BOARD OF DIRECTORS. FINANCE Committee of the Whole MEETING

Transcription

1 BOARD OF DIRECTORS FINANCE Committee of the Whole MEETING September 10, 2009, 1:00pm Lee Memorial Hospital Boardroom 2776 Cleveland Ave, Ft. Myers, FL ELECTRONIC BOARD PACKET ALL MEETINGS ARE OPEN TO THE PUBLIC AND THE PUBLIC IS INVITED TO ATTEND Any Public Input pertaining to an agenda item is limited to three minutes and a Request to Address the Board of Directors card must be completed and submitted to the Board Assistant prior to the meeting.

2 LEE MEMORIAL HEALTH SYSTEM BOARD OF DIRECTORS P.O. BOX 2218 FORT MYERS, FLORIDA CAPE CORAL HOSPITAL GULF COAST MEDICAL CENTER HEALTHPARK MEDICAL CENTER LEE MEMORIAL HOSPITAL THE CHILDREN S HOSPITAL THE REHABILITATION HOSPITAL LEE PHYSICIAN GROUP LEE CONVENIENT CARE BOARD OF DIRECTORS DISTRICT ONE Stephen R. Brown, M.D. Marilyn Stout DISTRICT TWO Richard B. Akin Nancy M. McGovern, RN, MSM DISTRICT THREE Lois C. Barrett, MBA Linda L. Brown, MSN, ARNP DISTRICT FOUR Frank T. La Rosa Dawson C. McDaniel DISTRICT FIVE James Green FINANCE COMMITTEE OF THE WHOLE MEETING Thursday, September 10, :00 p.m. Lee Memorial Hospital Boardroom TENTATIVE AGENDA 1. CALL TO ORDER (Marilyn Stout, Finance Chairman/Board Treasurer) The meeting of the Finance Committee of the Whole of the Lee Memorial Health System Board of Directors will be called to order. Matters concerning the business of Lee Memorial Health System consisting of Gulf Coast Medical Center & Lee Memorial Hospital/HealthPark Medical Center and its subsidiaries (HealthPark Care Center, Inc., Lee Memorial Home Health, Inc., Cape Memorial Hospital, Inc. doing business as Cape Coral Hospital, and Lee Memorial Medical Management, Inc.) may be reported, discussed and recommended by the Committee of the Whole, then referred to the full Board of Directors for final action. 2. PUBLIC INPUT: Any public input pertaining to items on the Agenda is limited to three minutes and a Request to Address the Board of Directors card must be completed and submitted to the Board Assistant prior to meeting. 3. Consent Agenda (Approval) A. August 20, 2009 Finance Committee Meeting Minutes B. FYTD 2009 July Strategic Scorecard 4. LeeSar HealthTrust Partners LLC Merge to LeeSar, Inc. (Approval) (John Wiest, Chief Financial and Institutional Services Officer 5 min) 5. Bonita Community Health Center Operations Report (Acceptance) (Suzanne Bradach, System Director/Special Projects 30 min) 6. Sanctuary Ambulatory Surgery Center Design-Build Contract (Approval) (Dave Cato, System Director/Outpatient Services - 10 min) 7. Orthopedic & Neurosurgical Implants (Update) (Gaile Anthony, Chief Administrative Officer/LMH - 15 min) 8. Employee Appreciation and Recognition Payment (Approval) (Jon Cecil, Chief Human Resource Officer 15 min) 9. Investments Review (Verbal Update) (John Wiest, Chief Financial and Institutional Services Officer 15 min) 10.Financial & Statistical Reports for *August 31, 2009 (Acceptance) (John Wiest, Chief Financial and Institutional Services Officer 15 min) *Due to early Finance meeting, the financials will be delivered at the meeting. 11.Other Items 12.Date of the next REGULAR FINANCE Committee of the Whole: Thursday, *November 19, 2009, 1:00 p.m. Lee Memorial Hospital Boardroom, 2776 Cleveland Ave, Fort Myers *REMINDER NO FINANCE COMMITTEE MEETING IN OCTOBER 13.ADJOURNMENT of FINANCE COMMITTEE V:\Presentations\2009\Finance\091009

3 L E E M E M O R I A L HEALTH SYSTEM BOARD OF DIRECTORS PUBLIC INPUT AGENDA ITEMS: Any public input pertaining to items on the Agenda is limited to three minutes and a Request to Address the Board of Directors card must be completed and submitted to the Board Assistant prior to meeting. Refer to Board Policy: 10:15E: Public Addressing the Board Non-Agenda Item: Individuals wishing to address the Board on an item NOT on the Agenda, the Board office must be notified of subject matter at least seven (7) days prior to the meeting to allow staff time to prepare and to insure the matter is within the jurisdiction of the Board.

4 Finance Committee of the Whole September 10, Consent Agenda: (Approval) A. August 20, 2009 Finance Committee Meeting Minutes B. FYTD 2009 July Strategic Scorecard

