Special Report: Hospital District Election — How Somervell County got into the hospital business

Photo courtesy of Glen Rose Medical Center

Photo courtesy of Glen Rose Medical Center

Second in a series

By Kathryn Jones

Editor

A lot of people in Somervell County get emotional when they talk about Glen Rose Medical Center. Some residents were born at the hospital back when babies still were delivered there.

Others have loved ones whose lives were saved or improved, they believe, because of the medical care they received locally. For them, the hospital is part of their personal history.

The medical center also is part of Glen Rose’s history going all the way back to the early settlement at Barnard’s Mill, which was the site of the town’s first hospital.

The hospital district election set for this Saturday, May 11, has become an emotional — and financial — issue for many taxpayers as well. This will be the second time voters will go to the polls to determine whether they want another taxing district to take over hospital operations from the county. The previous hospital district election, in 2009, resulted in the proposal voted down by a 2-1 margin. The medical center ended up back in the county’s hands.

While he was county attorney, Ron Hankins, who retired at the end of 2012, compiled a history of the county’s ownership of the hospital. That began in 1990 when the county purchased the hospital from Harris Methodist Affiliated Hospitals. This article is based on Hankins’ records in addition to independent reporting.

 ‘Healing waters’ draw patients to town

The hospital’s roots go back more than a century earlier with the arrival of pioneer Charles Barnard around 1847. He built Barnard’s Mill on the banks of the Paluxy River. In 1874, he sold the mill to T.C. Jordan of Dallas, who began constructing the county’s first courthouse.

According to a history of the mill prepared by the Somervell History Foundation, financial problems forced Jordan to sell the property to A.J. Price, who operated the mill and added a cotton gin. After Price died, his wife and son sold the property to Dr. John James Hanna in 1943.

Glen Rose’s “healing waters” with a high mineral content attracted visitors with health problems and Dr. Hanna turned the mill into a clinic. His daughter, Mildred, also a doctor, joined him and they expanded the practice, added an operating room and delivering babies.

“By 1949 it was a full service hospital,” the history foundation reported. “Dr. Roger Marks joined the staff in 1949 and then Dr. Robert D. English. Several other doctors passed through the hospital during these few years.”

After Dr. Hanna and his daughter died, Dr. Marks and Dr. English bought it in 1955. The medical facility was called the Marks-English Clinic & Hospital. Soon it had outgrown its location and the doctors planned a new hospital and nursing facility on the site of what is today the grounds of Glen Rose Medical Center.

A partner murdered

The new facility was under construction in September 1970s when Dr. English was shot to death while he was sitting in his car parked beside the First Baptist Church (what is now the First Methodist Church’s Family Center). He died minutes later at the local hospital that bore his name.

James Copeland Howard was arrested and charged with murder with malice. Howard’s estranged wife and sons had been staying at the English home for about a month.

Dr. English would have been an associate of Dr. Marks in operating the new hospital under a lease-purchase agreement with the Glen Rose Industrial Foundation, which built the project.

When the medical center was completed, Dr. Marks and Dr. Gerald Cope, the new doctor in partnership with Dr. Marks, cut the ribbon, along with Wylie Lilly, president of the Glen Rose Industrial Foundation. The complex included the Marks-English Hospital Inc., Glen Rose Nursing Home Inc. and Drs. Marks-English & Associates Clinic.

“The complex is designed to take care of most diagnostic, emergency and regular medical needs of this community and includes x-ray equipment and an emergency room that will provide for minor surgery,” according to a local newspaper account of the medical center opening. “Two rooms in the hospital have coronary monitoring devices for treatment of heart cases and oxygen is available in all hospital rooms.”

 The county takes over

Harris Methodist Affiliated Hospitals (now Texas Health Harris Methodist Hospital Alliance) based in Fort Worth was acquiring rural hospitals and in the 1980s its sights fell on Glen Rose. Harris Methodist acquired Glen Rose Medical Center but ran into financial problems in its rural markets and began closing some of the hospitals, including one in nearby Hamilton (citizens there subsequently raised the funds to reopen it).

In 1990 Harris Methodist Affiliated Hospitals sold the medical center to Somervell County.

“At the time of the purchase of the hospital, Harris was ‘threatening’ to shut down the hospital due to its operating at a continual loss,” Hankins wrote in his history

Unlike other counties, Somervell had a large tax base from the Comanche Peak Nuclear Power Plant and had the resources to buy the hospital from Harris. An agreement was reached for the county to purchase the hospital, pay to expand and update it and then lease it back to Harris. The county also agreed to pay Harris in advance for projected losses. If the losses differed from the projections, the parties would “settle up” at the end of the year, Hankins recalled.

The problem was that the hospital lease did not include a “proposal procedure” as required by the Texas Health and Safety Code.

When Hankins took office on Jan. 1, 1993, he looked into the lease’s legality and didn’t like what he saw.

“I determined it was not done in accordance with the requirements of the law, and proceedings were undertaken to correct that mistake,” he said.

During fiscal year 1992, the county paid Harris a management fee of almost $1.2 million. After the lease was terminated in October 1993, another lease – this time following the procedures – was signed with Warren Health Care. It turned the hospital around financially and in 1998 received a management fee of $359,230, according to Hankins’ history.

With the hospital finally began operating at a small profit, in September 2001 the health care company’s owner, Bill Warren, turned the hospital’s operation back over to the county. The county operated the hospital for the next two years through the Somervell County Health Care Authority without an outside management company.

