Talk about temptations. The city of Cookeville, Tenn., with its population rising to over 25,000 and a multimillion-dollar convention center on its wish list, is being offered $113 million in cash - $52 million this year, with the rest to follow over the next five years.
All the city has to do to claim the money is something several other towns in this rural part of Tennessee have already done: turn its public hospital over to the private sector.Under the proposal, a private health-care company would lease the 227-bed hospital, which last year had profits well in excess of $6 million. The company would continue most of the $23 million expansion program the city has already started and plow other funds into making the hospital a top-notch regional facility.
The $113 million would be enough to fill plenty of potholes, build the convention center and finance other public works projects. And the city could even think about doing away with property taxes for the foreseeable future.
That's how the mayor and other Cookeville officials sized up the situation this spring. But once the privatization notion became public, the plan went from a straightforward business deal to an emotionally charged issue.
"It's torn the town in two," says City Manager Jim Shipley.
Cookeville General Hospital is a point of pride in this part of central Tennessee, a home-grown facility poised to rival the big hospitals in Nashville and Memphis.
It's also a symbol of the city's ability to take care of its own. Cookeville General is where indigent residents can go for treatment, no matter how sick and how poor they are.
But there's more at work than hometown boosterism. There's also a lot of fear. Residents are concerned that, if a big health-care company comes in, it will skim off the hospital's profits and send Cookeville cash to Knoxville, Nashville or to a corporate headquarters beyond Tennessee's borders.
Then there are the nurses, technicians and orderlies who work at the hospital and have been public employees for years. They and their families see privatization as a direct threat to their livelihoods.
The $113 million offer has become such a touchy issue on so many levels that, while the city continues to explore the lease option and write guarantees of employment for existing staff into the proposed agreement, the city council will go only so far. Before any signatures are inked onto a contract, the proposal will be put on the ballot and the citizens of Cookeville will make the decision.
What has happened in Cookeville is happening elsewhere in towns large and small. As health care companies have grown more powerful, more national and more tied to Wall Street and stockholders, hospital privatization has become political dynamite.
Even in big cities such as New York and major urban counties such as Los Angeles, where public hospital subsidies are bleeding budgets of millions of dollars, proposals to privatize the facilities raise firestorms of protest.
This spring, when New York Mayor Rudolph W. Giuliani tried to sell three of the city's 11 publicly owned hospitals, he was hit with lawsuits and a host of grass-roots protests that have set back his privatization plans.
Nonetheless, it's easy to see why overburdened localities are looking to unload their public hospitals. Of the 1,300 or so public hospitals in the country, a decrease of some 400 in the past 15 years, about one-third are in danger of failing, according to a hospital expert at the Robert Wood Johnson Foundation.
Many are in huge urban areas where they are beset by declining federal aid to pay for the uninsured and increased competition from other hospitals for the Medicaid patients who have been their bread and butter. Local government subsidies often make up the difference, and the drain on the public purse is immense.
When these subsidies become more than a financially shaky locality can bear - as is the case right now in Los Angeles County, New York City and Washington, D.C. - privatization becomes an attractive alternative.
But this isn't the situation in Cookeville, or in other places such as Austin, Texas, and Denver, where privatization is also on the active agenda. If there's no financial hemorrhage, why would a locality take on a privatization fight?
The answer runs like a current through inner-city, suburban and rural public hospitals alike, whether robust or impoverished: The issue is governance.
The sunshine laws, procurement rules, civil service regulations, restrictions on raising capital, decision-making processes - all the rules and regulations that government institutions must operate under - are dead weight for a hospital that has to act quickly and work efficiently to survive in the super-competitive and fast-changing health care market.
"The fast eat the slow in this business. If it takes you a long time to accomplish something, you may not be a player," says Patricia Gabow, who manages Denver's Department of Health and Hospitals and has explored various privatization options for Denver General Hospital.
Running a public hospital is not like other government services, she points out, It's at risk in a competitive market.
"If people in your community don't like the police force, they don't go use the police in a neighboring community," she says. "If we're not operating our hospital well, our patients will go elsewhere."
And it's hard to operate well when key decisions have to wend their way from hospital administrators to legislative councils and the mayor or county executive.
"Actions and decisions are often made not only in a business or health care context but in a political one as well," says Anne B. Camper, corporate counsel to the National Association of Public Hospitals.
On top of all this, there are public procurement rules that must be adhered to, which are typically more geared to buying pencils rather than health care equipment and supplies. In some localities, the rules prevent hospitals from participating in the efficiencies of cooperative purchasing groups.
Civil service regulations also lump hospitals in with the rest of the government in terms of collective bargaining. Even though public hospitals are vying with the private sector for employees, they are unable to tailor their salary and benefits packages to meet the competition's.
Individually, each governance issue makes it incredibly trying to run a public hospital efficiently. Taken together, they can make it almost impossible to be competitive.
(Distributed by Scripps Howard News Service.)