5 LEE MEMORIAL HEALTH SYSTEM BOARD OF DIRECTORS FINANCE COMMITTEE OF THE WHOLE MEETING MINUTES Thursday, August 20, 2009 LOCATION: Lee Memorial Hospital Boardroom, 2776 Cleveland Avenue, Fort Myers, FL MEMBERS PRESENT: Marilyn Stout, Finance Chairman/Board Treasurer; Richard Akin, Board Chairman; Nancy McGovern, RN, MSM, Board Vice Chairman; Linda Brown, MSN, ARNP, Board Secretary; Lois Barrett, MBA, Director; Frank La Rosa, Director; Dawson McDaniel, Director; James Green, Director; Joe Catti, Community Representative/Finance Committee; Ken Marcum, Community Representative/ Finance Committee; Gene Principi, Community Representative/Finance Committee MEMBERS ABSENT: Steve Brown, M.D., Director OTHERS PRESENT: James Nathan, President/CEO; Cathy Stephens, Board of Directors Liaison ; Alison Ash, Esq., Fowler, White, Boggs, Banker/Board Counsel; John Wiest, Chief Financial and Institutional Services Officer; Jon Cecil, Chief Human Resources Officer; Donna Giannuzzi, RN, Chief Patient Care Officer; Doug Luckett, Chief Administrative and Ancillary Services Officer/GCMC; Larry Antonucci, M.D., Chief Administrative Officer/CCH; Mike German, Vice President/Financial Services; Ben Spence, System Director/Controller/Reimbursement; Patty Duquette, Controller/Corporate; Brian Church, Controller/Physicians/Outpatient; Dave Kistel, Vice President/Facilities Support Services; Anne Rose, Executive Director/System Director/Administrator Business Development, Marketing, Communications, Lee PHO, Lee County Trauma Services District; Karen Krieger, System Director, Public Affairs; Pam Scardina, Manager/Financial Services; Marliese Mooney, Physician Leadership Council Consultant/Planning Committee; Bob Simpson, President/LeeSar; Gayle Reynolds, Chief Financial Officer/LeeSar; Peter Glennon, Director/Relationship Management/SEI Investments; Terry Gerlich, Client Investment Strategist/SEI Investments; Chris Lamarca, Healthcare Investment Director/SEI Investments; Bob Johns, Guest; Beth Kilgore, Executive Secretary/Board of Directors NOTE: Documents referred to in these minutes are on file by reference to this meeting date in the Office of the Board of Directors and on the Board of Directors website at for public inspection. SUBJECT DISCUSSION ACTION FOLLOW-UP MEETING CALLED TO ORDER PUBLIC INPUT There was no Public Input. The FINANCE COMMITTEE OF THE WHOLE meeting was CALLED TO ORDER at 1:02pm by Marilyn Stout, Finance Chairman/Board Treasurer. The Board sits as the Lee Memorial Health System Board of Directors of Gulf Coast Medical Center, Lee Memorial Hospital, HealthPark Medical Center and the Board of Directors of its subsidiary corporations: Cape Memorial Hospital, Inc. doing business as Cape Coral Hospital; Lee Memorial Medical Management, Inc.; Lee Memorial Home Health, Inc.; and HealthPark Care Center, Inc. CONSENT AGENDA Marilyn Stout asked if anyone wished to pull any of the items listed on the Consent Agenda for discussion: A. June 18, 2009 Finance Committee Meeting Minutes B Board Liaison Appointments to Fill Vacant Positions (Exhibit 1) A motion was made by Linda Brown to approve the following Consent Agenda items: A. June 18, 2009 Finance Committee Meeting Minutes B Board Liaison Appointments to Fill Vacant Positions (Exhibit 1) The motion was seconded by James Green and it carried with no opposition. 2 nd QUARTER INVESTMENT PERFORMANCE REPORT Peter Glennon and Terry Gerlich presented the 2 nd Quarter Investment Performance Report (Exhibit 2). John Wiest said the future of finances will be moving toward saving and investing and will impact our System strategy. Discussion ensued with regard to diversifying with international trading and the future of commercial real estate markets. John Wiest said we will be reviewing the investments at the September 10 th Finance Committee meeting for further discussion. A motion was made by Gene Principi to accept the 2 nd Quarter Investment Performance Report (Exhibit 2). The motion was seconded by Nancy McGovern and it carried with no opposition. Investments Sept 10 th Finance COW SALE OF MEDICAL OFFICE PROPERTY TO HEALTHCARE REALTY TRUST (HRT) Alison Ash reviewed the information provided in the Sale of Medical Office Property to Healthcare Realty Trust (HRT) (Exhibit 3). She said there were issues in the development and cross access easement agreement however, they continue to work with HRT on negotiations to resolve these issues. She said the sale of the property to HRT will release LMHS from further property management and will allow LeeSar to continue in their development plans. Dawson McDaniel said he is concerned with LeeSar s level of satisfaction on the current negotiations being made regarding this property. Bob Simpson said he has not had the opportunity to A motion was made by Joe Catti to approve the sale of

