Bay Med trustees to vote Friday on lease

PANAMA CITY — The Bay Medical Center Board of Trustees votes Friday on the lease of the hospital that would effectively change local health care for decades.

If approved, the 40-year lease with two 10-year extensions would require a vote by the Bay County Commission before the hospital could transfer from public, not-for-profit status to private, for-profit status run by joint venture partners LHP Hospital Group and Sacred Heart Health System.

Bay Medical Center officials have been working for nearly a year to find a solution to provide capital and care while facing health care budget cuts, rising interest rates and increasing charity care. The joint venture idea was proposed several months ago and county commissioners have worked to catch up since the announcement.

Commissioners have asked for time and have said they will not be rushed, but as of a workshop Thursday, commissioners agreed to try to stick with Bay Medical Center’s timeline. County commissioners have been asked to take up the vote on the proposed lease at their meeting at the end of February.

“We hired a company to look at this and give us recommendations,” Bay County Commissioner Mike Thomas told the Bay Medical Center delegation at the workshop. “It would be foolish to have a doughnut cook and car salesman make this decision. While you seem to be pushing this on us and making us uncomfortable, the consultants believe there is a time element here.”

If the deal is delayed or killed, bankers are expected to declare Bay Medical Center in default and start charging the higher default interest rate on their $120 million bond, according to Bay Medical Center President and CEO Steve Johnson.

One of the concerns of Thomas and other commissioners is the county’s ability to approve and disapprove of new joint venture partners if LHP or Sacred Heart wanted to sell their share of control of the hospital in the future. Thomas cited the special act that created the special district, which runs the hospital, as giving the county the right to have a say in who runs the hospital.

Thomas said he believes the special act will hold up in court and that the county would try to fight for the right to have a say in any new partners.

“This is not where we started,” said Jim Shannon, executive vice president of development for LHP. “We had to make some compromises, but I’m happy at where we are at. The process we have gone through has been a very robust review process.”

Shannon pointed out that most of these types of agreements never make it to the end of the lease term. He said that because of large capital investments it would be likely in 15 to 30 years down the line before the main parties get together again to renegotiate terms of the lease or ask for an extension.

“We have tried hard to state openly our intentions and we believe in this partnership through the lease and longer,” Henry Stovall, vice president of Sacred Heart Health System, said to reassure commissioners.

Bay County Commissioner Guy Tunnell said he looks forward to an as-yet unscheduled public hearing to find out directly from the public their comments and concerns with the proposed lease.

 “There have been a lot of changes made since the first document,” Thomas said. “It’s a better contract than it was several months ago.”

One new topic that was discussed Thursday for the first time publicly is the sales tax that would need to be paid on the $154 million. The Bay Medical Center Board of Trustees made it clear they would not pay the expected $8 million in taxes out of their portion of the total lease amount. The joint venture would be responsible for paying the tax.

“The joint venture is being as open as they can,” Tunnell said. “I’m feeling better about it but it is still a major decision for us.”