Q&A/Legal roles of The Hospital, LHA, The City & The Clinic

[Maggie Fraley]

This article was posted on facebook from onelakewood.com. It addresses specific misconceptions, on the record, from a source that knows the legal standing of all the parties involved, the city's law director, Kevin Butler.
http://www.onelakewood.com/frequently-a ... -hospital/
His conclusions :
(1) The Cleveland Clinic does not have a lease with the city and is not obligated to run Lakewood Hospital through the end of the city’s lease with LHA.
(2) LHA, the city’s tenant and the entity responsible for running the hospital, could cease operating the hospital notwithstanding the lease, leaving the city with no partners to run the hospital.
(3) The Cleveland Clinic is not required to cover LHA’s operating losses.
(4) Neither LHA nor the Cleveland Clinic is obligated to invest significant capital money into the hospital facility—making major improvements at the hospital the city’s responsibility.

I believe a fundamental starting point for all sides is where do we go NOW?
I'm sure that many Deck readers would enjoy respectful and civil discourse on these important central points.

[Pam Wetula]

Please read the Definitive agreement attached before you assume that Cleveland Clinic has no financial responsibility etc... to Lakewood Hospital, LHA etc...

The lease does NOT spell out everything - the Definitive agreement has much more information. Read it please. As "THE MEMBER" of the LHA, CCF has many responsibilities.

pam wetula

[christopher dan]

So would the clinic or LHA just walk away from the hospital Building and leave in empty?

How can the city Vote on anything while in litigation?

It seems like we are just going in circles?

what does the master agreement involve? why are these questions so hard to answer

it just seems like nothing is actually being accomplished.

what is the city going to do when the clinic has enough ans says see ya...the city could be left with nothing? Im confused?

Actually i have one last questions what is the status with the law suite ? where does its stand, has it been to court where can we find info on this--- all we here is there s litigation but where is that in the process?

[Brian Essi]

Christopher,

My answers are in red:

So would the clinic or LHA just walk away from the hospital Building and leave in empty?

Not at all likely.

How can the city Vote on anything while in litigation?

They could vote, but assets cannot be transferred without paying all liabilities.

It seems like we are just going in circles?

Yes

what does the master agreement involve? why are these questions so hard to answer

It is more detail on how we're being screwed--they don't want to share it with us so they avoid answering.

it just seems like nothing is actually being accomplished.

It's all secret so we don't know, but I tend to agree.

what is the city going to do when the clinic has enough ans says see ya...the city could be left with nothing? Im confused? In my opinion we will never be left with nothing--but some fear mongers are saying that--so they are trying to confuse

Actually i have one last questions what is the status with the law suite? where does its stand, has it been to court where can we find info on this--- all we here is there s litigation but where is that in the process? pending

[Jim O'Bryan]

This article was posted on facebook from onelakewood.com. It addresses specific misconceptions, on the record, from a source that knows the legal standing of all the parties involved, the city's law director, Kevin Butler.
http://www.onelakewood.com/frequently-a ... -hospital/
His conclusions :
(1) The Cleveland Clinic does not have a lease with the city and is not obligated to run Lakewood Hospital through the end of the city’s lease with LHA.
(2) LHA, the city’s tenant and the entity responsible for running the hospital, could cease operating the hospital notwithstanding the lease, leaving the city with no partners to run the hospital.
(3) The Cleveland Clinic is not required to cover LHA’s operating losses.
(4) Neither LHA nor the Cleveland Clinic is obligated to invest significant capital money into the hospital facility—making major improvements at the hospital the city’s responsibility.

I believe a fundamental starting point for all sides is where do we go NOW?
I'm sure that many Deck readers would enjoy respectful and civil discourse on these important central points.

Maggie

You have left a couple points out.

1) LHA's responsibility to the City of Lakewood, both morally and financially.
a) What happens to their $53 million in assets that have always been described as community assets?
b) What is their responsibility for damages to the property, as they leased a working hospital from us, and the deal does call for them to at least "maintain it."

2) What is the Mayor and Councilwoman's Madigan's fiduciary responsibility to the City of
Lakewood? It supersedes and other agreement or responsibility they have, as spelled out
in the laws of the State of Ohio?