6 LEE MEMORIAL HEALTH SYSTEM BOARD OF DIRECTORS FINANCE COMMITTEE OF THE WHOLE MEETING MINUTES Thursday, August 20, 2009 Page 2 of 3 SUBJECT DISCUSSION ACTION FOLLOW-UP be involved in negotiations. He said there may be complications with the property plans that will affect operations however, he is optimistic. Discussion ensued regarding alternative options for property entrances for LeeSar and HRT at the Winkler Road property. John Wiest said there has been a tremendous amount of work that has gone into the negotiations between LMHS and HRT, which has resulted in a positive outcome for all. approximately 5.44 acres adjacent to Southwest Florida Regional Medical Center hospital property along Winkler and Evans Avenues to Healthcare Realty Trust (HRT) for a purchase price of $678,341 less deductions and pro-rations; also approving Jim Nathan, LMHS CEO authorization to execute the sales contract (Exhibit 3). The motion was seconded by James Green and it carried with no opposition. DEMOLITION OF SOUTHWEST FLORIDA REGIONAL MEDICAL CENTER Dave Kistel reviewed the Demolition of Southwest Florida Regional Medical Center request for approval (Exhibit 4). Dave said the recommendation being presented today is to approve awarding Cross Environment Services, Inc. the demolition contract. Dawson McDaniel said Dave and his team have done a fantastic job during this entire demolition process. A motion was made by Dawson McDaniel to approve awarding the Southwest Florida Regional Medical Center demolition contract to Cross Environmental Services, Inc. for the amount of $884,676; also approving Jim Nathan, LMHS CEO authorization to sign the contract after approved legal review. The motion was seconded by James Green and it carried with no opposition. LEESAR HEALTHTRUST PARTNERS, LLC John Wiest provided a brief update on the LeeSar HealthTrust Partnership, LLC tax exemption status (Exhibit 5). He said this change will result in annual operational savings in taxes. John said he will be reporting back to the Board on this matter at the September 10, 2009 Finance Committee meeting. LeeSar Sept 10 th Finance COW MANAGED CARE CONTRACT AMERIGROUP Anne Rose provided an update on the status of the termination of the managed care contract with Amerigroup (Exhibit 6). She said they have been working for twelve to fifteen months to resolve various issues and to ensure every member of the plan will have the opportunity to reenroll and participate in the network providers. She also announced Amerigroup has plans to leave this area soon. She said there will be communication to the public to notify them of the change. BONITA COMMUNITY HEALTH CENTER (BCHC) FUNDING John Wiest reviewed the request for additional funding for the Bonita Community Health Center (Exhibit 7). He said our goal is for BCHC to become a financially viable stand alone facility. John said BCHC will be reporting funding initiatives to the Board at the November 19 th Finance meeting since there are no finance meetings in October. Richard Akin requested a report from BCHC at the September 10, 2009 Finance meeting. John Wiest said the final results will not be available until the November meeting however, they can provide an update. Jim Nathan said LMHS is in the best place possible in terms of our partnership with NCH in current and future planning. A motion was made by Ken Marcum to approve funding for the Bonita Community Health Center (BCHC), in the amount of $1,263,000 (to be paid in installments over the next 14 months (August 2009 to Sept 2010), Joint owners: Lee Memorial Health System and Naples Community Hospital will be contributing equal amounts. The motion was seconded by Linda Brown and it carried with no opposition. BCHC Update Sept 10 th Finance COW FINANCIAL & STATISTICAL REPORTS June 30, 2009 July 31, 2009 Mike German reviewed the Financial and Statistical reports for June 30, 2009 (Exhibits 8-10) and July 31, 2009 (Exhibits 11-13). John Wiest said there are a lot of very good operations throughout the organization, resulting in an overall gain. Linda Brown said the financials are very impressive and she is very proud of all System staff for working so hard to produce these great results. Jim Nathan said we are currently working toward communicating to staff our appreciation of their hard work. John Wiest said the System needs to stay prudent and to continue encouraging employees to be actively engaged in controlling expenses. (James Green left the meeting at 2:15pm) A motion was made by Linda Brown to accept the Financial and Statistical reports for June 30, 2009 (Exhibits 8-10) and July 31, 2009 (Exhibits 11-13). The motion was seconded by Nancy McGovern and it carried with no opposition. QUARTERLY CAPITAL REPORT Mike German reviewed the Quarterly Capital Report for June 30, 2009 (Exhibit14). (James Green entered the meeting at 2:34pm) A motion was made by Joe Catti to accept the Quarterly Capital Report for June 30, 2009 (Exhibit 14). The motion was seconded by Nancy McGovern and it carried with no opposition.

7 LEE MEMORIAL HEALTH SYSTEM BOARD OF DIRECTORS FINANCE COMMITTEE OF THE WHOLE MEETING MINUTES Thursday, August 20, 2009 Page 3 of 3 SUBJECT DISCUSSION ACTION FOLLOW-UP FY 2010 BUDGET Operating Budget Acute Care Hospital Room Rates Capital Budget Capital Budget Request Process OTHER ITEMS Board Member Compensation Full Board Meeting Location Change NEXT REGULAR MEETING John Wiest said there was a major effort in preparing the FY 2010 Budget for the August Finance Committee. He introduced Brian Church and said Brian has done an incredible job in preparing and organizing next year s budget. Brian Church reviewed the FY 2010 Operating Budget (Exhibit 15). Discussion ensued regarding the depreciation and appreciation on the consolidated balance sheet between 2008 and 2009 based on the accelerated depreciation of Southwest Florida Regional Medical Center. Further discussion ensued regarding the future of government reimbursement. John Wiest reviewed the FY 2010 Acute Care Hospital Room Rates (Exhibit 16) for approval. Jim Nathan said each year (by law) the hospital room rate must be approved by the Board to be included in the budget independently. John Wiest said LMHS still remains below the state average on room rates. John Wiest reviewed the FY 2010 Capital Budget (Exhibit 17). He said in addition to approving the Capital Budget he would also recommend consideration of 2010 additional funding requests for necessary equipment if funds become available. He said there were items denied based on lack of funds, not necessity. Donna Giannuzzi reviewed the Capital Budget Request Process presentation (Exhibit 18), which included information on capital requests for 2010 and recommendations for consideration of additional capital in the future. She said we are not asking for approval on additional capital, we are informing the Board of future possibilities for funding based on System needs. Linda Brown requested future reports on requests in project format which will help with philanthropy. Cathy Stephens provided an update on Board member compensation. She said Jim Humphrey s office is still working on this issue with the state and she will keep the Board posted of any news. Cathy announced there is a location change for the August 24, 2009 Board of Directors meeting, which is now being held in the Lee Memorial Hospital Auditorium at 1:00pm. The date of the next REGULAR Finance Committee of the Whole meeting is Thursday, September 10, 2009, 1:00 p.m. in the Lee Memorial Hospital Boardroom. REMINDER NO FINANCE COMMITTEE MEETING IN OCTOBER. A motion was made by Joe Catti to approve the FY 2010 Operating Budget (Exhibit 15). The motion was seconded by James Green and it carried with no opposition. A motion was made by Joe Catti to approve the FY 2010 Acute Care Hospital Room Rates (Exhibit 16). The motion was seconded by Richard Akin and it carried with no opposition. (Joe Catti left the meeting at 3:00pm) A motion was made by James Green to approve the FY 2010 Capital Budget subject to the approval of the 2010 Operating Budget(Exhibit 17). The motion was seconded by Nancy McGovern and it carried with no opposition. (Frank La Rosa left the meeting at 3:16pm) ADJOURNMENT The Finance Committee of the Whole meeting was ADJOURNED at 3:18pm by Marilyn Stout, Finance Chairman/Board Treasurer. Minutes were recorded by Beth Kilgore, Executive Secretary/Board of Directors Office Linda Brown, MSN, ARNP Board Secretary

