District asks for ownership of Hulett Clinic

As long as the new Hulett Clinic reverts to the ownership of Crook County Medical Services District (CCMSD) once the building is completely paid off, the Board of Trustees has signaled its willingness to enter into a rental contract to occupy it.

This decision to make a counter-offer that includes a clause in which the district ultimately takes ownership of the building was made following a fractious discussion at Thursday’s regular board meeting. The board has been split on this issue, with some in full support because they feel it is only fair for Hulett to finally get a new building, while others are concerned by the potential costs.

Construction of the new building has been funded and overseen entirely by the Crook County Medical Services District Foundation. So far, the $1.5 million spent on the project has been fully covered by donations; however, because there is still an estimated $1.5 million outstanding, the foundation has indicated it will charge rent while the loan is being paid off.

The foundation indicated when the two boards met last Friday that the intention is to pay off the balance within one year. From that time, they suggested the district would only be asked to pay its proportional contribution towards costs such as maintenance and insurance.

“We had a meeting last week with the foundation about leasing of the new building and they came back with a revised quote to us of saying they wanted $1.25 per square foot plus the common area maintenance expenses, and that would be for a one-year lease,” said Chairman Mark Erickson as discussions began on Thursday.

As was explained at the joint meeting, clinics within a rural health district are generally loss leaders because they are designed to funnel business to the hospital, where such things as the lab are located. However, Erickson said he is still concerned about the additional loss that would be associated with the new building – through costs, he pointed out, that will include more than just the rent.

“It’s a big change in square footage from what we currently have,” he said. “How do we properly staff that? Currently we are operating with a staff of two in the existing clinic.”

Erickson went on to point out that the board needs to look carefully at the cost impact. “We all agree that the clinics operate at a loss, but how much more do we want as an increase of that loss?” he asked.

From the point of view of the district having equity in the building Erickson stated that it would make sense for the district to take ownership and that he would like to see this reflected in the contract.

“If they’re going to build this as a foundation to better healthcare in Crook County then it’s a gift, and it becomes a gift, to the hospital,” he said, noting the district would be “eternally grateful” for that gift.

Trustee Sandy Neiman bjected, however, on the basis she felt uncomfortable with the idea that the district would be “demanding” the building be signed over. Erickson disagreed, saying that this would be simply putting future expectations in writing.

It was never put in writing for the Moorcroft and Sundance clinics, Neiman said, but Erickson felt that was irrelevant to the current conversation. “The past is the past,” he said.

Trustee Ed Ray pointed out that Judy Hutchinson, chairman, said the foundation doesn’t want to be a landowner.

“And they don’t,” responded Neiman.

“What’s the heartburn then?” asked Erickson.

Neiman objected that ownership of the building was not discussed at the joint meeting and said she would like the board to agree to the contract she said had already been agreed on at that meeting. Erickson refuted this, stating the district had not agreed to anything except to discuss the foundation’s offer.

“Can we move forward with what was discussed?” asked Neiman. She suggested the district could accept the contract for one year while renting out the old building to offset the cost, then see how things stand at that time.

Ray commented that the clinics are losing $100,000 per year right now and the rental agreement could see this jump to a quarter million. He still felt concern it would be unsustainable in the long term.

“That sounds great,” agreed Erickson; however, he said, there is no reason not to include a clause about what ultimately happens to the building. The foundation said the clinic will be paid off in less than a year, he said, and this would make things as “simple as possible:” if it is, the building reverts to the district; if not, the district can choose to opt out.

Speaking to the foundation’s efforts to pay off the building quickly, Neiman responded that, “They’re putting in for grants left and right” and also have “legislative backing” for this.

“You have to admit in this time and this age and this day, to pay off $1.5 million in six months…is amazing, and it’s all donations – there’s been no grants in that,” she said.

In that case, said Erickson, there should be no heartburn to put things in writing. He commented that Neiman sounded like she was speaking as a member of the foundation, rather than the district.

Neiman responded that the foundation already said they would be donating the building. Not in writing, said Erickson, while CEO Micki Lyons reminded the board that the foundation had also suggested giving the building to the town or keeping it to manage themselves – the district would remain a lessee in that case, she said, and have no way to control future changes to the rent.

“From just listening to them talk at a couple of [meetings] that I’ve been to, that is not the goal,” said Neiman. She urged the board to move ahead to allow the foundation to get on with applying for grants.

The board contacted Hutchinson via phone to ask for her thoughts on including a clause in the contract for the building to revert to the district. She confirmed that the foundation does not want to be a landlord, but said she could not speak for her whole board and indicated that the foundation is not pleased with the district’s attitude to the project so far.

