South Charlotte

CHS closer to lease in Union

Union County moved closer last week to finalizing a new lease for Carolinas HealthCare System to run the county-owned hospital in Monroe for the next half century.

The trend in the healthcare industry is for consolidation as standalone community hospitals look to partner with bigger systems, in part to ensure adequate access to capital, according to Kaufman Hall. CHS, the third largest public hospital system in the country, is based in Charlotte and has more than 30 affiliated hospitals in the Carolinas.

During a nearly two-hour meeting, consultants Kaufman Hall updated county commissioners on negotiations with CHS. They detailed significant changes from the current set up, moves that also will make it easier for CHS to proceed with long-delayed plans of opening an emergency department in Waxhaw.

Under terms being discussed, the county would still own the hospital. Instead of being a standalone operation, it would become part of the CHS system. That means all facets of the hospital, from employees to clinical work, would be part of the healthcare giant and going forward, it would not be CMC-Union money that is invested in the hospital but CHS funds.

"They take the risk and they get the reward," said Mike Finnerty, senior vice president at Kaufman Hall.

Such a set-up also would allow CHS to complete funding needed to open the Waxhaw site, which had been held up because commissioners, under the current arrangement, had not authorized the money from CMC-Union cash reserves needed to complete the work.

CHS would be able to cover such expenses under the new arrangement, County Manager Cindy Coto said. CHS initially intended to have the Waxhaw site leased and operated by CMC-Union.

At the end of last week's meeting, commissioners gave the go-ahead for their attorneys and Kaufman Hall to try to negotiate a final lease agreement. That could take 45-60 days, Finnerty said.

The existing 25-year lease for CHS to run CMC-Union runs to August 2020.

The prior board majority had considered selling the hospital, which could have generated much-needed funds for the county. The current three-member majority, which was elected last fall, had promised not to sell the facility.

At the end of the proposed 50-year lease period for CMC-Union, the county would have the option to sell the hospital to CHS, renew the lease or end it and pay CHS for everything it put into the facility.

Dennis Phillips, CHS executive vice president, said after the commissioners meeting that CHS has made progress during "open and transparent communication" with Kaufman Hall.

The current lease calls for the county to receive annual lease payments of $1.4 million or 10 percent of operating cash flow plus 7.5 percent of investment income, whichever is greater.

The new lease would have the county receive $6.1 million in annual payments, and a one-time payment of $54 million from cash on hand from the hospital balance sheet, which would be paid at the closing of the new lease.