What I see is an elected official in deep denial: How much is a money losing community hospital worth?

And how much federal tax money will have been pissed away on construction that will never fetch more than 20 cents on the dollar in the real estate market.

Lafontaine: Selling hospital is ‘not viable’ ~ Dwayne Bremer

Last month, a consultant told the Hancock County Hospital Board that he believed HMC was worth between $14 million to $22 million.

Hancock County Board of Supervisors President Blaine Lafontaine said Friday that he believes that number is “very low.”

According to Lafontaine, HMC received much more than $22 million from the federal government to rebuild the hospital.

“I don’t have the exact figures, but it could be between $80 million to $100 million,” Lafontaine said. “Selling the hospital is not a viable option at this time. Our conversation needs to be on how to enhance the hospital.”

The truth is $14 million may be too high when you factor in the consistency of the 15% operating losses which can’t be sustained unless one subscribes to the Mayor Fillingame theory of economics. Further, any valuation that is a function of earnings or cash flow indicate a money losing business is worth exactly zero. Worse is the fact the supervisors are fooling themselves thinking the problem can be solved by growing the population of the county.

Phillips said research shows that Hancock Medical has made several improvements under Ochsner, but it is still operating at a 15 percent operating loss per year.

Lafontaine said he believes the hospital has made improvements and there is additional room for improvement.

One area of optimism, he said, is that Hancock County has been experiencing a tremendous amount of residential growth.

Readers of Slabbed, having been through our coverage of the Singing River Hospital Meltdown and the long term lease process of one of the two Jefferson Parish Public Hospitals, understand the economic headwinds facing Hancock Medical Center derive from the Affordable Care Act, which is forcing consolidation in several areas of the health care sector of the economy including Hospitals. In business slang, you either merge or die. What is happening in Hancock County is not unique despite what the locals may think and unless the Supervisors are willing to begin levying taxes to support a money losing Hospital only bankruptcy can forestall the inevitable.

Finally the number one complaint I’ve heard out of the hospital involve the number of politically connected employees that still over staff certain areas of the operations. I get the feeling though that even if every deadhead position were eliminated, the Hospital would still lose money.

The bottom line is there is no quick fix to this problem. If the Sups did some homework I think they’ll end up in the same place locales like Jefferson Parish did and will negotiate a long term lease with a qualified Hospital operator. The partnership with Ochsner gives everyone in Hancock County access to one of the finest health care systems in this area. I’d personally carefully weigh my options before torching that business relationship.

2 thoughts on “What I see is an elected official in deep denial: How much is a money losing community hospital worth?”

  1. Doug,
    Good insight. We have to look at this even further, as far as tax dollars go. We may be funding the wrong things with tax dollars.
    We fund the following through County and City (Diamondhead, Waveland, Bay Saint Louis) Tax Dollars. The people living in municipalities are double dipped because they pay county taxes and get no special benefits paying through the city:

    Libraries: BSL alone $330K
    Tourism: BSL alone $20K
    Animal Control
    The list is longer but you get the point.
    Now the Chamber of Commerce is coming back to BSL for Funding, $9000 annual to join Diamondhead and Waveland. We already support them through the County Taxes and Port Authority.

    The bottom line is we do have cash to help our hospital but we keep giving it to 501C3’s through multiple sources from the same people. We need to prioritize where our money is needed. If you are convinced that these organizations are worthy as a politician, give them your personal money. Remember that the politicians get free tickets, meals and other perks for giving our money away.
    Let’s fund the important things. We cannot grow as a city or county without a local hospital. Public Safety and Health Care are primary to growth as a community not specialty groups who can’t quantify what they do!

  2. Attention Hancock County: Wake up and pay attention. You are about to lose your local hospital, which I’m sure is appraised for at least $50M, to Ochsner Health System who will pay a grand total of $12.5M. That’s one hell of a bargain and no one seems to be concerned about it. Recent articles in the Sea Coast Echo indicate Ochsner will be investing $32M+ over the course of 25 years in a lease/purchase agreement. That number looks great, but let’s not kid our ourselves folks – Hancock County will only receive a total of $12.5M cash in hand for something that has a total value of at least $50M. The difference in $32M and $12.5M is what Ochsner will be investing in capital improvements in the facility. While the number sounds good, they will ultimately be “investing” in themselves, and Hancock County will have giving away a lot of tax payer money. So their capital improvements will only serve to make them more money, because let’s face it, the hospital itself is essentially new.