“We can vote on it,” Hutchinson said. “I can’t tell you how everybody is going to vote, mainly because so far we haven’t seen a whole lot of support from CCMSD so we’ve got to see some support to know that you’ll do the clinic right when it’s done.”

If the board doesn’t want to accept that clause, Hutchinson asked, does that mean the district won’t lease the facility? Erickson responded that it would just put things back to where they are today, with proposals and counter-proposals until the two parties reach an agreement.

“I just think it’s throwing a big ‘what if’ in,” said Neiman. “Is there any way you guys would be agreeable to just lease it for one year? They’re going to know if in one year it’s going to be paid off and we’re going to know if we want to accept responsibility [for it].”

Erickson said he would not be agreeable to this without putting into writing what happens to the building. Hutchinson mentioned during the call that the foundation could bring in its own management firm, he said, so clearly there is not yet certainty on this question.

Erickson reiterated that he can’t understand why the clause would be a problem.

“We want it in writing,” said Ray. “To protect the district,” added Erickson.

“I don’t want to demand it,” said Neiman, expressing that she would rather figure out a way to ask. However, said Erickson, there’s no point making the request at all if it’s not enforceable.

Erickson reminded the board that the new foundation has a new charter. Unlike the old foundation, its mission is to support medical services in the county, rather than to support the district, so there’s nothing stopping the foundation from bringing in another provider.

“I don’t know why you’re trying to railroad this,” he accused Neiman, who denied doing so.

The board contacted Trustee Connie Lindmier by phone, as she had not been able to attend the meeting. Lindmier, too, was in opposition on the basis that donating the building to the district had not been discussed at the joint meeting.

Erickson reminded Lindmier that, at the joint meeting, discussion was held about what will happen to the building in the future and “they threw out a lot of different options,” including running it themselves or giving it to the Town of Hulett. As his job is to represent the district, Erickson said, he would like it confirmed that the building comes to CCMSD.

“I would agree to negotiate it, but I would not agree that that has to be a condition,” said Lindmier.

However, when Lindmier said she would prefer negotiations to take place after the building has been paid off, Erickson said that would be “nebulous” and open-ended. Lindmier protested that adding this clause would be changing what had been agreed to at the joint meeting and agreed with Neiman that including such a clause would be making a demand of the foundation.

Neiman asked why the district couldn’t simply suggest that it would like to be given ownership of the building and say the board hopes this is the case.

“We don’t have the right to demand,” Lindmier said, adding that the foundation is already now taking on the cost of the x-ray machine due to the district’s choice to only enter into a contract for one year.

Erickson explained again that the contract is no different to a real estate negotiation. Adding the clause, he said, is the district’s counter-offer.

“We’re saying that one of our other things we want in our contract is that we want the building to revert to us when it’s paid off because statements have been made multiple times in public that the building will be paid off in less than a year,” he said, insisting that this is necessary to protect the district.

Neiman accused Erickson of thinking the foundation is not working for the district, which he denied. Ray explained that the possibility of the building going to someone else is worrying because “we’re at their mercy” when it comes to rent.

For example, he said, if it was given to the Town of Hulett, the current council might be willing to maintain the rent at its current level, but what about future councils? Neiman responded that she can “almost guarantee” the town wants no part of it.

In that case, Erickson asked again, what’s the problem? Again, Neiman said her concern is that the district is making a demand.

Erickson tried again to explain that including the cause is simply clarifying the district’s terms and conditions on the contract. Saying it’s a demand is like saying the foundation is demanding the district occupies the building, he said.

“We want the building for the county,” agreed Ray, and therefore the district is asking the foundation for that to happen. Lyons also agreed, suggesting that the board was getting hung up on wording and that this would simply be an offer and is not the end of the road for negotiations.

Neiman made an additional argument that the district should agree to occupy the building: three other healthcare companies are interested in doing so. “What would that do to our Hulett Clinic?” she asked.

Erickson called this a threat, to which Neiman said the foundation hasn’t sat down with those companies until the district makes up its mind. Lindmier meanwhile condemned her fellow trustees’ attitude.

Later, a motion was passed to make an offer to the foundation that includes the building reverting to the district once paid off. Erickson and Ray voted aye, while Neiman did the same after a pause, stating that she was doing so “as an offer.”

Clarification

In last week’s article about the clinic, we included a statement from Judy Hutchinson that the new building will not require time-share with physical therapy and therefore it will be possible to see patients five days per week. Though we did note that Trustee Trish Habeck refuted Hutchinson’s claim, we would like to clarify that it was in fact mistaken and the Hulett Clinic does schedule patients five days per week.