8 Indicators PEOPLE LMHS STRATEGIC SCORECARD SUMMARY FYTD July 2009 FYTD Trend* Favorable Direction Period Reported FY 2008 Actual FY 2009 Target Fiscal YTD Actual Current Period Vacancy Rate Jul % 5.0% 2.89% 2.96% Total Turnover Jul % 13.0% 9.5% Year 1 Turnover Rate Jul-09 New Indicator for FY % 9.97% QUALITY Mortality Rate - Acute Jul % 1.91% 1.65% 1.65% Medication Errors(Level II) per 10,000 Qtr ALOS - Acute Jul Surgical Infection Rate - Acute Qtr % 1.50% 1.32% 1.20% SERVICE Patient Satisfaction Qtr HCAHPS (% Top Box) - Likelihood to Recommend Jun % 66.3% 64.1% 68.5% New COMMUNITY Indicator for Establishing Public Image FY 2009 Baseline New Indicator for Establishing Medical Staff Satisfaction Uncompensated Care & Charity (in thousands) Jul-09 Philanthropy - Total Gifts Qtr 3 FINANCE FY 2009 New Indicator for FY 2009 New Indicator for FY 2009 Operating Margin Jul % Baseline FY 66,723 FYTD 55,711 CM 5,535 $56,248 $6,023 FY 5,553 FYTD 4,943 CQ 1,000 5,670 1,751 FY 2.25% FYTD 2.4% CM 1.3% 4.6% 5.7% Cash/Debt Ratio Jul % 61.0% 59.7% Bond Rating Moodys / S&P ***** Jul-09 New Indicator for FY 2009 A2 / A A3 / A n/a Days in Accounts Receivable Jul FY 51.5% Wages % of Net Revenue Jul % FYTD 51.4% CM 52.3% 49.1% 47.9% FY $6,699 FYTD $6,706 Net Revenue per CMI Adjusted Admission Jul-09 $6,568 CM $6,827 $6,672 $6,975 FY $6,540 FYTD $6,542 Cost per CMI Adjusted Admission Jul-09 $6,545 CM $6,739 $6,365 $6,574 = at or better than target No Update = below target - no immediate concern = below target - immediate concern ***** - Moodys has LMHS on a "Negative Outlook" watchlist Prepared by Planning and Strategy

9 L E E M E M O R I A L HEALTH SYSTEM BOARD OF DIRECTORS RECOMMENDED ACTION FOR BOARD APPROVAL (Action includes Acceptance, Approval, Adoption, etc) Keep form to one page, SUBMIT (thru SLC Member) ELECTRONICALLY to L Drive Miscellaneous - BOD Presentations by Noon the Friday before you re scheduled on agenda. DATE: September 10, 2009 LEGAL SERVICE REVIEW? YES_X_ NO SUBJECT: Merge LeeSar Healthtrust Partners LLC Into LeeSar, Inc. REQUESTOR & TITLE: John Wiest, Chief Finance Officer Lee Memorial Health System PREVIOUS BOARD ACTION ON THIS ITEM (IF ANY) (justification and/or background for recommendations internal groups which support the recommendation i.e. SLC, Operating Councils, PMTs, etc.) None SPECIFIC PROPOSED MOTION: Approval to merge LeeSar Healthtrust Partners LLC into LeeSar, Inc. PROS TO RECOMMENDATION LeeSar Inc. has received a 501(C)(3) Designation from IRS. This merger will save $200,000 operational expense as well as allow us to access the tax free bond market for funding of our new facility. CONS TO RECOMMENDATION None LIST AND EXPLAIN ALTERNATIVES CONSIDERED Remain an LLC and not take advantage of tax exempt status. FINANCIAL IMPLICATIONS Budgeted Non-Budgeted (including cash flow statement, projected cash flow, balance sheet and income statement) Approximately $200,000 annual operational savings in taxes. Additional savings in property taxes upon completion of new service center as well as sales tax during construction. OPERATIONAL IMPLICATIONS (including FTEs, facility needs, etc.) None SUMMARY BOD/Forms/Board (Action) Reporting Form - revised 6/16/08 cs

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14 L E E M E M O R I A L HEALTH SYSTEM BOARD OF DIRECTORS RECOMMENDED ACTION FOR BOARD APPROVAL (Action includes Acceptance, Approval, Adoption, etc) Keep form to one page, SUBMIT (thru SLC Member) ELECTRONICALLY to L Drive Miscellaneous - BOD Presentations by Noon the Friday before you re scheduled on agenda. DATE: 09/10/09 LEGAL SERVICE REVIEW? YES NO SUBJECT: Bonita Community Health Center (BCHC) Operations Report REQUESTOR & TITLE: Suzanne Bradach, Interim CEO PREVIOUS BOARD ACTION ON THIS ITEM (IF ANY) (justification and/or background for recommendations internal groups which support the recommendation i.e. SLC, Operating Councils, PMTs, etc.) N/A SPECIFIC PROPOSED MOTION: Accept the Bonita Community Health Center (BCHC) Operations Report. PROS TO RECOMMENDATION None LIST AND EXPLAIN ALTERNATIVES CONSIDERED None CONS TO RECOMMENDATION None FINANCIAL IMPLICATIONS Budgeted Non-Budgeted (including cash flow statement, projected cash flow, balance sheet and income statement) The company will need cash infusions for the next twelve to twenty-four months. OPERATIONAL IMPLICATIONS (including FTEs, facility needs, etc.) See Attachment. SUMMARY The economic environment remains a challenge in terms of ongoing interest rates and business volumes. Expense adjustments in labor and other direct expenses have occurred. The completion of the ASC joint venture arrangement and expansion of service volumes will continue to be addressed over the coming months. See attachment for further detail. BOD/Forms/Board (Action) Reporting Form - revised 6/16/08 cs

15 BONITA COMMUNITY HEALTH CENTER Finance Committee Update September 10, 2009

16 BONITA COMMUNITY HEALTH CENTER 2010 Budget 2009 Projected Net Revenue $ 5,547,092 $ 5,547,092 Other Income 1,110,000 1,129,438 Total Revenue 6,657,092 6,676,530 Salaries & Benefits 3,304,141 3,759,326 Drugs and Medical 637, ,227 Other Expenses 2,521,463 2,741,432 Bad Debt 138, ,677 Total Operating Expense 6,601,508 7,276,662 Operating Gain (Loss) 55,584 (600,132) Depreciation 883, ,065 Bond Interest 2,057,000 2,081,282 Net Loss $ (2,885,360) $ (3,588,479)

