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Tuesday, April 21, 2015

Taking the Financial Temperature of the Possible Lakewood Hospital Closure

Posted By on Tue, Apr 21, 2015 at 10:23 AM

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Since city leaders first announced that Lakewood Hospital would be "redesigned to fit community needs," i.e. "transitioned into a wellness campus," Lakewood City Council has held a number of hearings to explain all sorts of angles to the news. In short, there’s no sense that the Letter of Intent signed with Cleveland Clinic will be done away with; rather, the city is just trying to find ways to “manage.”

The immediate 2016 financial impact of the measure would involve a $1.5- to $1.7-million hit to the city’s general fund. That’s 4 percent of general fund revenues. (Council members later pushed back during a Monday night meeting, saying that the loss could be greater, as it’s possible and likely that salaries and income tax withholdings of the 150-250 wellness campus employees will not proportionally match the salaries and income tax withholdings of the 1,000-plus Lakewood Hospital employees. But that’s one of seemingly hundreds of unknowns at this point.)

The point is: This would be a blow to Lakewood.

“This is going to be a loss,” Council President Mary Louise Madigan said, avoiding the subjunctive. “We know that. We’re trying to manage our future.”

While none of this is final, it sure feels like it at Lakewood City Hall.

On Monday, Finance Director Jennifer Pae took city legislators on a tour of the hospital’s history. She said that Lakewood has never been a company town and that the hospital is but one facet of a diverse tax base.

From 1907 to 1986, Pae said, the hospital’s finances were reported as part of the city’s finances in a self-sustaining enterprise fund. In 1987, the city transferred all real property (and, well, mostly the $36 million of outstanding debt on the hospital) to the Lakewood Hospital Association. City leaders realized, according to Pae, that the city was quickly growing unable to accommodate the hospital’s ballooning debt. In 1997, the Lakewood Hospital Special Revenue fund was created to bring lease payments and EMS run fees back into the city folds.

The historical framework put the hospital in an apparently minor financial role on the city’s budget books — a $1.5-million annual blip in the years since 1987. But opponents to the deal have held that Lakewood Hospital’s importance to the community rises well beyond lease payments and EMS calls — that the deal being cut is a long-term disaster. Many in Lakewood are asking the city simply to wait a minute. The lease with the Cleveland Clinic Foundation runs through 2026, and payments to the city grow by $25,000 every three years (it is currently $1.15 million annually).

Furthermore, and this point has been a bit more shadowy, residents have asked for broadly open dialogue about the $100-million hospital opening in 2016 next to Avon’s Richard E. Jacobs Health Center. As a municipal tax-sharing agreement has been proposed between Lakewood and Avon, many are wondering about the machinations that led to the Letter of Intent in Lakewood. A point of contention in the coffee-shop discourse of Lakewood is that the shuttering of the hospital has been a long-in-the-works open secret. Scene spoke with independent doctors with offices inside Lakewood Hospital back in 2013. Some had reported being forced out of the building (essentially to accommodate this inevitable change). None would speak on the record when asked for interviews.

“[The Cleveland Clinic Foundation] has created the immediate crisis and has or could cause great damage to [the Lakewood Hospital Association], the City and its citizens if the City does not stand up for their rights,” resident Brian Essi wrote in a letter to city leaders, which was later published by the Lakewood Observer.

“Economic development needs to be our highest priority,” Pae said at the meeting. It’s not immediately clear what might financially replace the income tax and lease hit at the corner of Belle and Detroit (the hospital has been property tax-exempt, so any new development would be an automatic increase to the city, schools and county).

Several more meetings will be held on the hospital switch. Ongoing discussion of finances will take place at 6 p.m. April 27 at Lakewood City Hall, and a discussion “of Cleveland Clinic’s commitment to Lakewood” will take place at 6 p.m. April 30 at Lakewood City Hall.


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