 Deregulation

However, forces beyond the county’s control were lurking in the form of electric industry deregulation. According to Hankins’ history, in 2003 the devaluation of Comanche Peak drove county commissioners to seek an alternative to subsidizing the hospital with county tax dollars.

“It was subsequently determined that the method of doing this would be best accomplished by the Hospital (Health Care) Authority leasing the hospital to a non-profit corporation created specifically to operate the hospital,” Hankins wrote.

That was the beginning of the Glen Rose Medical Foundation, which leased the hospital operations on Oct. 1, 2003, for $1 a year. The lease terms were for five years with an automatic extension of an additional five years.

In exchange for the lease, the foundation agreed to “certain financial covenants, one of which was to ‘cover’ any indigent health care not paid for by the county,” Hankins wrote.

In 2007 the foundation board determined the hospital needed to expand. There wasn’t enough room for medical records, the laboratory or the emergency room, which had seen steep increases in visits.  Between 1992 and 2005, ER visits to GRMC soared 247 percent, according to Hankins’ history.

A loan program was identified through the U.S. Department of Agriculture, but it could not provide all of the funds needed for expansion. A local bank agreed to loan the money if Somervell County co-signed the note, which it could not do because the Texas Constitution prohibited government entities from “lending its credit.”

With the USDA loan possibility dead, the commissioners decided the best way to finance the expansion was to issue Certificates of Obligation. The $14 million generated by the certificates was handled by the county and used only for the expansion project. As of January 2010, just under $1 million was left in the fund account, Hankins said.

The county did not want to continue provide a subsidy, so in 2008 the county and foundation amended their lease agreement. Under the change, the foundation agreed to repay to the county the amount of Certificates of Obligation over a period of 28 years.

“This was done in order to make the foundation’s ability to make the payments more reasonable,” Hankins said.

About the same time, Dr. Mark Schneider decided to close his practice at the hospital. It was a financial blow because physicians are revenue generators for hospitals and Dr. Schneider’s practice had generated about $8 million in gross revenue for GRMC. Another doctor was found to replace Dr. Schneider, but some patients didn’t stay with GRMC and revenue was lost.

Compounding the financial pressure was a sharp increase in the number of uninsured and underinsured patients. By 2008, the hospital saw a 40 percent increase, or $1 million, in bad debt.

The foundation began worrying about its ability to make the first payment due to the county on the Certificates of Obligation repayment plan, Hankins noted. The monthly amount came to $62,500, or $750,000 a year.

Hospital district voted down

Forming a hospital district was put on the ballot in 2009. The goal, Hankins recalled, was “to preserve the local hospital for the use and benefit of the residents of Somervell County and to keep it in a condition that will allow the provision of ‘first class’ healthcare at the most reasonable cost to the average taxpayer.”

Voters, however, resoundingly defeated the hospital district. In September 2009 the foundation told the county it was not going to be able to make its payments. Seeing no other options, the county recreated a hospital authority and transferred operations from the foundation to the authority at midnight on Dec. 31, 2009.

“The new hospital authority has pledged that it will look at all reasonable avenues, which may be available to operate hospital at the highest level of care, but at the lowest cost to taxpayers of the county,” Hankins wrote in the concluding sentence of his history.

In the years that the hospital authority has overseen operations, GRMC had continued to operate at a loss. Gary Marks, son of Dr. Roger Marks, retired as chief executive in November 2011 and former chief financial officer Ray Reynolds was named to succeed him after the authority board conducted a search.

Last year the Somervell County Commissioners Court again began exploring options about what to do with the medical center. Advocates for a hospital district began floating the idea around town and a group of supporters held discussions. Physicians made a video about their future “wish list” for the medical center and in support of a hospital district.

In July the commissioners court invited speakers to discuss the medical center’s future and how to keep it viable. David Orcutt, chief executive of Lake Granbury Medical Center, discussed the benefits of a possible partnership. Community Health Systems, a for-profit corporation, owns the Granbury medical facility.

Orcutt said Lake Granbury would be interested in a 30-year lease of GRMC with a 10-year extension. But County Judge Mike Ford said he was concerned that Lake Granbury would try to direct patient traffic in its direction under such an arrangement.

Orcutt acknowledged he had heard about citizens’ “fear of closing the hospital,” but said it “just makes sense to keep the hospital going” and that Lake Granbury and Community Health Systems had resources to help the hospital and their intention was to keep it open, not shut it down.

This year a political action committee was formed to get the hospital district before the voters again. Enough citizens signed a petition to force a vote on the issue. A group of opponents calling themselves the Somervell County Anti-Tax Brigade has been running advertisements in a local newspaper each week listing reasons why voters should defeat the proposal. The hospital district PAC has been mailing brochures to registered voters and placing phone calls to rally support. Early voting for the election ended Tuesday.

One financial headache has been removed from GRMC’s business. Last year the medical center reached a lease agreement with Rick Villa and Brian Thomas to operate Glen Rose Nursing Home. They took over on Jan. 1 and pay $26,000 a month to GRMC for the lease. The new owners have spruced up the facility and, knowledgeable sources say, they expect the operation will turn a profit.

Reynolds said the hospital itself still struggles to break even each month.

Third in the series (to be published Thursday, May 9) : Rural communities grapple with keeping hospitals open. We look at what happened in Hamilton, Breckenridge and other communities. 

Fourth in the series (to be published Friday, May 10): Options for the future

2 Responses to Special Report: Hospital District Election — How Somervell County got into the hospital business

  1. Larry P. Smith Reply

    May 9, 2013 at 6:08 am

    Excellent unbiased reporting.

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