3) Why should; we put what is clearly public money into a yet unnamed non-profit?

4) If you agree th hospital was run into the ground, why would you trust them with this deal?

5) Would you not say honesty and transparency in government is a problem too?

6) Management, how do you feel about how this whole thing was managed?

Carry on, thanks for coming on and sharing your thoughts.

.

[Brian Essi]

I believe a fundamental starting point for all sides is where do we go NOW?

Maggie,

This is a fair and logical question, but Kevin Butler's analysis is not grounded in fact and is not supported by law.

1. Butler cites no law at all for his conclusions.

2. Butler cites no facts, except that two legal agreements exist.

3. Butler has misinterpreted the agreements in many key respects (more on that later).

4. Butler engages speculation wrapped around conjecture, e.g. Butler crystal balls a bankruptcy scenario for LHA that currently has $50 million in liquid assets, is supported by LHF with over $30 million and if all that fails, LHA has multibillion CCF guaranteeing 1:1 cash to debt.

5. Butler was on President of Council in 2010 when he let CCF/LHA out of key terms of the agreements he is now opining on--back then he believed that changes he endorsed would make the hospital sustainable for "years and decades to come." Plans to close the hospital predated Butler's proclamation. So he has a poor track record of predicting the future of healthcare. In his 4 page rendition of fictional scenarios where the City has says no rights and is left with nothing, he concludes without any mention of a plan or details that his "analysis" will inform us on "a robust healthcare delivery model in Lakewood for years and decades to come."

Building seemingly logical thinking on a series of false premises is a recipe for disaster--it won't result a fair solution to the core problem we face.

If Butler's analysis in the cornerstone of the "negotiations" with CCF, it will only result in further litigation and political and social turmoil for out City.

More to follow.....

[Jennifer Pae]

My thoughts, questions, and comments from the Lakewood Observer exchange between Christopher Dan and Brian Essi:

Brian Essi: My answers are in red:

Christopher Dan: So would the clinic or LHA just walk away from the hospital Building and leave in empty?

Brian Essi: Not at all likely.

Jenn Pae comments / questions: If the Clinic leaves and LHA ceases to exist, which is a very real possibility, who is going to run it? Does Mr. Essi believe that the City can force them to continue to operate the hospital? Or that some other healthcare system is more than willing to take over operations? If so who? Who is going to compete against the Clinic and UH? The City is not a healthcare system and is not possible for the municipality to take over inpatient hospital operations.

Christopher Dan: How can the city Vote on anything while in litigation?

Brian Essi: They could vote, but assets cannot be transferred without paying all liabilities.

Jenn Pae comments / questions: These are three separate issues as I outlined previously. Litigation does not prevent City Council from continuing their responsibilities. Council will determine the best course of action only if and when the judge makes a decision. The negotiations will potentially address the terms of the existing lease so comments like "assets cannot be transferred without paying all liabilities" are not an issue. The lease is not written in stone and can be negotiated to be amended or even terminated.

Christopher Dan: It seems like we are just going in circles?

Brian Essi: Yes

Jenn Pae comments / questions: No. The hospital on its own cannot sustain itself. Two nationally recognized healthcare consulting firms, Subsidium and Huron, have confirmed this through the following:
- the changing trends in healthcare towards the inpatient model and the goal of keeping people out of hospitals,
- that this area's healthcare market is extremely competitive and is only going to get more competitive,
- the area is over-bedded,
- there is a physician shortage,
- there are significant capital improvements needed without a means to finance it. If a financial institution would even attempt to let the hospital issue revenue bonds knowing all of the financial and operational risks it faces, the lender will require a guarantee that the debt service will be repaid well over break-even profits. So there may be patient revenue, but will it be sufficient to operate the hospital, maintain the hospital, and pay the debt service? Pretty risky in my opinion. If that can't happen, the City could be responsible for the improvements.

