Facing a challenging and uncertain financial landscape for rural hospitals, the DeSoto Memorial Hospital board voted Thursday night to hear presentations on three competing proposals for the institution’s future.
The options for Arcadia hospital include:
- A 49-year lease to Tampa General Hospital for an investment of $45 million over five years and rent of $10 per year.
- A sale to AdventHealth, one of the nation’s largest health care systems, for about $52 million.
- A management services agreement with NorthStar Hospitals Inc., a health care management and investment company based in Andover, Massachusetts, with an undisclosed capital commitment.
All three organizations would commit to keeping the hospital in the community and retaining staff who meet professional criteria. Presentations from the organizations will occur in a public meeting on a date to be determined by hospital administrators.
“We’ve been presented with two very good opportunities. Quite frankly, we’re blessed to have these opportunities,” said DeSoto Memorial CEO Vince Sica, referring to the lease and sale options. “I think both have a lot of resources that could help us maintain ourselves now and into the future.”
The board issued a request for proposals for sale, lease or partnership in late June. During a special meeting in July, Sica cited a slew of difficulties for DeSoto County’s only hospital: difficulty recruiting physicians and nurses; an aging staff and the loss of expertise as they retire; and services being reimbursed at less than actual cost for patients with Medicare and Medicaid.
Sica noted that larger health care groups have more ability to bring in specialists and more power for capital purchases.
“Economies of scale are something that you can’t ignore,” he said.
On Thursday, the board selected its top three proposals after quickly ruling out three others for management services agreements or partnerships from companies with limited or no experience in Florida.
Board member Robert Heine Jr. said that the hospital had tried a management services agreement in the past and it failed.
A representative from Tampa General Hospital said the lease proposal is modeled after the hospital system's lease with Hillsborough County, which began in the late 1990s.
The proposal also includes adding a helicopter site to DeSoto Memorial’s facilities.
“That’s a significant investment” for the crew and equipment, Sica said.
That’s on top of the proposed $45 million for capital expenses and operating support.
Sica said both TGH and AdventHealth committed to providing more specialists than the hospital has currently, which could reduce transfers and residents traveling many miles for care.
The board emphasized its desire for staff to keep their jobs if any proposal is accepted.
“The biggest thing that’s been asked to me by the community is, what’s going to happen to staff? Is everybody going to lose their job?” Heine said. “My response to them: I wouldn’t think so.”
Board Chair Kenneth Hancock said DeSoto Memorial doesn’t get enough credit for its high-quality staff.
“That was important for us to make sure we take care of our people. Of the three that we’ve narrowed it down to, it seems that they’re committed to that,” he said.
Hospitals have consolidated nationwide
The board’s considerations come amid a wave of hospital consolidation nationwide that has led to higher health care prices, according to KFF.
From 2005 to 2017, more than 2,300 hospitals were affected by mergers and acquisitions, an American Hospital Association report shows. The share of hospitals affiliated with health systems also has grown, reaching more than two thirds in 2022, according to KFF.
Arcadia is about 90 miles southeast of Tampa in rural DeSoto County, a largely agricultural area with a growing population of nearly 37,000.
In Charlotte County, which borders DeSoto to the south, AdventHealth purchased a 254-bed Port Charlotte hospital previously owned by Community Health Systems for $260 million earlier this year. The deal also included a Punta Gorda facility that was closed after damage from Hurricanes Helen and Milton, according to the Business Observer. AdventHealth is among the 10 largest health systems in the country, according to KFF.
Two years ago, the Tampa General system acquired three rural hospitals in Brooksville, Spring Hill and Crystal River from for-profit Bravera Health and rebranded it as TGH North.
Sica said Thursday that another national health care organization evaluated DeSoto Memorial’s request for proposals but chose not to submit because it would not commit to keeping an acute care hospital locally.
DeSoto Memorial is one of only about 24 government-owned hospitals in Florida. As a public hospital board, the directors must deliberate about a sale or lease in public meetings. State law requires that they consider all proposals, but David Davidson, the hospital’s legal counsel, said they have “a lot of leeway” on which ones to explore more deeply. Davidson spoke to board members about their obligations during the special meeting in July.
If board members vote to accept a proposal, they must hold another meeting to allow public comments. The new managing organization must commit to continuing health care services at the same quality of care, including providing care to those who can’t afford it.
The board also must petition the state Agency for Health Care Administration for approval of any sale or lease.
Large hospital’s inquiry got the ball rolling
In July, Sica said the request for proposals was initiated after a large hospital group inquired about the possibility. He said the board also published a request for proposals in 2014 but received no responses.
So the board went to the county commissioners and proposed what became the “indigent care sales tax” — a half-penny tax that is used to pay off the $20 million U.S Department of Agriculture loan the hospital needed to rebuild following Hurricane Charley in 2004.
The tax has been “a huge, huge benefit to the hospital,” Sica said in July.
Hospital officials expect to pay off the loan by 2029, or seven years before the limit on the sales tax. “That’s a significant achievement by the community,” Sica said.
But with labor and equipment costs soaring, the hospital has struggled in other financial areas.
It posted a $500,000 operating loss in fiscal year 2024, according to an independent audit report. That was an improvement from the previous year’s $3.6 million deficit, driven by an uptick in patients and reduced reliance on contract labor such as travel nurses.
Board member Ernest Hewett said Thursday that depreciation factors into audit reports, and without that, the numbers would be positive. “Not enough positive” to make needed investments, though, he said.
Steep cuts to federal Medicaid in the next decade could exacerbate the financial challenges. At DeSoto Memorial, about 1 in 5 patients are covered by Medicaid, according to Sica.
“It’s a big question mark. We don’t know what’s going to happen,” Sica said Thursday. “I think that being associated with a larger system that has more resources would soften the impact.”
As it weighs its options amid uncertainty, the board is clear on one thing for the future.
“This hospital cannot close,” Heine said at the July special meeting. His statement received an “amen” from multiple audience members.
This story was produced by Suncoast Searchlight, a nonprofit newsroom of the Community News Collaborative serving Sarasota, Manatee and DeSoto counties. Learn more at suncoastsearchlight.org.