17 BONITA COMMUNITY HEALTH CENTER Volume Trends FY 06 FY 07 FY 08 FY 09 Walk-in clinic 12,460 10,472 10,778 10,445 Radiology 11,486 10,852 10,424 11,900 Rehab 3,771 3,397 3,831 3,300 ASC 9,134 9,182 8,375 7,033 Totals 36,851 33,903 33,408 32,678 Walk-in volumes down 16% Surgical volumes down 23% Rehab volumes down 13%

18 BONITA COMMUNITY HEALTH CENTER Labor management (FTE s) 2006 FTE s FTE s FTE s FTE s FTE s budget 49.0 Walk-in volumes down 16% Surgical volumes down 23% Rehab volumes down 13%

19 BONITA COMMUNITY HEALTH CENTER Interest rate swaps Effective dates June 14, 2007 & August 1, 2007 Termination dates June 1, 2012 & December 1, 2012 In 2008, the interest rate relationships used to evaluate the benefit of the swap changed. This resulted in effective interest rates above the 5.72% and 5.275% fixed rates targeted for the transaction. In 2009, the interest rate on the variable rate taxable bonds averaged 8.6% and 8.8% respectively.

20 BONITA COMMUNITY HEALTH CENTER Interest rate swaps Additional interest expense above the fixed rates of 5.275% and 5.72% 2009 $650, budget $650,000

21 BONITA COMMUNITY HEALTH CENTER Impact of revenue and expense initiatives Initial 2010 estimated net loss $ (3,809,032) Labor savings 681,476 Other revenue & expense adjustments 242,196 Current 2010 budgeted net loss (2,885,360) Swap impact on interest rate expense 650,000 Increase in non-surgical business (10%) 267,637 Increase tenant occupancy 170,000 New service line - echocardiography 60,000 Expanded rehabilitation services 300,000 Total net loss $ (1,437,723)

22 L E E M E M O R I A L HEALTH SYSTEM BOARD OF DIRECTORS RECOMMENDED ACTION FOR BOARD APPROVAL (Action includes Acceptance, Approval, Adoption, etc) Keep form to one page, SUBMIT (thru SLC Member) ELECTRONICALLY to L Drive Miscellaneous - BOD Presentations by Noon the Friday before you re scheduled on agenda. DATE: September 10, 2009 LEGAL SERVICE REVIEW? YES_x NO SUBJECT: The Sanctuary Ambulatory Surgery Center Suite Design-Build Contract REQUESTOR & TITLE: David Cato, System Director of Outpatient Services PREVIOUS BOARD ACTION ON THIS ITEM (IF ANY) (justification and/or background for recommendations internal groups which support the recommendation i.e. SLC, Operating Councils, PMTs, etc.) On April 19, 2007 the Board of Directors approved the lease and commencement of Construction activities for the East Ambulatory Services Project (The Sanctuary OP Center including the Exterior Build out of the Ambulatory Surgery Center). SPECIFIC PROPOSED MOTION: Board approval to enter into a contract with ERDMAN Company d/b/a Erdman Healthcare Facilities Company in the State of Florida in the amount of $3,790,253 to complete the construction of the Ambulatory Surgery Center Suite located at the Sanctuary Outpatient Center. This Design-Build Contract is contingent upon final LMHS council and outside construction review. PROS TO RECOMMENDATION Need to meet ACHA approval deadlines to commence Construction by October Complete a comprehensive OP medical complex for the residents of Lee County that includes the Regional Cancer Center, diagnostics, LPG, Lee Specialty Physicians, and the Surgery Center. Provide an OP Surgery Center for our employed surgeons, Cancer Center Surgeons, and others in the community to utilize. Enhance LMHS ability to compete for profitable OP surgery market share. CONS TO RECOMMENDATION None. LIST AND EXPLAIN ALTERNATIVES CONSIDERED N/A FINANCIAL IMPLICATIONS Budgeted _X Non-Budgeted (including cash flow statement, projected cash flow, balance sheet and income statement) The funding to complete the construction infill for the Surgery Center suite is currently funded with existing approved funds. Capital funding for equipment, furniture, and IT has not been attained at this time. Due to the current capital constraints at LMHS we are investigating alternative ways to fund the capital needed for equipment, furniture, and IT for this project. We will be coming back the LMHS board to review options. OPERATIONAL IMPLICATIONS (including FTEs, facility needs, etc.) No operational implications until the Center is completed. SUMMARY This is the final phase of a multi year project at the corner of I-75 and Colonial Blvd (The Sanctuary). Construction of the OP Diagnostic Center including the exterior build of the Surgery Center was completed this year with the Diagnostic Center opening on May 4, The interior construction of the Ambulatory Surgery Center will be completed in the summer of 2010 and at its completion will compliment the existing OP Diagnostic Center and the Regional Cancer Center at the Sanctuary. This project serves as a fundamental component of LMHS s ambulatory strategy. This project and location is strategically located in the market and will enable LMHS to provide comprehensive OP clinical care from diagnostic services to OP surgery. This project will also provide significant contribution to the LMHS revenue stream upon implementation. BOD/Forms/Board (Action) Reporting Form - revised 6/16/08 cs

23 Erdman Standard Form Version Date 7/5/05; Revised 7/12/07, 2/19/09, 5/18/09 Page 1

24 DRAFT 08 / 11 / 2009 DESIGN-BUILD CONTRACT FOR Lee Memorial Health System AMBULATORY SURGERY CENTER Medical Office Building 8960 Colonial Center Drive Ft. Myers, Florida ERDMAN PROJECT NUMBER Erdman Standard Form Version Date 7/5/05; Revised 7/12/07, 2/19/09, 5/18/09 Page 2