There is a proposal before the community to provide healthcare and emergency services based on the above findings. Council can act and negotiate the best possible agreement it can, or they cannot chose not to. It is pretty clear what will happen if Council does not act. Or they do act, and voters could reject the legislation because of the potential charter amendment. We then go back to the first question asked by Mr. Dan.

Christopher Dan: what does the master agreement involve? why are these questions so hard to answer

Brian Essi: It is more detail on how we're being screwed--they don't want to share it with us so they avoid answering.

Jenn Pae comments / questions: What master agreement? There is no master agreement because negotiations have just begun. Or does Christopher mean the 1996 Definitive Agreement between LHA and the Cleveland Clinic?

Christopher Dan: it just seems like nothing is actually being accomplished.

Brian Essi: It's all secret so we don't know, but I tend to agree.

Jenn Pae comments / questions: LHA, a private non-profit, spent around two years studying the issues detailed above and determining what they felt was the best course of action for their organization. Was it driven by the Cleveland Clinic? Absolutely, because per the 1996 Definitive Agreement Lakewood Hospital became part of the Cleveland Clinic health system.

Once the Clinic and LHA finalized the Letter of Intent, which is a non-binding proposal, it was immediately introduced to City Council because of the terms of LHA and the City's lease agreement. So for over the past 8 months, City Council has done their due diligence studying and understanding the issues in a very public manner. They are now ready to negotiate and asked their legal representatives to begin doing so through a resolution at last night's council meeting.

Christopher Dan: what is the city going to do when the clinic has enough ans says see ya...the city could be left with nothing? Im confused?

Brian Essi: In my opinion we will never be left with nothing--but some fear mongers are saying that--so they are trying to confuse

Jenn Pae comments / questions: See my comments above. Who? And don't say the Cleveland Clinic has kept all other interested parties out. Any other potential interested parties are aware of the risks Lakewood Hospital faces as a stand-alone facility, and throw in a charter amendment that forces a voter referendum regarding the operations of the hospital, will make it nearly impossible to sustain it as an inpatient hospital. Some may call it fear mongering, but I call it good business sense and reality.

Christopher Dan: Actually i have one last questions what is the status with the law suite? where does its stand, has it been to court where can we find info on this--- all we here is there s litigation but where is that in the process?

Brian Essi: pending

Jenn Pae comments / questions: I don't believe the judge has made any decisions as of today. I do know that there have been multiple motions from both the plaintiffs and the defendants, and depositions have been taking place.

[Brian Essi]

I move under Rule 12(b)(6) or in the alternative, a "My Cousin Vinnie" response if you get my drift....

She never laid a glove on me.

More later...

[Bridget Conant]

Jennifer Pae

Negotiations have just begun

The never ending changing story. We go from an announcement of an agreement with the Clinic to build a health center and the creation of a "new foundation" to "negotiations have just begun.

What happened to that ER and Wellness Center??

[Brian Essi]

I believe a fundamental starting point for all sides is where do we go NOW?

Maggie,

This is a fair and logical question, but Kevin Butler's analysis is not grounded in fact and is not supported by law.

1. Butler cites no law at all for his conclusions.

2. Butler cites no facts, except that two legal agreements exist.

3. Butler has misinterpreted the agreements in many key respects (more on that later).

4. Butler engages speculation wrapped around conjecture, e.g. Butler crystal balls a bankruptcy scenario for LHA that currently has $50 million in liquid assets, is supported by LHF with over $30 million and if all that fails, LHA has multibillion CCF guaranteeing 1:1 cash to debt.

5. Butler was on President of Council in 2010 when he let CCF/LHA out of key terms of the agreements he is now opining on--back then he believed that changes he endorsed would make the hospital sustainable for "years and decades to come." Plans to close the hospital predated Butler's proclamation. So he has a poor track record of predicting the future of healthcare. In his 4 page rendition of fictional scenarios where the City has says no rights and is left with nothing, he concludes without any mention of a plan or details that his "analysis" will inform us on "a robust healthcare delivery model in Lakewood for years and decades to come."

Building seemingly logical thinking on a series of false premises is a recipe for disaster--it won't result a fair solution to the core problem we face.

If Butler's analysis in the cornerstone of the "negotiations" with CCF, it will only result in further litigation and political and social turmoil for out City.

