Local Group Says It Now Has Enough to Take Over Management of Hospital
Half Million Grant From EDC Pushes Fundraising Over Revised Goal
The Hospital Center of Excellence (HCOE) says it has secured enough funding to take over the management of St. Mark’s Medical Center in La Grange.
Tuesday night, Sept. 5, the board of the La Grange Economic Development Corporation (EDC) voted to provide up to $500,000 in local tax dollars that will pay for repairs at the hospital. HCOE Chief Strategy Officer Sam Wilson said the half-million-dollar injection from the EDC was the last piece of funding HCOE needed to move forward with their plans for St. Mark’s.
“This decision puts us over the hump,” Wilson said after the vote Tuesday night.
At the meeting, Wilson told the board that HCOE initially estimated it needed $8.5 million to execute the management transition at St. Mark’s.
“Once we got access to real data – books and records other than what we could get publicly, we looked at how much cash was on hand and what we needed to operate the hospital – that number is now $5.3 million,” Wilson said. “In the last two weeks, HCOE has secured funding commitments for $4.8 million of that. We’re $500,000 short of what we need to fund this hospital.”
Wilson said the funding commitments so far include the following:
• $1,593,000 million dollar grant and deferment from the State of Texas Health and Human Services (DSHS);
• $200,000 grant from a local contributor through a nonprofit organization;
• $2,010,000 in loan funds from 17 local individuals; and,
• $1,000,000 bridge loan funding under a letter of intent from the non-profit group PeopleFund.
“That leaves us about $500,000 short, and that’s where the Economic Development Corporation can hopefully help us,” Wilson said. “It’s my understanding that (La Grange) EDC doesn’t really do working capital and you don’t make business loans. But infrastructure and facilities that drive economic impact, is in your wheelhouse.”
He said St. Mark’s Medical Center requires about $2.7 million in building repairs.
“That’s not from neglect or people not doing their jobs,” he said. “It’s an 18-year-old building. Just like your house, the roof eventually needs to be replaced and the air conditioner needs repair.”
Wilson said the hospital roof was damaged during Hurricane Harvey in 2017, and the Federal Emergency Management Agency awarded St. Mark’s a $1.255 million grant to repair the roof. The grant requires a ten percent match of $125,504, but St. Mark’s has not had enough cash on hand to engage the grant.
In addition, he said two of the chillers that provide air conditioning for the hospital are near the end of their service life. One of the chillers can be repaired, he said, but the other needs to be replaced. Quotes to repair the air conditioning system total $329,625.
Moreover, he said the leaking roof and pipe drains have led to water intrusion in two areas of the hospital. Quotes to address the water intrusion problems total $58,292.
Wilson asked the EDC for financial assistance to address these three areas. Wilson said that even if HCOE fails in its efforts to transition the management and the hospital defaults on its mortgage, fixing these infrastructure problems will preserve the building for a future owner.
“HCOE has a threepronged strategy,” Wilson said. “One is to make sure the rural emergency hospital stays operational and profitable; two, to lease up the rest of this building; and three, to clean up the balance sheet.”
Wilson said the hospital was built as a 65-bed facility at a time when hospital care involved longer periods of inpatient care after procedures. Today, hospital care more often involves minimally-invasive outpatient procedures with shorter stays in the hospital, requiring fewer beds. Wilson said HCOE plans to lease the unneeded space to providers of other healthcare services such as dialysis and chemotherapy infusion that are not currently available in the local area. “If there’s ever an opportunity to have some economic impact, it’s this right here,” Wilson said. The La Grange EDC gets its money from a portion of the City’s sales tax revenue. Several of the EDC board members remarked at the meeting that record inflation has greatly benefited the EDC’s coffers in recent years. Since 2020, EDC revenues have increased more than 30 percent, as illustrated by the data listed below from the Texas State Comptroller’s Office: La Grange EDC Annual Revenue
FY 2022 $902,473 FY 2021 $706,735 FY 2020 $685,249 FY 2019 $687,811 FY 2018 $687,297
EDC board members Janet Moerbe and Brenda Rainosek asked whether St. Mark’s would resume inpatient care under HCOE’s leadership. St. Mark’s obtained a Rural Emergency Hospital (REH) designation earlier this year that brought an injection of cash from the Centers for Medicare and Medicaid Services (CMS) amounting to $3.3 million a year. In exchange, the hospital had to discontinue inpatient care. Wilson said HCOE hopes to transition away from the REH designation and resume inpatient care in three years. In the meantime, he said St. Mark’s can perform a range of general surgery procedures with overnight observation, if necessary, as long as the average patient stay does not exceed 24 hours over a 12-month period. HCOE intends to expand services by leasing space inside the hospital to an independent long-term acute care provider (LTAC), which he said would be possible under the REH designation.
Moerbe made a motion to fund the full $500,000 request from HCOE. Rainosek seconded the motion and it passed without dissent. Under the agreement, EDC will supply funds for the repairs on a reimbursement basis.
After the meeting, Wilson told the Record that HCOE must complete the transition by Sept. 29.
He said HCOE must now secure irrevocable funding commitments from the community members and groups that pledged funding. SMMC must complete documentation associated with the funding agreement from DSHS. They must also draft a transition agreement between the St. Mark’s board, HCOE and the hospital’s current management company, Community Hospital Corporation. Finally, they must secure approval from the hospital’s mortgage backer, the U.S. Department of Housing and Urban Development.
“It’s in everybody’s best interest to make this happen as quickly as possible,” Wilson said.