25 INDEX of ARTICLES Preamble Article 1 General Provisions Article 2 Design-Build Documents Article 3 Completion Article 4 Contract Sum and Terms of Payment Article 5 Changes in the Work Article 6 Hazardous Conditions and Differing Site Conditions Article 7 Public Construction Bond Article 8 Insurance and Indemnification Article 9 Warranties Article 10 Owner Responsibilities Article 11 Design-Builder Responsibilities Article 12 Dispute Resolution Article 13 Termination Article 14 Miscellaneous Provisions Exhibits: "A" Construction Drawings, Building Specifications and Medical Equipment Specifications "B" Application for Payment "C" Change Order Form "D" Existing Drawings E Final Contractor s Affidavit Erdman Standard Form Version Date 7/5/05; Revised 7/12/07, 2/19/09, 5/18/09 Page 3

26 ERDMAN PREAMBLE This Design-Build Contract (hereinafter Contract ) is entered into this day of August, in the year of 2009, by and between the OWNER: Lee Memorial Health System 2776 Cleveland Avenue Fort Myers, FL (hereinafter Owner ), a public body created by Chapter , Laws of Florida and DESIGN-BUILDER: ERDMAN COMPANY d/b/a Erdman Healthcare Facilities Company in the State of Florida P.O. Box Madison, WI (hereinafter Design-Builder), a Wisconsin corporation, for services in connection with the following: PROJECT: The Ambulatory Surgery Center East Ft Myers Medical Office Building 8960 Colonial Center Drive Ft Myers, FL (hereinafter Project ). In consideration of the mutual covenants and agreements herein, Owner and Design- Builder agree as set forth herein. Erdman Standard Form Version Date 7/5/05; Revised 7/12/07, 2/19/09, 5/18/09 Page 4

27 ARTICLE 1 GENERAL PROVISIONS 1.1 Spirit of Cooperation The Owner and the Design-Builder agree to cooperate fully with each other, and proceed on the basis of trust and good faith to permit each party to realize the benefits afforded under the Design-Build Documents. 1.2 Change Order 1.3 Day A Change Order is a written instrument issued after the execution of this Contract signed by Owner and Design-Builder stating their agreement to changes in the Work and adjustment to the Contract Sum, Scheduled Substantial Completion Date, or both. Day or Days shall mean calendar days unless otherwise specifically noted in the Design-Build Documents. 1.4 Hazardous Conditions Hazardous Conditions are any materials, wastes, substances and chemicals deemed to be hazardous under applicable Legal Requirements, or the handling, storage, remediation, or disposal of which are regulated by applicable Legal Requirements. 1.5 Legal Requirements Legal Requirements are all applicable federal, state and local laws, codes, ordinances, rules, regulations, orders and decrees of any government or quasigovernment entity having jurisdiction over the Project or Site, the practices involved in the Project or Site, or any Work. 1.6 Others Others means other contractors and all persons at the Worksite who are not employed by Design-Builder or its Subcontractors. 1.7 Project The Project consists of the total design and construction of the ambulatory surgery center located at 8960 Colonial Drive, Fort Myers, Florida Erdman Standard Form Version Date 7/5/05; Revised 7/12/07, 2/19/09, 5/18/09 Page 5

28 1.8 Representatives of the Parties 1.9 Site.1 Owner s Representative Owner designates the individual listed below as its Owner's Representative, which individual shall have complete authority to transmit and receive information to and from the Design-Builder, and interpret, define and determine Owner s decisions with respect to prosecution of the Work. Suzanne Bradach -Corporate Director Special Projects Lee Memorial Health System 9800 S Health Park Drive, Suite 202 Ft Myers, FL Phone: Suzanne.bradach@leememorial.org.2 Design-Builder's Representative Design-Builder designates the individual listed below as its Design-Builder's Representative, which individual shall have complete authority to transmit and receive information to and from the Owner, and interpret, define and determine Design-Builder's policies and decisions with respect to prosecution of the Work. Tim Marusarz Construction Project Manger Southeast Region Erdman Company 3100 Northwoods Place, Suite F Norcross, Georgia tmarusarz@erdman.com fax Site is the land or premises on which the Project is located Subcontractors 1.11 Work A Subcontractor is any person or entity who has a direct contract with Design- Builder to perform a portion of the Work. Work means the design, construction, and other services required by the Design- Build Documents, including furnishing labor, materials, equipment and services reasonably inferable from the Design-Build Documents, to be provided by Design- Builder. The Work may constitute the whole or a part of the Project. Erdman Standard Form Version Date 7/5/05; Revised 7/12/07, 2/19/09, 5/18/09 Page 6

29 ARTICLE 2 -DESIGN-BUILD DOCUMENTS 2.1 The Design-Build Documents form the Design-Build Agreement. The Design-Build Documents shall include this Contract between Owner and Design-Builder, its attached exhibits, other documents listed in the Contract and exhibits, including the Contract Design Drawings and Specifications referenced in Exhibit A, and Modifications, as defined in Section 14.9 hereof, to the Design-Build Agreement. 2.2 The Design-Build Documents are intended to be complementary and interpreted in harmony so as to avoid conflict, with words and phrases to be interpreted in a manner consistent with design and construction industry standards. In case of any inconsistency, conflict or ambiguity between or among the Design-Build Documents, the documents shall govern in the order in which they are listed below (e.g shall take precedence over and so forth): Modifications of the Design-Build Agreement as contemplated in Section 14.9; except to the extent used to make construction documents part of the Design-Build Documents; This Contract, including all exhibits, attachments, and documents listed in this Contract, except for the Contract Design Drawings and Specifications referenced in Exhibit A; The most current construction documents, as described in Section 11.1; The Contract Design Drawings and Specifications referenced in Exhibit A. ARTICLE 3 -COMPLETION 3.1 Substantial Completion The Design-Builder shall achieve Substantial Completion of the Work on or before the Scheduled Substantial Completion Date. The Scheduled Substantial Completion Date shall be, subject to adjustments permitted by the Design-Build Documents, as follows: 40 weeks after receipt of building permit from the City of Ft Myers and Letter of Commencement to Proceed with construction by the Owner. Substantial Completion is the stage in the progress of the Work when the Work or designated portion thereof is sufficiently complete in accordance with the Design- Build Documents so that the Owner can occupy or use the Work for its intended use The Design-Builder shall notify the Owner when the Work or an agreed upon portion thereof is substantially completed by issuing a Certificate of Erdman Standard Form Version Date 7/5/05; Revised 7/12/07, 2/19/09, 5/18/09 Page 7

