oanoke/Chowan Hospital, a 122-bed not-for-profit community hospital in Ahoskie, North Carolina, was leased by a subsidiary of Pitt County Memorial Hospital (Eastern Carolina Health) in February 1997 for a period of 23 years. The yearly lease amount, $1,000,014 million, is to be paid in 12 equal monthly payments to the Roanoke/Chowan Alliance, the not-for-profit organization that ran the hospital before the lease. These funds must be invested in capital improvement programs for the hospital or the hospital's affiliated medical practices or hospice. At the end of the 23-year lease, Eastern Carolina Health has the right to purchase the Roanoke/Chowan Hospital for a set payment of $100,000. A charitable foundation is being created with the $14 million surplus fund balance that the Roanoke/Chowan Hospital had on hand on the effective day of the lease, February 1, 1997.
Conversion Process
Motivation. The hospital board felt the hospital had little chance of survival as an independent facility. The previous hospital board had been discussing the need for an external partner to improve long-term survivability of the hospital for several years. During the summer of 1996, the board began to look seriously for an external partner as their census fell, costs rose, and reimbursement levels stayed flat. They discussed affiliation with several other hospitals, including Senterra Hospitals in Norfolk, VA, Columbia/HCA, and Carolinas Medical Center in Charlotte, N.C. There was concern among board members that affiliating with an outside hospital corporation or health system would not be in the best interests of the hospital or community.Public Oversight. The lease arrangement was not widely publicized in advance; there was no identifiable opposition to the arrangement. A few informational meetings were held with members of the medical community, but the community at-large appears to have been largely unaware that a lease arrangement was being considered before it was entered into. Most community members view Pitt Memorial in Greenville, NC as a natural ally since the hospital already serves as a referral point for medical care. For this reason, most members of the community did not see the lease arrangement as controversial.
The Attorney General had no involvement in this lease arrangement. The lease occurred between two 501(c)(3) hospital corporations and no antitrust issues were raised.
Fair Value. While technically a lease, at the end of the lease period, Eastern Carolina Health may purchase the hospital for $100,000. It would appear certain that the hospital would be purchased for this sum of money at the end of the 23-year lease. The members of the old hospital board were forthright about the fact that this arrangement might be viewed as highly favorable to Eastern Carolina Health. During their negotiations, the old hospital board utilized a large consulting firm to assist them in choosing from among several potential buyers and lessors.
Community Control
The community has lost control of the hospital as the Board of Eastern Carolina Health has ultimate governing authority. The community will have some role through a community governing body whose role is not yet determined. There does not appear to be a great deal of worry in the community about loss of control.Community Health Impact
Hospital Survival. Maintenance of a viable community hospital has been assured for 23 years. All but one key informant felt that the only choice for the Roanoke/Chowan board to make was to select which larger system with which to affiliate through sale or lease. There seemed to be a consensus that keeping a quality healthcare provider in this community was vitally important, and the only way this could happen was by seeking outside help.