CU Lease Comments

Mayor William Michael Mattiace

City of Las Cruces

200 North Church Street

Las Cruces, New Mexico 88004

April 29, 2004

            Re:  Proposed Lease of Memorial Medical Center

Dear Doña Ana County Commissioners and Las Cruces City Council Members:

Consumers Union is deeply concerned about the proposed lease of Memorial Medical Center (“Memorial”) to Province Health Care (“Province”).  Since 1936, Consumers Union's mission has been to test products, inform consumers and protect the public.  Our Community Health Assets Project is a national project dedicated to the preservation of charitable assets and health services across the country.  We have provided technical assistance to community organizations in New Mexico on several hospital transactions, as well as on the sale of Blue Cross Blue Shield of New Mexico.  It is imperative that the city-county continues to protect the access and availability of health care to its residents.   We urge the city-county to carefully consider this proposed lease agreement and each condition contained within the agreement.

The following concerns are in reference to and based upon the draft of the lease agreement and asset purchase agreement provided by the Las Cruces City Clerk to Common Cause on April 13, 2004, which are the same documents made available to the public regarding this proposed transaction.

·        Incomplete Agreements

The draft Lease Agreement and Asset Purchase Agreements which were made available to the public on April 13, 2004 are incomplete.  These omissions are not minor.  Both documents are missing referenced attachments, and both documents have incomplete language and definitions.  More specifically, Sections 4.2 Taxes and Utilities, 4.9 Annual Review, 4.10 Indigent Care Subsidy and 12.1 Remedies for Default are incomplete and appendices and schedules mentioned in the agreements are missing.  The city-county must insist that this critical language is provided to all commissioners and council members, and to the public at-large.  Complete Lease and Asset Purchase Agreements are necessary to provide full disclosure not only to the public for thorough review, but the city-council requires complete documents to make a well-informed decision. 

·        Lack of Public Process

According to information provided by concerned community members, the city-county have not held adequately noticed public hearings in regard to this proposed lease of Memorial.  The only hearings which have taken place have been in Las Cruces, although the hospital services communities outside of Las Cruces.  The city-county should hold public hearings after the public has had an opportunity to review complete documentation of the lease agreements and the asset purchase agreements.  Also, the city-county should allocate sufficient time to review the public’s comments before making its decision on the proposed agreement.

·        Fiduciary Duty

The Doña Ana County Commission and Las Cruces City Council have the responsibility to protect not only the community’s access and availability to health care, but also are responsible for protecting the public’s assets.  We must not forget that Memorial Medical Center is a public hospital, maintained largely through contributions by the city and county residents through taxes and Doñations.  Thus, it is imperative that the county commissioners and the city council uphold their duty in ensuring that these assets are protected so that Memorial will continue to provide health care to the city and county’s residents.

Many sections appear to provide the potential Lessee/Province with significant control over the city-county/Memorial’s assets.  Such conditions must be discussed thoroughly, with particular attention paid to how the community’s assets may be jeopardized if these conditions are approved. 

For instance, under Section 2.2 of the draft Lease Agreement, Province is provided with the option of purchasing Memorial for a nominal $100 in the event the city-county terminates the lease without cause.  This condition appears to strip the city-county of its bargaining powers with Province in the future, thereby relinquishing its control over the community’s assets. 

Similarly, proposed Sections 7, Right to Mortgage Its Leasehold Interest and 8.2 Approval of Subleases of the draft Lease Agreement raise questions as to the city-county’s control over Memorial and its facilities.  These sections must also be questioned as to whether the city-county is adequately protecting the community’s assets and the access and availability of health care to the residents of Las Cruces and Doña Ana County.   

Section 12.1(f) addresses remedies in the event of default by the Lessee/Province.  The only remedy stated under this section is specific performance.  The city-county should carefully review this section and suggest language providing for alternative remedies, such as monetary damages. 

·        Undefined Task Force

Section 4.9 of the draft Lease Agreement references a Task Force that would meet annually to “discuss the continuum of care provided by Lessee [Province] for the residents of the City and the County.”  Details regarding the Task Force have yet to be discussed, as stated in the draft Lease Agreement.  The Task Force's membership, its authority and its duties remain undetermined.  In order to maintain accountability between the city-county and Province, this Task Force must be have members from both the city and county who are knowledgeable and reflect the interests of the community,  provided with authority and assigned duties to adequately monitor the Lessee's obligations.

·        Indigent Care Subsidy

Section 4.10 of the draft Lease Agreement regarding indigent care does not address what will happen to the indigent care subsidy after the first 36 months of the lease although the draft Lease Agreement states that the lease term is for 40 years, subject to renewal, as stated in Section 2.1.

A following questions must be answered before the city-county decides on this condition and agrees to subsidize indigent care at Memorial under the new Lessee:

-What will happen to the indigent care subsidy after Provinces initial 36 months of leasing Memorial Medical Center?

-Will Province continue to provide the same levels of indigent care after these initial 36 months of subsidized care by the city-county?

-Will Province limit its indigent care expenditures to the respective $600,000 and $500,000 a month subsidy'?

-Will these subsidies cover medical charges or actual costs of care for the indigent patients Memorial serves?

Additionally, this section must also define what “indigent care” actually is or what services will be provided and who the indigent care policy will cover. 

·        Capital Improvements

Section 21 Purchase of Equipment, Leasehold Improvements and Net Working Capital at End of Term calls upon the city-county to purchase “all equipment owned by Province and used…in the operation of the [Memorial] which has been purchased within the last three years prior to the date of such expiration or termination.”  Similar language has been proposed regarding “any and all leasehold improvements completed and/or installed by [Province].”  Such equipment, improvements and installations should not be required to be purchased by the city-county.  Instead, the city-county should remove such language and instead suggest that Province will be required to provide capital improvements to Memorial’s facilities as a condition of lease. 

 ·        Asset Purchase Agreement

The mere existence of a draft Asset Purchase Agreement is questioned.  If the intent is to lease, why is there an asset purchase agreement on the table proposing a sale of Memorial?

·        Non-Competition

Section 5.7 of the draft Asset Purchase Agreement attempts to bar the city-county from constructing or operating any hospital or other health care facility.  Simply stated, this is absurd and appears to be contrary to public policy.  New Mexico Statute Section 4-48B-5 specifically grants counties the power to construct, maintain and operate county hospitals.[1]    

Many important questions remain unanswered regarding this proposed lease of Memorial by the city-county to Province.  The city-county and the residents of Las Cruces and Doña Ana deserve complete answers to these questions.  Immediate and future implications that the conditions of this lease agreement will have upon the access and availability of health care to its residents must be assessed as well as whether the agreement adequately protects the community’s assets held in Memorial Medical Center. 

We thank you for your consideration of these comments.

Regards,

Michelle Jun

Staff Attorney

West Coast Regional Office