PERRY COUNTY'S HOSPITAL COULD BECOME PRIVATE; COUNTY COMMISSION TO HAVE FINAL VOTE IN SWITCH

PERRYVILLE -- Becoming a private, not-for-profit business will make Perry County Memorial Hospital more competitive in the long run, hospital officials say.

It is now a public, not-for-profit hospital. The administration and board of directors have been studying the feasibility of converting it to a private, not-for-profit institution.

The hospital would continue to receive tax support -- approximately $150,000 a year from the county's meal levy, said Ralph Paulding, hospital administrator.

The hospital board will meet Feb. 10, "and we hope we'll come to a decision," said Bill Wingerter, board president. "We think we're going to go ahead with it. We want to make sure."

If the board decides to privatize, the process should be wrapped up by mid-April or the end of May, Paulding said. The new entity will be known as Perry County Health Systems.

Most of the groundwork for making the decision has been done, Paulding said. "The development process is probably 95 percent done," he said, adding the board has worked out the bylaws and necessary documentation for the privatization.

"Essentially what we need to do is make the final decision that we want to proceed," Paulding said.

The public won't notice many changes if the hospital does make the switch, Wingerter and Paulding said.

But going private will make a big difference for Perry County Memorial, a 68-bed facility with 275 employees, a $15 million budget and management of the county nursing home.

"The health care industry is really moving into a much more competitive environment," Paulding said. "In years past we didn't have the environment where we had to compete as providers and submit bids to an insurance company or an HMO. The phenomenon that's been going on is that currently, when you're in a competitive market, the public hospital is somewhat at a disadvantage when there's a real aggressive managed care market."

As a public hospital, most of Perry County Memorial's administrative data -- utilization rates, employee pay structure and other financial information -- can be accessed by anyone who wants to see it, including the competition, he said.

"That really puts the institution at a disadvantage when we're trying to bid," he said.

Paulding said he expects to see managed care become a much stronger presence in the region in the near future.

"It's not moving very quickly right now, and that's one of the reasons we're not sure we're going to proceed," he said.

But there is "some movement" into the region, he said, "and we anticipate that within the next nine to 18 months, we'll probably have a major managed care presence in our region."

When that happens, Paulding said, Perry County Memorial wants to be ready.

"The market is getting so competitive, and we're so small, we're just doing everything we can," Wingerter said.

In addition, becoming a private entity would give the hospital "freedom to maneuver in the business world," Paulding said.

Since the hospital is an arm of the county government, the board can't invest hospital funds in the private structure to buy buildings, invest in HMOs or similar organizations or for building projects, Paulding said.

The county owns the hospital, and that won't change, Paulding said. The hospital also will keep managing the nursing home, but the nursing home will not become a part of the private entity.

If the privatization goes through, a new hospital board will be formed.

The five-member elected board will still exist, but the new board will handle the day-to-day operations of the hospital, Paulding said.

The public board will oversee administration of the meal levy funds, Paulding said.

The Perry County Commission will have final approval on whether or not the hospital goes private, said Presiding Commissioner Karl Klaus.

"The commission is concerned that there be a path back to the voters from the new board," Klaus said.

He said the commission wants three of the public board's members to be accountable to the voters.

Klaus said the hospital's board of directors has kept the commission up to date on the privatization discussions, but the commission is still waiting for a final proposal.

He wouldn't say whether he'll vote in favor of the privatization.

"I can't comment on that until I see what their proposal is," he said.

Jerry Sill, the senior vice president and general counsel for the Missouri Hospital Association, said the privatization procedure is "pretty well covered" in state statute.

In the last several years, only three public hospitals have opted to privatize, he said -- one in Boone County now leased to the BJC HealthSystem, one in Audrain County and a former city hospital in Lexington now leased to Health Midwest.

"I suspect several may be thinking of it," Sill said.

Once a public hospital undergoes privatization, he said, it is no longer subject to the state's open meetings laws, which means its board of directors can meet in private, with no public input or scrutiny.

But Paulding said the board of directors isn't looking for an opportunity to operate in secret -- and privatizing won't give the board free reign to sell Perry County Memorial to a large health care system like BJC.

"It's really not an opportunity for us to conceal anything," he said.

And the county commission will still have control over the hospital's future.

"If we wanted to sell it or something, obviously we'd have to clear it with the county," Paulding said. "If we wanted to close it down or file bankruptcy, which we're still very financially viable, we'd have to go to the county. The authority ultimately rests with the county."

Perry County Memorial Hospital operates an ambulance service, a home health service, manages an adult day care service and a fitness service and owns two physician office buildings.