Making a Decision 2: Guide to Communities Considering Hospital Conversion in the Carolinas

NEGOTIATING THE DEAL
Like all business transactions that involve a bargaining process, the negotiation for hospital conversion will be based on a tradeoff, with each party to the deal giving up areas of less importance in order to gain more in those areas of more importance. For the community whose hospital conversion is at hand, there is a lot at stake. Yet, the hospital whose governing body has taken the time to understand the many aspects of conversion and to evaluate the needs and important issues of the hospital and community will bring to the negotiation table a strong understanding of which areas to hold fast and which to budge. The following suggestions may help guide this process:

Get Help: There are consultants who specialize in analyzing hospital conversions and who can show the net financial value of different offers to the community, pointing out differences that may not be apparent at face value. Legal counsel is necessary to ensure that all contracts are enforceable.
Understand Your Partner's Goals: It is clearly to the advantage of the converting hospital to look closely at the situation of the potential conversion partner. A good understanding of their biases, intentions and needs allows the converting hospital to be more flexible in determining which areas to negotiate.
Review Hospital Conversion Cases: Especially those cases that are similar to those you are considering. Executive summaries of the 10 North and South Carolina hospital case studies are available in a separate report, as is the complete version of each. The Project HOPE and GAO case studies also are readily available.
Review Information on Other Facilities Owned or Operated by a Proposed Partner: North Carolina law requires that public hospitals considering sale to a for-profit hospital review information on hospital charges, services and levels of indigent care. This is probably wise for all hospitals to do, regardless of the end-point ownership status of the hospital. Decisionmakers also may want to review other areas of potential change, such in hours of hospital operation and continued commitment to medical education or religious mission.
Make Site Visits to Other Communities: Site visits to hospitals owned or operated by a prospective partner can provide useful information about their management philosophy, their commitment to quality and local control, as well as how well they follow through on commitments.
Keep a "Scorecard": The stakes involved and tradeoffs implicit in various proposals become much clearer when laid out in a scorecard (See Durham Regional Hospital example following Conclusion). Compare each possible conversion offer according to categories of potential change that are important to the hospital. This will give a clear picture of how the offers differ, which may then be compared to the priorities determined earlier.
Ask Questions: What does the prospective buyer bring to the table (e.g., access to regional networks, management expertise, capital)?
What does the prospective buyer want?
Is the mission of the buyer compatible with the mission of the sale hospital?
Is the buyer of the facility financially stable (i.e., is the buyer likely to be acquired in the future)?
How stable is the leadership of the acquiring company (i.e. has top level management undergone tremendous change)?
How has the prospective acquiring hospital held up its deals with other hospitals?
Does buyer have any important potential legal liabilities or past history that might jeopardize its performance or reputation?
What Does Your Community Think?
While obtaining community input may be cumbersome and may even slow down the decision making process, doing so will likely help those charged with making decisions more comfortable with the their final choice.
What Does Your Community Think?: While obtaining community input may be cumbersome and may even slow down the decision making process, doing so will likely help those charged with making decisions more comfortable with the their final choice.

CONCLUSION
Hopefully this guide has provided those communities who are considering the conversion of their hospital with a strong introduction to the many issues involved. There are many decisions to be made, and often no easy answers. For this reason, a fitting conclusion may to point to the recommendations for conversion made by three groups actively involved in the conversion of the nation's hospitals: The National Association of Attorneys General, the Volunteer Trustees Foundation for Research and Education, and the American Hospital Association. These groups all recommend similar broad suggestions for accountability in the conversion process (See Table 14). However, the detail of these suggestions varies. A community considering the conversion of its hospital should select the combination of suggestions best suited to its unique situation.