mean skyrocketing prices. “Make no mistake, a merger with any large organization will forever end the dream of having
a true community hospital,” he said.
YRMC first explored a partnership with a larger organization a few years ago, but the board at the time decided to remain independent. This time the board explored the possibility more in depth and hired an advisory firm to help with the process.
The firm “went to the entire market and hospital systems and asked, is this something you would be interested in, knowing what our financials, quality and operational metrics were,” Trenschel explained.
YRMC got a “robust” response back from many “high-quality” organizations across the country. The board took months to sift through the offers, keeping in mind certain objectives they wanted to achieve with a partnership. “For example, behavioral health was important for the board to grow and develop for the community, pediatric services, and the residency training program.”
After the board whittled down the number of offers, board members visited the entities that expressed interest, not only visiting hospitals but also talking with community leaders, physicians and staff “to see if what we’re being told is accurate,” Trenschel said.
In the end, the board landed on Lifepoint. “It was a cultural fit with our organization. The way they look at their staff, the way they treat their staff, the way they put an emphasis on quality healthcare, the way they focus on operational efficiencies, is very similar to how we do our work. From our board’s perspective, it was important there was a fit culturally first and foremost,” Trenschel noted.
From a business perspective, LifePoint also seems like the “strongest fit,” with shared values, operational metrics and many of the same approaches to how things are done, he added.
A group of about 30 YRMC physicians and members of the hospital leadership had also spoken on the phone with the finalists. They also felt LifePoint was the strongest fit, Trenschel said.
David Dill, LifePoint CEO, agreed on the “cultural fit,” pointing out “the shared commitment, the shared vision around improving care at the bedside. What came through loud and clear in discussions with the board and leadership of the hospital was commitment to keep care close to home and expanding core services. Behavioral health is a great example.”
LifePoint is “very excited” with the potential partnership, Dill said. “Our goal is to help take YRMC, which is a great health care system today, and with a broad range of experiences and additional resources, make it even more than it is today. And that doesn’t necessarily mean new buildings and new equipment, although it includes that, it really means improving our bedside. At our very core, that’s what our company means, committed to keeping care close to home through the lens of high quality and patient safety.”
Dill said that the LifePoint investment of $300 million is aimed at improving healthcare and service areas, with key investments in facilities, technology, equipment, employees and providers. “We listened to the leadership team in Yuma about where we need to spend the first early dollars,” Dill said.
Dill also addressed fears that the transaction will mean a loss of local control. “Our expectation is that the CEOs of our hospitals and the boards of our hospitals lead in the community. There will be decisions that we will make up here. As a large complex highly regulated company there are things we need to do at our support center, but the decisions of day-to-day caring for patients and employees and positions, those decisions will stay locally with the leadership team,” Dill said.
The YRMC board also felt the need to form a partnership with a larger organization due to the purchasing power and expertise. “There’s expertise in these larger organizations that we just don’t have here as an individual hospital,” Trenschel said. “Because you just don’t have the scale and scope to support it, but when you’re with larger organizations, they do have the scale and scope and expertise to support those kinds of initiatives.”
While YRMC is “doing well financially today, and we’re probably doing well financially for the next year or two,” as the cost of technology increases, the hospital can benefit from an affiliation with a larger organization, he noted.
Trenschel also noted that a partnership would allow the hospital to grow in the future and better serve patients by having access to the expertise available to the hospital.
“With COVID, it became very clear that the sharing of information and resources was very important,” Trenschel said.
LifePoint has committed to hiring all employees in good standing, with the current leadership remaining in place. “We anticipate everybody staying. We don’t anticipate changes in any of that,” Trenschel said.
YRMC also sees it as an opportunity to develop employees. A larger organization has more opportunities available for individuals to grow, not just in the local hospital, but across the LifePoint system, he added.
FORMING A FOUNDATION
A key factor that won over the YRMC board is the foundation that would be part of the transaction. With proceeds from the sale, YRMC would pay off its debts, including bonds, pensions and other debts. The remaining proceeds, along with profits from investments made over the years and money saved for a “rainy day,” will go toward a foundation to benefit the community.
“Once we have that paid off, what’s left over is really for the foundation, and that foundation is strictly for the community of Yuma. We feel very comfortable that it will be in excess of a $300 million foundation for the community of Yuma. I suspect it will be more than that. I suspect closer to five,” Trenschel said, stressing that it can’t be used for the hospital. “It can be used to advance healthcare in the community, with clinics, scholarships, and an assortment of things that can do for the community.”
Dill reiterated that the foundation funds cannot be used to purchase new equipment or buildings for the hospital. “We’ve gotten that taken care of.”
Addressing concerns that becoming a for-profit hospital will mean skyrocketing prices, Trenschel said, “LifePoint recognizes that healthcare in rural communities like ours is critical for the growth of the community and they’re going to want to continue to invest to help the community grow, and having affordable pricing is part of that.
“I can’t speak for LifePoint, but I suspect they would do the same because they realize what the importance is of keeping costs low. In fact, they highlighted that. That was one of our concerns, how do we maintain affordable pricing for the community,” he added.
Dill also addressed cost concerns around the for-profit status. “We are an investor-owned company. I like to say a taxpaying entity vs. a non taxpaying entity. I don’t like to think about it as for-profit or not-for-profit.”
As such, he added, “we’ll be a large taxpaying entity in the community,” supporting the city, county and state tax base. He noted that YRMC would become an economic engine and a large employer that recruits some of the “most top-paid and sophisticated talent.”
IN TALKS WITH HOSPITAL DISTRICT
The Hospital District has to approve a new lease with LifePoint. Wait fears that “now it appears the District Board and its members have crumbled and are in negotiations with YRMC to allow LifePoint to purchase YRMC and end any say in health care over to them and away from the community. That is a terrible idea.”
In spite of legal disputes between the Hospital District and YRMC, Trenschel said that the hospital district board members have been open to learning about the proposed joint venture. “The conversations have been cordial and open and the district has been open to listening to the facts and finding out more to what it means for them and for the community and patients,” he said.
However, Bryant objects to the residents of the hospital district not being asked whether they want this partnership, when they might prefer another organization, such as Banner Health, Dignity or Honor Health, “a true not-for-profit community minded hospital that really cares about the community and invests in lowering cost and increasing services. If the residents are heard and they don’t want to give up on the dream the answer is clear, no merger with anyone. The elected Hospital District Board would then be faced with evicting the current tenant and seeking a new not-for- profit operator.”
For this visit, the LifePoint team members will appear before the Hospital District Board on Wednesday at 5:30 p.m. at the Yuma Convention Center, 1440 W. Desert Hills Drive, in the Yuma Room.
Following this presentation, Dill said, “We plan to be more active in the community and meet with leaders and be visible in the right places and be transparent and able and willing to answer any questions that come whether at the district board meeting or smaller listening groups inside or outside the hospital.”
As for the transaction timeline, Dill said, “Every situation is different, every community is different, every transaction is different.” He noted that the industry is highly regulated and the transaction must receive federal and state approvals. If all goes as planned, the joint venture could become official within six months and at the latest into the new year and the first quarter of the next year.