More to follow.....

Jenn,

You did not address my post above.

Please note that Summers’ “WAR on the POOR” is supported by his high priced crisis management gurus and you doing this on a payroll that I fund through paying taxes.

I am just a lowly independent citizen volunteer defending the underserved as best I can with no funding or support.

Pae: Per the 1996 Definitive Agreement Lakewood Hospital became part of the Cleveland Clinic health system.

Essi: Check Mate! Please tell Butler that this means the Clinic is now the tenant because Lakewood Hospital is part of the Clinic—that’s an admission of one thing Butler and Summers have been denying in the lawsuit.

Pae: Council will determine the best course of action only if and when the judge makes a decision.

Essi: I agree with you that the lawsuit has good chance of saving the hospital and the underfunded Plaintiffs are crushing the rich guys. Just image where we would be if Summers switched sides? The rascals would be run out of town after being ordered to pay us millions to rebuild what they stole and destroyed while Summers cheered them on.

Pae: Who is going to compete against the Clinic and UH?

Essi: Call the FTC, you have verified a violation of federal antitrust laws in restraint of trade if you believe nobody can compete and these parties are in collusion.

Pae: Any other potential interested parties are aware of the risks Lakewood Hospital faces as a stand-alone facility. This area's healthcare market is extremely competitive and is only going to get more competitive,

Essi: Risk and competition are not dirty words—they are things to embrace-- not things to be feared. The Clinic’s competitors don’t want it as a stand-alone facility—they want it and Columbia Road as their satellites right in the center of the Clinic’s market— you believe that Huron/Subsidium said it is going to get more competitive right? You can’t have more competition with if there are no competitors. Pssst CCF fears competition. That’s why they got Summers to reject the $15 million UH offered for Columbia Road—CCF should pay a premium for Columbia to keep it from their main competitor—not get it for a song especially if their agreement is as flimsy as Butler says right?

Pae: And don't say the Cleveland Clinic has kept all other interested parties out.

Essi: The Cleveland Clinic has kept all other interested parties out—see the FTC thingy above—they are a Predator within the meaning of the Antitrust laws.

Pae: The negotiations will potentially address the terms of the existing lease so comments like "assets cannot be transferred without paying all liabilities" are not an issue.

Essi: WOW! That sounds like you already know what’s cooking and LHA will not be dissolved? Please share the details with us. Otherwise, LHA can’t be dissolved unless provisions are made to satisfy all claims—didn’t you admit that above that we have to wait for Judge O’Donnell? BTW, no real “negotiations” are going to occur—anybody who thinks otherwise doesn’t understand the Clinic—Butler’s strategy was doomed the minute he published what this thread started on. And he only put that farcical nonsense out there for political purposes to try cover Summers’ horrid plan (the failed LOI).

Pae: The lease is not written in stone and can be negotiated to be amended or even terminated.

Essi: Now we are getting some place—I suggested amending the lease back in April and then again on May 13th—I’m glad if City Hall is coming around to that thinking. Amending the lease to grant the City the right and option to terminate the lease---this would give City Council absolute power over the assets that all belong to us. It would also give Council power over the Clinic’s market share in Lakewood. Summers and Butler want to cede that power away.

Pae: If the Clinic leaves and LHA ceases to exist, which is a very real possibility, who is going to run it?

Essi: In my opinion this would be the best case scenario possible because CCF and LHA led by Summers have screwed everything up--- but that scenario is the least likely to occur. I have been told of at least three parties currently interested and working on proposals in anticipation of new Council leadership and a new mayor who will contain the Clinic and give the suitors a real opportunity.

Jenn, can you and Dru tell me the names of the developers, retailers, office tenants, hotel operators for Summers’ plan? If not, then don’t expect the suitors to come forward and waste their time with a corrupt Mayor and brainwashed Council President.

Pae: Does Mr. Essi believe that the City can force them to continue to operate the hospital?

