Note concerning documents: some of the documents I am posting pertaining to Washington County Regional Medical Center and the Washington County Board of Commissioners have notes and underlined portions. I have not marked up any of the documents, they are uploaded exactly as I received them. All documents here and in a February 15, 2015 post on Rural and Progressive were obtained through Georgia Open Records Act requests.
Sometimes the best way to solve a problem is to have a fresh pair of eyes look things over. In September 2014 the Washington County Board of Commissioners (WCBOC) received a contract from consultant Alan Richman, the President and CEO at InnoVative Capital(IC). Richman offered to assess and advise on several areas of hospital operations.
On October 9, 2014, Board of Commissioner Chair Horace Daniel signed the contract (InnoVative_Capital_contract_Sept_2014) . The contract detailed seven tasks for Richman to complete:
- Hospital Financial and Operational Review
- Staffing Study Review
- Review of Outstanding WCRMC Funding Requests of Washington County
- Review and Critique Management and Consulting Proposals Received by WCRMC
- Identification of Issues Statement
- Produce a Strategic Roadmap of Next Steps
- Present Finding to Washington County
The contract included the possibility of an extension through December 2015. Washington County agreed to pay a “hospital consulting fee” totaling $40,000. A non-refundable payment of $20,000 was due when the contract was signed, and the remaining $20,000 would be paid when Richman presented his findings to the county.
My Open Records Act document search included an email to former County Manager Chris Hutchings in late March 2015 from Richman detailing his suggestion that additional consultants may be required for his project here. These consultants would be “retained” by Washington County. Richman credited the county’s earlier $20,000 payment to his new contract proposal and requested an additional $10,000. On April 13, 2015 Horace Daniel signed a new agreement on the county’s behalf that included a monthly payment to IC for $7,000 plus expenses. (InnoVative_Capital_contract_April_2015)
What is especially interesting about the April 2015 contract is item 14 on page 2: “If the Transaction involves the WCRMC’s Partner’s commitment to a replacement hospital or major renovation/project (“Hospital Modernization Project”), InnoVative Capital may provide mortgage banking services for this purpose under a separate contract with the WCRMC Partner, if asked to do so by the WCRMC Partner, the Hospital Authority, or the County.”
The county’s hospital consult also does mortgage banking services.
Think about that for a minute.
If the county’s consultant recommends a new hospital building or major improvements, he can then step up and offer financing services. If bonds are needed, Richman’s consulting company does those too.
And there’s more.
On pages 3-4, (InnoVative_Capital_contract_April_2015) the contract spells out what Richman’s company receives in different scenarios. for example:
- The county requires debt funding of $7-10Million, signs an “External Management Contract” or extends the Management Agreement with University, or “retention of Replacement Internal Management”
If University Hospital is the signing partner InnoVative Capital would be paid a $40,000 transaction fee.
If a partner other than University was the Partner for an External Management Contract, Richman’s company would receive an $80,000 fee.
- WCRMC enters into a Lease or Change of Ownership and the county has a net debt funding requirement of less than $5Million:
If University is the Partner, InnoVative Capital receives $100,00 plus 5% times the final Net Debt Funding required < than $5M
If a Partner other than University is engaged, IC makes more money. Richman’s company would be paid $140,000 plus 5% times the final Net Debt Funding required < than $5M
Any agreement or modernization project that didn’t include University Hospital meant a bigger check from Washington County for Richman’s work.
Richman made seven trips to Washington County that cost taxpayers $14,483.45. Some of Richman’s expense reimbursements are a simple word document with no receipts attached. However, the request submitted on June 29, 2015 reveals that Richman’s hotel of choice isn’t anywhere near Sandersville. The county’s consultant stays at the Ritz Carlton in Atlanta’s toney Buckhead district near the Governor’s Mansion, and commutes to Sandersville in a rental car. (see page 10 InnoVative_Captial_invoices)
Richman submitted another contract for his services in November of last year, one that would run from November through July 2016. Richman’s monthly consulting fee jumped from $7,000 per month to $10,000 per month, an increase of almost 43 percent. Horace Daniel committed the county to the higher monthly consulting fee when he signed the contract on November 13, 2015. (InnoVative_Capital_contract_November_2015)
The November 2015 contract includes a list of 12 items for Richman to work through. Item 8 reads, “Identify potential partners for the County and Authority and work to make the process competitive, if possible.”
Hospital leaders here did a call for proposals for management/lease options in the fall of 2014 from nine companies/organizations. University, Navicent Health, and Augusta University were among the nine asked to submit proposals. The resulting document includes a response from University but nothing from Navicent. Augusta University (Georgia Regents Health system at the time, still often called the Medical College of Georgia) was interested in a partnership but “without any change in management,” i.e. they didn’t want to run our hospital.
( see the last page in WCRMC_requests_for_proposals_fall_2014)
We had a plum lease agreement from University Hospital last spring that was left on the table by county leaders (University_proposal_to_WCRMC_April_29_2015). Navicent Health never made an offer last summer, which prompted local officials to pursue a partnership with Augusta University Hospital (which had already said it didn’t want to manage WCRMC).
The contract Horace Daniel signed in November includes a scope of services for Richman to complete. The resulting recommendations for the county to consider are contained in no more than two pages in a January 21, 2016 document, titled Washington County Regional Medical Center-Plan B:Repurposing WCRMC-Business Plan Development is “for discussion purposes only.”
The proposed plan development team includes two consulting firms in addition to InnoVative Capital. Richman allows for eight weeks of work. Depending on the amount of work required, the fees for the market and financial feasibility consulting firm DHG Healthcare could range from $35,000-$45,000. Adams Management Services, a capital consulting company, would ring in at $12,500. Both companies would also bill for expenses in addition to their fees.
Who would manage this project?
If you guessed Richman proposed that his company should serve as the Project Manager you would be right.
Through January 2016 Washington County taxpayers have spent $102,000 on consulting fees to InnoVative Capital. Combine those fees with $14,483.45 in travel expenses, and we’ve spent $116,483.45.
The more time I spend reading these documents, the more I scratch my head.
Of course we need a hospital here, and it should be a good one. We are fortunate to have good doctors and hospital staff who want their friends and family to receive the best care possible, at home, when they need it.
I don’t expect the bond to fail in May, and I am not suggesting that people consider voting against it.
What we need to understand as voters and property owners, is that we didn’t get to this question overnight. We are more likely to hold our local leaders accountable for our hospital’s sustainability if we know the full story.