The Galveston County Daily News

The best scenario for the University of Texas Medical Branch in the long-term is to move most of its hospital operations to League City, keeping only beds for prisoners on the island, according to a consultant’s report released Wednesday.

Atlanta-based Kurt Salmon Associates made that recommendation to the UT System Board of Regents in Austin just hours after a state panel released a report asserting, among other things, that Texas lawmakers should immediately restore a Level 1 Trauma center at the island campus severely damaged by Hurricane Ike and ultimately return John Sealy Hospital to its former scope.

Should the regents and lawmakers embrace Kurt Salmon Associates’ recommendation, it would greatly alter health care on the island, home to John Sealy Hospital for more than a century.

But even more jolting were projections no matter which path the medical branch took, it would incur enormous operating losses for years to come.

Regents have not made a decision that ultimately must be approved by state lawmakers, who have the final say about how and where the medical branch rebuilds its clinical operations.

Regents will convene a public hearing on the island later this month for public input.

Medical branch President David L. Callender called the report and its findings a starting point subject to much public input and consideration of complex factors.

Under the scenario Kurt Salmon listed as the top priority among several options, the medical branch would move all hospital beds for the general public to League City. The only inpatients remaining on the island would be Texas Department of Criminal Justice inmates that the medical branch has a state contract to treat.

The medical school and other educational programs, along with research, would remain on the island, as would a facility offering ambulatory medical care including diagnosis, observation, treatment and rehabilitation on an outpatient basis.

Several Options

The recommendation was among several the consulting firm laid out for regents in the much-anticipated report.

Another scenario assessed restoring all inpatient hospital capacity on the island, where the storm surge damaged the first floor of John Sealy Hospital, forcing a dramatic downsizing of the facility and closure of its Level 1 trauma center.

Another assessed building a large hospital in League City while keeping a 64-bed community hospital on the island.

Another looked at splitting hospital care between the island and League City, where the medical branch has been growing its presence in an attempt to lure more paying customers to help offset losses from treating uninsured and indigent patients from around the state.

John Sealy Hospital lost $25 million last year, officials said. But after investment income and donations, including from the island-based Sealy & Smith Foundation, were added, the hospital posted a net loss of $1.5 million in fiscal 2008.

Projected Losses

The report validates efforts by the medical branch to expand in the affluent north county, where the island institution is building a $61 million specialty care center on 35 acres near Interstate 45 and FM 646. Just before the hurricane, the medical branch paid $9.4 million for 29 acres near the specialty center, a likely spot for a hospital.

The report, which focused solely on hospital and health care operations, projects huge operating losses even if the medical branch were to move hospital operations to League City. Rebuilding hospital operations on the mainland would result in a cumulative operating loss of up to $1.06 billion from 2013 to 2017, according to the report.

But the firm’s projections don’t include the $155 million in outside support each biennium for hospital and clinical enterprises, of which $154 million is from state appropriations, medical branch officials said.

What’s Not In The Report

While rebuilding on the island would result in cumulative operating loss of up to $1.1 billion in the same four-year span — not much worse than moving all clinical enterprises to League City — it wouldn’t advance the mission of the medical branch’s attempts to capture the patients with insurance and Medicaid, the consultants said.

Building inland would increase the medical branch’s chances of attracting insured patients, while restoring clinical operations in Galveston would result in a loss of those paying patients, according to the report.

Medical branch officials said the report also does not take into account such factors as the swelling north county population, the possibility of more state funding for unsponsored care and improvements in reimbursements rates for Medicare and Medicaid, or the potential formation of a hospital district to help pay to treat the poor and uninsured.

The report also did not consider how much of about $667 million in federal money for storm repair, mitigation and hardening the campus against future storms could be spent on mainland projects, state Rep. Craig Eiland said.

The maximum is about $130 million, Eiland said.

The report also did not take into account that the charter of Sealy & Smith Foundation — which has given more than $600 million to medical branch — limits funding to Galveston projects, Eiland said. Eiland also noted the absence of state funding in its projects.

Everything In Context

Eiland also took issue with the firm’s recommendation that regents not plan for national health care reform.

“As long as we keep everything in context, this report might be a little helpful,” Eiland said.

“However, when you consider that they recommend that you rebuild everything on the mainland or have a split campus, they don’t include the fact that you would not have $540 million in FEMA money available to you to rebuild right now, $20 million per year available to you from an ‘island only’ foundation or the potential to receive up to $90 million extra for uncompensated care either in the form of a national health care program or wrestling away and keeping the local federal funds earned from the disproportionate share program.”

The medical branch, which before the storm employed more than 12,000 people, sustained $710 million in physical damage and revenue losses from Hurricane Ike, resulting in the mass layoffs. It had only $100 million in insurance coverage.

On Nov. 12, UT system regents authorized cutting up to 3,800 full-time equivalent positions. The medical branch ultimately laid off 2,450 people officials said.

Also in November, at the urging of Gov. Rick Perry, regents agreed to hire an independent consulting firm to research options for the medical branch. It agreed to pay Kurt Salmon Associates $285,000 for its report.

Consultants with the firm said Wednesday their report was not shaped by any biases.

Callender urged the public to attend a public hearing this month in Galveston on the redevelopment of the medical branch. A panel of regents will convene a public meeting from 9:30 a.m. to 12:30 p.m. Feb. 20 at the Moody Gardens Convention Center. The public also can submit e-mailed comments to task force(at)utsystem.edu.

Callender, an island resident, said he favored a scenario that would keep significant health care facilities on the island.