30 Substantial Completion which shall: (1) indicate the date Substantial Completion of the Work was achieved, (2) include a list of items to be either completed or corrected by mutual agreement between the parties (hereafter Punch List ) and (3) fix the time by mutual agreement of the parties within which the Design-Builder shall complete Punch List items In the event of a dispute regarding when or whether the Design-Builder has achieved Substantial Completion of the Work, the dispute shall be resolved pursuant to Article Final Completion Final Completion shall occur when Punch List items are complete. Additional items discovered after completion of the Punch List will be corrected under the provisions of Article 9 -Warranties. 3.3 Delays in the Work & Force Majeure If causes beyond the Design-Builder s control delay the commencement or progress of the Work, then the Scheduled Substantial Completion Date, shall be equitably adjusted by Change Order. Such causes shall include but not be limited to: changes in the Work requested by Owner, acts or omissions of the Owner, separate contractors employed by the Owner, or Others, hazardous materials not brought to the site by Design-Builder, differing site conditions, wars, floods, earthquakes, labor disputes (including but not limited to strikes, slowdowns, job actions, picketing and secondary boycotts), unusual delays in transportation, epidemics, adverse weather conditions not reasonably anticipated, fire or other casualty loss, public disorder or riot, unavoidable accidents, delays in regulatory inspections or approvals, or any other casualties, circumstances or cause beyond the control of the Design-Builder In addition to Section 3.3.1, if adverse weather conditions not reasonably anticipated, whether specifically related to the Project Site or not, impact the Project, then the Scheduled Substantial Completion Date shall be equitably adjusted by Change Order. Such impacts shall be limited to labor or material cost increases resulting from such adverse weather conditions. Hurricanes, windstorms, storm surges, floods, earthquakes, tsunamis and other similar extreme conditions shall, in any event, be considered not reasonably anticipated. For purposes of this clause, adverse weather conditions shall include earthquakes In the event of any delay under this Section 3.3, the parties agree to undertake reasonable steps to mitigate the effect of such delays. Erdman Standard Form Version Date 7/5/05; Revised 7/12/07, 2/19/09, 5/18/09 Page 8

31 3.3.4 Notwithstanding anything contained herein to the contrary, the Design- Builder shall not be entitled to recover any monetary damages it might sustain as a result of any delay caused the Design-Builder by any act of the Owner, any separate contractor employed by the Owner, or any other causes whatsoever. Design-Builder further agrees that it shall make no claim for compensation for such delay and shall accept in full satisfaction for such delays any extensions of time which are granted to it by Owner. 3.4 Owner Occupancy. If the Owner wishes to use or take occupancy prior to Final Completion, it may do so, provided that such occupancy or use is consented to by the insurer, if so required by the insurer, authorized by public authorities having jurisdiction over the Work, the parties have a written agreement stating the responsibility of each party for security, maintenance, heat, utilities, insurance and damage to the Work and the Owner makes payment as provided in Section below. ARTICLE 4 -CONTRACT SUM AND TERMS OF PAYMENT 4.1 Contract Sum The Owner shall pay Design-Builder for the latter's performance of this Contract, and for the materials and equipment utilized within the Project, subject to additions and deductions by Change Order, the total Contract Sum of: Three million seven hundred ninety thousand two hundred fifty three and *****************************************************************00/100 ($3,790,253.00) 4.2 Schedule of Values An Initial Payment of $281, for design services is credited against the contract sum upon execution of this Contract. On or before October 11, 2009, the Design-Builder shall submit to the Owner a schedule of values for the various portions of the Work aggregating the Contract Sum, divided so as to facilitate progress payments and, to the fullest practical extent based on unit prices ( Schedule of Values ). The Schedule of Values shall be in a form specified and approved by the Owner. The Schedule of Values shall be used as the basis of Design-Builder s progress payments. 4.3 Progress Payments Application for Payment. Design-Builder shall deliver to the Owner on the last business day of each month, an Application for Payment covering the Work performed during such month. Provided the Application for Payment is received not later than the last day of the month, the Owner shall make payment to the Design-Builder not later than the fifteenth (15 th ) day of the Erdman Standard Form Version Date 7/5/05; Revised 7/12/07, 2/19/09, 5/18/09 Page 9

32 following month. With each Application for Payment, the Design-Builder shall submit such evidence as may be necessary, in the sole opinion of the Owner, to demonstrate costs incurred or estimated to be incurred on account of the Work during such month and the percentage of completion of each category of Work. The Owner shall pay the Design-Builder that portion of the Contract Sum which correlates with the portion of the Work actually performed by the Design-Builder during such month less the retainage as set forth in subparagraph 4.7 below, provided that the payment amount before retainage will not exceed the percentage of completion of the Work multiplied by the Contract Sum as set forth in the Schedule of Values Payment for Materials Stored Offsite. Payment shall be made for materials and equipment suitably stored offsite provided Design-Builder furnishes to the Owner the following:.1 The location of the materials;.2 Evidence that title to the materials and equipment will pass to the Owner upon payment therefore;.3 Evidence that the materials and equipment are adequately insured; and.4 Such other matters as the Owner may reasonably require in order to protect its interest Certification and Release Documentation. In each Application for Payment, the Design-Builder shall certify that: there are no known valid construction liens or bond claims outstanding at the date of this application, that all due and payable bills with respect to the Work have been paid to date or shall be paid from the proceeds of this Application for Payment, and that there is no known basis for the filing of any construction liens or bond claims on account of the Work, and that waivers from all subcontractors and materialmen furnishing labor and materials in connection with the Work have been obtained in such form as to constitute an effective waiver of bond claims under the applicable laws of the State of Florida. Concurrent with each Application for Payment, the Design-Builder shall execute and furnish a waiver of lien rights current to the effective date of such application and delivery of a consent of surety. The Design-Builder shall also deliver with each application and as a condition of payment thereof, waiver of bond claims for each subcontractor who has provided labor, services, or materials through the effective date of the previous Application for Payment. The form of said partial waivers of bond claims shall be as prescribed under the provisions of Section (2)(b), Florida Statutes. Erdman Standard Form Version Date 7/5/05; Revised 7/12/07, 2/19/09, 5/18/09 Page 10

