A sad day for Lee and Fayette County: St. Marks Medical Center is set for closure

On 5:30 PM Tuesday, HCOE informed the Board of Directors of SMMC that HCOE would stand down in our proposal to execute a corporate member substitution and save St Mark’s Medical Center. The HCOE team has invested over 1,300 documented hours to prepare to take over as the single member of St Mark’s since May 12th when we formed HCOE. This does not include the time invested by the dedicated staff at SMMC and CHC supporting the due diligence effort to find a viable solution. We worked through 155 contracts and over 3,681 individual documents supplied as part of the due diligence effort. We have identified and were prepared to immediately contract with the employee benefits provider, expert medical consultants, the 401k/403b retirement plan fiduciary, insurance providers, information technology consultants, and leasing specialists. We have published a comprehensive 36-page business plan, a 16-page staffing plan, and a 5-year financial pro forma to model impacts of operational changes. Make no mistake, our plan represented a comprehensive restart of the hospital. The Corporate Member Substitution would have substituted CHC, the management entity of the past 12 years, with HCOE and with that CHC would have had no continuing input to management of the hospital. The HCOE plan included recruitment of a completely new management team. The transfer agreement also required the 10 nominated board members to resign immediately, and HCOE would have convened a new board, with a full commitment to transparency and engagement in our community. HCOE would have implemented operational changes that start with a new organizational structure. As soon as practical we would have brought back needed outpatient surgery, orthopedics, endoscopy, and noninvasive cardiac procedures with advanced diagnostics. And we already have a signed letter of intent to lease a significant portion of the hospital’s 100 wing for a critically needed psychiatric diversion center.

Essentially the only portion of St Mark’s that would not have undergone change is the national payor numbers and the managed care contracts critical to ongoing operations, and the dedicated and passionate staff that have remained steadfast in their duties during these troubled times. The Housing and Urban Development‘s Office of Hospital Facilities oversee the hospital mortgage and had to approve this member substitution. They do not grant that approval without their own due diligence as they have a $12.1 million investment at stake. HCOE submitted extensive documentation including our resumes and professional experience. HUD has conducted background and Individual credit checks. After two full months of review and an ongoing weekly dialogue, HUD’s Office of Hospital Facilities has agreed to grant approval. With regard to funding, HCOE has spoken with over 150 businesses and individuals. We have approached the heads of the largest employers in the county, we have engaged Federal, State, County and City leadership, and we have spoken with nine local banks covering Lee and Fayette counties. We approached the Medical Office Building owners who were unwilling to become a partner in ongoing hospital operations with a reasonable fair market value investment in St Mark’s in exchange for the ground lease under their building as well as land immediately adjacent to their facility. We also approached over a dozen investment banks and private healthcare related investors, as well as St David’s HealthCare. In the end only the State Health and Human Services (HSSC), the city EDC, the SMMC Charitable Foundation and 19 individuals in the entirety of Fayette County, the 7th ranked highest net worth county in Texas, would rise to the occasion to help secure the future of the hospital. The Fayette County leaders, who should have a priority focus on helping to preserve this important county asset, with the exception of a select few, have been notably absent from support of the effort. And the La Grange City Council, when presented with the last remaining funding component request, a $1.5 million loan guarantee, tabled the agenda item as a result of a closed meeting we believe in violation of the State of Texas Open Meetings Act, Section 551.071, successfully ending HCOE’s efforts. In the end HCOE was able to secure commitments for $5.3 million in capital, pending the city guarantee. This is additive to the REH facility fee of $3.3 million, $600,000 in annual Uncompensated Care advance funding, almost $500,000 in Uncompensated Care payment deferment from the State Health and Human Services Commission (HSSC), increases in State and Federal Medicare and Medicaid reimbursement, and the hospitals cash on hand. This funding would have resulted in an unprecedented level of funding of over $10 million dollars for hospital operations. Funding sufficient to ensure long term viability of St Marks Medical Center. We at HCOE thank St Mark’s Board and CHC for their contributions to the due diligence effort. We recognize and thank the dedicated and passionate staff that have remained steadfast in their important jobs, some for decades, only to learn that their dedication will not be recognized by our community with continued hospital operations. Finally, we thank the myriad community members, too many to name, that did engage with HCOE to support our efforts. It is with a heavy heart and a grave concern for the future of healthcare and the related economic fallout for all of our residents, that we found ourselves with no option but to stand down and let fate plow its course.