Response to the Gaston Gazette Article

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November 20, 2012

Many of you have asked about the story in the Gazette. While we were not given the opportunity to participate in the story, we wanted to give you important facts the article failed to recognize:

  1.  CaroMont Health was not given the opportunity to participate in the story, we wanted to share important facts the article failed to recognize:
  • The County and CaroMont currently have a binding lease agreement which provides that the Hospital will pay $1 a year in rent to the County through 2035.  This type of arrangement is common in North Carolina and recognizes the County’s commitment to ensure that its citizens have a place to receive health care services in their own community.
  • The County has indicated that it now wants a fixed, seven-figure annual lease payment rather than the $1.00 per year agreed on in 1984.
  • It is important to note that the County received 74 acres in exchange for the $1.00 per year lease on the 88 acres that comprises the main CaroMont campus as part of a mutually beneficial exchange. Therefore, the County received a valuable asset in return for the agreement to lease property to CaroMont for $1.00 a year.
  1.  The story referenced CaroMont’s “unwillingness to negotiate is insulting.”  Actually, the CaroMont Board has been in discussions for well over a year.  In those discussions, the Lease Committee of the Board authorized an offer that included:
  • The addition of seven additional board positions in exchange for CaroMont making a much higher annual lease payment.  The proposal was to expand the current Board from 14 to 21 members (with 7 appointed by the Board of Directors and 14 appointed by the County Commissioners).

This offer was rejected by the County Commissioners.

  • In a show of good faith, the Board then asked the Audit and Finance Committee to determine how to make an additional, one-time goodwill payment of $750,000 to the County by December 31.  The intent was to express CaroMont’s understanding of and, desire to help with, the County’s financial position as well as our  willingness to continue negotiating in good faith.

This offer was rejected by the County Commissioners.

CaroMont also offered an outright purchase:

  • Purchase of CaroMont’s 88 acre campus with an estimated value of $12,856,448
    Reimbursement for campus improvements made by the County, valued at $2,900,000
    Purchase of 8.66 acres at the corner of New Hope and Court Drive, valued at $1,265,191
  • Additionally, CaroMont would remain bound to operate the hospital as a community hospital open to the public and to provide services to those patients who are unable to pay.
  • The County would retain the right to the property so that if CaroMont went out of business, the building, grounds and equipment associated with the Hospital would revert to the County.
  • This total offer to the County:  $17,021,639

This offer was rejected by the County Commissioners.

  1. The article also talked about board appointments.  We are very sorry to lose Dr. Crouch and Dr. Harris as Board members.  Having these two medical professionals on our Board was highly beneficial since the health care industry is highly complex and even more highly regulated.
  • The healthcare environment is fraught with complexity and multi-layered operating requirements, as well as an extremely difficult financial structure that requires a lot of time, attention and dedication.
  • While the County Commissioners are quoted as wanting Board members to represent the County and its’  citizens, Health care board members have a legal and fiduciary responsibility to act in the best interests of the organization and its patients—which is why board appointments must be carefully considered.  Board members cannot legally serve “two masters.”
  1. Commissioner Carpenter is quoted as criticizing the “astronomical” salaries at CaroMont when compared to the “struggles of the rest of the County.”
  • CaroMont calculates salaries for physicians, nurses, management and all other employees based in heath care industry ranges.
  • CaroMont carefully researches and documents salary trends in the industry and bases salaries on the market in which it operates.
  • We do not compete with the school system, the city or the county for personnel.  We compete with other medical systems to recruit the highly skilled personnel required to care for patients and operate a complex health care system.
  • A Board compensation committee oversees CaroMont’s compensation program to ensure that it is fair and equitable based on market data and comparable salaries offered in health care.
  • Our salaries are as competitive as possible but are not out of line with industry standards.
  • If we are not competitive in the market we will not attract the most highly skilled employees.
  • Our work is to heal the sick—to save lives.  This critical mission must be in the hands of highly skilled and competent people.
  1. Lastly, the article talked about the levels of charity care we provide as not being enough to offset the not-for-profit exemption from taxes:
  • First, the numbers used in the article were incorrect. The reporter used the same incorrect numbers referenced in his July article on this issue, which we communicated about at that time.
  • Income from operations in Fiscal Year 2012 was $20.9 million—not the $128 million stated in the article (we have not determined where this number came from).
  • Our annual bad debt total for the same fiscal year was $50.5 million—this is, of course, in addition to the $54.8 million we provided in charity care.
  • This combined total of $105.3 million places the Hospital’s contribution to the health of the citizens of Gaston County significantly above the national average for charity care and bad debt as a percentage of gross revenue, according to the American Hospital Association.
  • We pay $582,000 in annual property taxes for the physician offices and other properties we lease to be able to provide services.

Our intent and desire throughout this process has been to reach a mutually agreeable and beneficial agreement that includes a fair exchange between the County and CaroMont.

We want you to know that we are doing our best to negotiate a fair and equitable lease arrangement with the County and will keep you informed as this issue progresses.

 

Randall L. Kelley
President/CEO

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