Dear Mr. Long:
In 1994 the West Volusia Hospital Authority found itself in a difficult position. It had been experiencing significant losses operating the hospital then known as West Volusia Memorial Hospital. The hospital was in need of major renovations, it was losing market share, it was being heavily subsidized by tax dollars and was unable to qualify for the type of financing that would infuse the necessary capital to bring the facility up to contemporary standards. The Authority developed a request for proposals to operate the facility and after a lenghty competitive review and negotiation process, selected Memorial Health Systems, Inc. to join with the Authority in a forty-year lease for the operation of the hospital facilities. Consistent with its proposal, Memorial Health Systems formed a subsidiary not-for-profit corporation, Memorial Hospital West Volusia, Inc., to serve as Lessee.
In compliance with its obligations under the Lease, Memorial HospitalWest Volusia began the task of evaluating and upgrading the physical plant and service capabilities of the hospital. Existing programs were dramatically improved, construction projects were initiated and completed, and new services were introduced to serve the healthcare neds of the residents of the Authority's district.
The increases in the quality and scope of services provided at the hospital were not accomplished without cost. In addition, difficulties in obtaining funding from the Authority for care provided to indigent residents of the taxing district, decreases in funding from the federal government for Medicare and related programs, and other external factors reduced the revenue that was anticipated by Memorial HospitalWest Volusia at the time that it entered the Lease. The impact of these factors is reflected in the report on the performance standards prepared by Price Waterhouse Coopers, dated February 4, 2000, a copy of which has been previously presented to the Authority.
That report and the terms of the Lease were discussed at a meeting of the Board of Directors of Memorial HospitalWest Volusia, Inc., which was properly called and conducted on March 21, 2000. After extended discussion, and in the spirit of and strong desire to maintain the Lease, a motion was made and seconded to exercise the special right of early termination as stated in section 11.03 of the Lease between the West Volusia Hospital Authority and Memorial HospitalWest Volusia, Inc. The motion passed by a vote of eight in favor, with one abstention. Therefore, pursuant to the terms of Section 11.03 of the Lease, Memorial HospitalWest Volusia, Inc., by this letter provides notice of its intention to terminate the Lease, which termination will be effective September 30, 2000.
The exercise of this right is necessitated by the current economic status of the Hospital. Memorial has presented a proposal to the Authority asking for funding to be budgeted for the coming years that would, in our opinion, provide sufficient additional revenue to the facility to permit it to operate at a ``break-even'' point. To date, we have not received from the Authority any requests for additional information, nor any counterproposals regarding the relationship embodied in the Lease. We remain available to answer any questions regarding that funding request, or any other relevant inquiry regarding the Lease or Memorial HospitalWest Volusia, Inc.
We deeply regret the need to exercise the rights stated in this letter but feel that we have no choice given the present circumstances. We are willing to discuss any proposals that the Authority may have regarding modification of the Lease. However, we strongly feel that any such proposals must be brought forward with all possible speed and that the salient elements of any such modification must be agreed to within 90 days from the date of this letter. The uncertainty associated with prolonging discussions beyond that point would be seriously detrimental to the Hospital in terms of employee morale, medical staff support, and patient confidence in the healthcare delivery system that we have worked so hard to develop for the West Volusia community. If at the end of the stated period acceptable modifications to the Lease have not been negotiated it will be imperative to then immediately begin formulation of a plan for the return of the facility to operational control by the Authority. In any event, it is Memorial's intention to fully cooperate with the Authority to facilitate a smooth transition as provided in the Lease.
Section 11.03(b)(ii) obligates the Authority to refund to Memorial Health Systems, Inc., the amount of all Advances made, as that term is defined in the Lease. Attached is a schedule containing a preliminary calculation of the amount that is due to Memorial Health Systems from the Authority. Those calculations result in the estimated net amount of $42,440,303.00 that is due to Memorial from the Authority in cash as of the date of termination of the Lease.
We remain available to answer any questions that the Authority may have.
Sincerely
Richard A Lind
President
Memorial HospitalWest Volusia, Inc.
CC:
I. Amounts Due Memorial Health System, Inc.
Section 6.27 `Defeasance of Bonds'
| A. Principal | "Additional | |||
| Balance 12-1-94 | Rent" | 7,527,061 | ||
| Amortization--1995 | 135,000 | 7,392,061 | ||
| " --1996 | 145,000 | 7,247,061 | ||
| " --1997 | 155,000 | 7,092,061 | ||
| " --1998 | 170,000 | 6,922,061 | ||
| " --1999 | 190,000 | 6,732,061 | ||
| " --2000 | 205,000 | 6,527,061 | ||
| B. Advance--Loss on refinancing Authority Bonds | 944,353 | |||
| 7,471,414 | ||||
II. Amounts Paid or Committed By Memorial HospitalWest Volusia, Inc. Section 11.03 `Special Right of Early Termination'
| Annual | Cumulative | ||
| A. Building and Equipment | |||
| 1995 | 10,609,346 | 10,609,346 | |
| 1996 | 9,400,116 | 20,009,462 | |
| 1997 | 4,929,082 | 24,938,544 | |
| 1998 | 4,440,934 | 29,379,478 | |
| 1999 | 6,118,760 | 35,498,238 | |
| est FY 2000 | 1,500,000 | 36,998,238 | |
| Total Due--Building & Equipment | 39,998,238 | ||
| C. Amount to close out the FRS "mirror" Retirement Plan | |||
| Estimated Prior Service Commitment @9/30/2000 * | 7,000,000 * | ||
| Sub-totals---Advances and Commitments | 43,998,238 | ||
| Gross Amount Due from Authority | 51,469,652 | ||
* Not applicable if the Authority acts in accordance with Section 11.03(b)(I) of the Lease. Actual amount of prior service cost @ effective date of termination to be determined by Plan actuary.
| Gross Amount Due from Authority (brought forward) | 51,469,652 | |
| Net Working Capital Due to Authority by Memorial | ||
| PriceWaterhouseCoopers | 6,166,344 | |
| Funded Depreciation @ 12-1-94 | 2,863,005 | 9,029,349 |
| Estimated Net Amount Due Memorial In Case At Termination | 42,440,303 | |
The undersigned certifies the above computation of the Estimated Net Amount Due from the West Volusia Hospital Authority in accordance with Sections 6.27 and 11.03(b)(ii) of the Lease and Transfer Agreement dated July 28, 1994 if the "Special Right of Early Termination" described in Section 11.03 is exercised by Memorial (Lessee).
Note: This estimate is based, in part, upon audited financial statements @ FYE 9/30/99. Consequently, some amounts will be adjusted for transactions occurring after the preparation date of this estimate; other amounts subject to adjustment based upon audit and/or updated actuarial reports.
[sign] 3/23/00
The material above was provided by
The material was re-keyed and adopted for web display by Tanner Andrews, one of the Taxpayers of Volusia County. Transcription errors are purely the fault of Andrews, of course.
Release of this information is done in the way of a paid political advertisement provided by Tanner Andrews, P.O. Box 1208, DeLand 32721, independent of any campaign or committee. This material is also on display at the offices of the West Volusia Hospital Authority. No candidate has approved this material.
There are people who would prefer that you not be aware that both the numbers and the entire debt may be bogus.