    Think of it this way: When you lease a car, you pay a set amount over the course of the lease, and if you choose to purchase the vehicle at the conclusion of the lease, you do so. If you choose to invest in the capital of the vehicle (by purchasing a high dollar sound system, tinting the windows, adding a lift kit, etc); the lease company gets no more money for those investments UNLESS you decide not to purchase the vehicle and return it to the lease company. At that point, the lease company would have received what you paid them PLUS the money you invested in the capital of the vehicle. Same is true for your hospital. The only way for Hancock County tax payers to see $32M would be for Ochsner Health System to give it back after 25 years, which is obviously not going to happen. So they are basically paying $12.5M for a hospital. A hospital with no debt, lots of assets, virtually brand new, etc. What is that $12.5M going to be spent on? It’s sad that the elected officials in Hancock County will look for any way possible to get their hands on more money, to spend on things that we the tax payers may not necessarily want to spend it on.

    For David Yarborough to sit up there and say it is time for Hancock County to get out of the business of healthcare, tells me that he and others have obviously been bought off by Ochsner Health System. For no one other than Scotty Adam to question the fact that of 90+ bids, only 1 person responded, tells me that the others did not want to question the odd circumstances – or they were paid not to question the odd circumstances. Mr. Yarborough is correct, Hancock County Board of Supervisors has no business being in healthcare and they never have. It’s obvious in some of the people that he has appointed to the hospital board that he has chosen to have no concern for Hancock Medical Center or its employees.

    Fact is, Ochsner Health System has done nothing for Hancock County and Hancock Medical Center has continued to fail under their management for the last four years. Ochsner Health System has intentionally allowed this to happen, so they could acquire Hancock Medical Center at the lowest cost possible. Their strategy has been pretty apparent from Day 1 and people on the Board of Trustees and Board of Supervisors have turned a blind eye to the hospital’s mismanagement. It infuriates me (and many others) that no one sees the real deal here.

    For the Board of Supervisors to sit up there and say “sure, we may lose a few jobs” – let’s hope everyone understand what that means. That means Ochsner will be bringing their people in to operate this hospital, and our people (our Hancock County people that is) will be looking for employment elsewhere. They won’t be contributing to the incomes of tax payers in Hancock County. They won’t be creating jobs for the people who have worked at this hospital for so long. They won’t be too concerned about what happens in their aftermath. That also means that the people who have worked for Hancock Medical Center – those that worked in the state retirement system – may not be able to retire despite many years of service to Hancock County. People better wake up and realize that if they can do this to their hospital, what is to stop them from doing this to others in city/county government. And I know the argument here – They won’t “lose” their retirement, it will still be there for them when they reach the right age.” Well that is a load of crap. People who set out on a path towards retirement may find that retirement delayed by 5 or 10 years because they won’t reach that magic age until they have worked much longer than originally planned.

    Lots of rumors are spurring that Blaine Lafontaine and Gary Yarborough screwed up many deals with various other groups, the biggest being with the University of Mississippi Medical Center. Why would they be willing to do that? Could it be because they too are in the pockets of Ochsner Health System? I can remember way back when, rumors were that UMMC wasn’t operating at the speed the Board of Supervisors wanted them to operate. Well, look where we are now. This deal has been postponed to November 1st (and possibly even later than that). So for the sake of a month, they passed on a Mississippi institution for Ochsner Health System. I wonder why!

    All of these watchdog groups in Hancock County have failed to put this on the radar. All of these watchdog groups in Hancock County need to pay attention to what transpired two weeks ago and what is going to take place on Monday. Hancock County is about to lose it hometown hospital, which Mr. Yarborough indicated was seeing positive cash flow for the first time in years. If that is the case, why now? Oh wait, that positive cash flow thing was likely a maneuver by Ochsner in 2016 to demonstrate proper management of the hospital, but from what I know, they were broke then and they are broke now. So positive cash flow in 2016 (as we get ready for this bid process) overshadows the deficit in 2017 (as we are in the bid process) only when it is convenient? Ochsner knows how to play poker and it appears that they have swindled Hancock County – hook, line and sinker.

    I hope that all voters pay attention to this foolishness and pay it forward, next election year when it comes time to reelect the five members of the Board of Stupervisors. You can thank your county representatives for giving away at a minimum $37.5M of taxpayer capital to Ochsner Health System. Damn, that’s one hell of a deal.

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