33 4.4 Sales and Use Tax The Design-Builder shall pay all sales, use and other similar taxes in effect at time the parties enter into this Contract for the Work or portions thereof provided by the Design-Builder. The Design-Builder shall provide that each Subcontractor shall pay all sales, use and other similar taxes for the Work or portions thereof provided by the Subcontractor Final Payment Final payment, including retainage amounts, shall be made by Owner to Design- Builder on or about thirty (30) days following final completion of performance of all Work and the Design-Builder s submission of a final Application for Payment therefore and final contractor s affidavit, provided that the Design-Builder has fully performed its obligations hereunder. In that regard, it is further agreed that the final Application for Payment shall not be made until Design-Builder has fully and finally completed all Work, including punch list items, and delivered to Owner a complete final release of all claims arising or which could arise out of this Agreement in the form prescribed under the provisions of Section , Florida Statutes. The acceptance of final payment by Design-Builder shall constitute a waiver of all claims by Design-Builder. The form of the final contractor s affidavit to be provided by Design-Builder shall be identical to that attached as Exhibit E. Upon Final Completion, as defined above in Section 3.2, all amounts withheld by Owner under Section 4.7 shall be paid to Design-Builder. Before Final Payment is due, it is understood the Design-Builder will obtain and furnish bond releases from all persons who have supplied labor or materials to Design-Builder in connection with the construction of the Project and who at such time may still have bond rights by reason thereof. 4.6 Payment is Not Acceptance. The payment of any Application for Payment by Owner, including the final Application for Payment, does not constitute approval of, nor acceptance of that part of the Work to which such payment relates nor shall such payment relieve Design-Builder of any of its obligations nor constitute a waiver of any claim which the Owner may then have or thereafter discover. 4.7 Retainage. Ten percent (10%) retainage shall be withheld from all progress payments made to the Design-Builder until the Work is fifty percent (50%) complete and, thereafter, the retainage amount shall be reduced to five percent (5%). Erdman Standard Form Version Date 7/5/05; Revised 7/12/07, 2/19/09, 5/18/09 Page 11

34 4.8 Withholding of Payment. The Owner may withhold payment on any Applications for Payment made by Design- Builder if any one or more of the following conditions exist:.1 Any part of such payment it attributable to Work which is defective or not performed in accordance with the requirements of this Agreement;.2 The Design-Builder has failed to make payments promptly to the Design- Builder s subcontractors or subconsultants or for labor or materials used in the Work for which Owner has made payment to the Design-Builder;.3 Damage to the separate Owner or separate contractor caused by the fault or neglect of the Design-Builder to the extent not covered by insurance; or.4 If the Owner, in good faith, determines that the portion of the Contract Price then remaining unpaid will not be sufficient to properly complete the Work, whereupon no additional payments will be due to the Design-Builder hereunder unless and until the Design-Builder, at its sole cost, performs a sufficient portion of the Work so that such portion of the Contract Sum then remaining unpaid is determined by the Owner to be sufficient to complete the Work. 4.9 Interest on Unpaid Sums. In the event a bona fide dispute exists with respect to any of the sums for which payment has been requested, no interest shall be due on such disputed sums until such dispute is resolved, provided, that all undisputed sums shall have been paid in due course. If Owner does not pay Design-Builder any undisputed sum as provided for herein, interest shall accrue on said payments at a rate of five percent (5%) per annum. ARTICLE 5 CHANGES IN THE WORK 5.1 Owner reserves the right to order Work changes in the nature of additions, deletions, or modifications, without invalidating this Agreement, and agrees to make corresponding adjustments in the Contract Price and time for completion, if appropriate. 5.2 All changes in the Work must be authorized by a written Change Order executed by the Owner and Design-Builder. Erdman Standard Form Version Date 7/5/05; Revised 7/12/07, 2/19/09, 5/18/09 Page 12

35 5.3 Notwithstanding anything contained in this Agreement to the contrary, design costs shall not form a part of the cost associated with any change until the achievement of ACHA S Stage III Approval for the Project and formal acceptance by the Owner of the construction drawings for the Project. For purposes of this paragraph, the term, Design Costs shall include, but shall not be limited to, fees paid to architects, engineers, and other professionals together with any incidental cost associated with the provision of design services. 5.4 The Design-Builder agrees to accept its direct costs, plus an overhead and profit allowance of seven percent (7%) as full compensation for all change order Work and expressly waives any claims for additional compensation associated with change order Work unless otherwise agreed to in writing by the Owner in advance of the Design-Builder performing said Work. For the purposes of this Agreement, the term, Direct Cost shall mean all of those costs directly related to the performance of the change order Work. 5.5 The Design-Builder shall be compensated for changes in the Work necessitated by the enactment or revision of codes, laws or regulations subsequent to the acceptance by the Owner of the construction drawings for the Project. 5.6 All changes in the Work authorized by a change order shall be performed under the applicable provisions of this Agreement. ARTICLE 6 HAZARDOUS CONDITIONS AND DIFFERING SITE CONIDITIONS 6.1 Hazardous Conditions Unless otherwise expressly provided in the Design-Build Documents to be part of the Work, Design-Builder is not responsible for any Hazardous Conditions encountered at the Site. Upon encountering any Hazardous Conditions, Design-Builder will stop Work immediately in the affected area and duly notify Owner and, if required by Legal Requirements, all government or quasi-government entities with jurisdiction over the Project or Site Upon receiving notice of the presence of suspected Hazardous Conditions, Owner shall take the necessary measures required to ensure that the Hazardous Conditions are remediated or rendered harmless. Such necessary measures shall include Owner retaining qualified independent experts to (i) ascertain whether Hazardous Conditions have actually been encountered, and, if they have been encountered, (ii) prescribe the remedial measures that Owner must take either to remove the Hazardous Conditions or render the Hazardous Conditions harmless. Erdman Standard Form Version Date 7/5/05; Revised 7/12/07, 2/19/09, 5/18/09 Page 13