Essi: This is a classic red herring—the Mayor distancing himself from LHA is pathetic—he leads LHA! Why should we have to “force” anyone to do what the agreements and the law requires them to do—run a hospital for Lakewood? A real Mayor with true leadership skills would turn to OUR 10 Lakewood appointees on LHA and get 2 others on board (isn’t Haber he Mayor’s friend so we only need 1 more) and say: “You will do what I and City Council tell you to because your duties are to operate a hospital for my people and my underserved citizens--so here is how we are going to do this together…1, 2, 3” Done! However, the LHA board is currently fictional and dysfunctional—it consists of junkies with only one supplier of their information who have been hooked CCF’s junk for so long they can’t break the habit—you saw a prime example of that in Bullock on Monday night when he “mainlined” on Jones and Ritchie’s best stuff, he defended there lies and made up some of his own when there is documentary proof and testimony of state regulators to the contrary. This is what junkies do—they lie to cover their habit. Send the junkies to rehab. Summers is the “Chief Pusher” of CCF’s crack.

Pae: the area is over-bedded.

Essi: Why have Main campus and Fairview been overflowing resulting increased “door to provider” times, deaths and debility? Why does the Decanting Plan call for stealing Lakewood’s bed licenses for Fairview? Just because an experts writes something doesn’t make it true—they were looking at abstract statistics—people are not statistics.

Pae: there is a physician shortage.

Essi: Physicians will flock to Lakewood if CCF leaves and the hospital stays—physicians don’t like working for the Clinic. This is another example of how the Huron and Subsidium reports are flawed---they were not engaged to look back at WHY independent physicians left Lakewood? In 18 years CCF has decimated and run the independents out of Lakewood—more have left since the announces closing—even Ricthie admits this. The Summers Plan will continue that trend, not solve it.

Pae: and throw in a charter amendment that forces a voter referendum regarding the operations of the hospital, will make it nearly impossible to sustain it as an inpatient hospital.

Essi: The existing charter already has a provision for a referendum and so do many other communities with thriving community hospitals. So making it automatic actually speeds up the process.

[Bill Call]

(1) The Cleveland Clinic does not have a lease with the city and is not obligated to run Lakewood Hospital through the end of the city’s lease with LHA.
(2) LHA, the city’s tenant and the entity responsible for running the hospital, could cease operating the hospital notwithstanding the lease, leaving the city with no partners to run the hospital.
(3) The Cleveland Clinic is not required to cover LHA’s operating losses.
(4) Neither LHA nor the Cleveland Clinic is obligated to invest significant capital money into the hospital facility—making major improvements at the hospital the city’s responsibility.

I believe a fundamental starting point for all sides is where do we go NOW?
I'm sure that many Deck readers would enjoy respectful and civil discourse on these important central points.

Thanks for joining in Maggie.

The definitive agreement is here:

http://www.onelakewood.com/pdf/Lakewood ... eement.pdf

From the definitive agreement ("Member" is the Cleveland Clinic):

Make any material change in its business, including any changes
in accounting principles and practices or make any capital expenditures individually in excess
of $2.5 million or in excess of $5 million in the aggregate ;
7.1.4 Execute, renew or extend any lease obligations The following corporate actions to be taken by the Lakewood Board of
Trustees shall require the approval of the Member

(but may not be exercised independently by
the Member)

THE IMPORTANT PART: may not be exercised independently by the Member.


1.1.1.1 Changes to Lakewood's Articles of Incorporation and ·Code of
Regulations.

1.1.1.2 Any merger, consolidation or other affiliation of Lakewood with
any other entity or the sale of all or substantially all of the assets of Lakewood or a dissolution
or material change in the operations or purpose of Lakewood.
1.1.1.3 Any management contract, lease or similar contract between
Lakewood and any outside entity involving a significant portion of the assets or operations of
Lakewood's strategic and financial plans, including the
implementation of new or elimination of existing services offered at Lakewood. For purposes
of Section 1.1.1.9, the term services" includes the types of services available at Lakewood at
the closing of this Agreement, including, but not limited to Obstetrics/Gynecology, Pediatrics,
Emergency Medicine Services, Pathology, Medicine and Surgery. The term "services" does not
include the magnitude or level of service, such as hours of service, or the manner (including
changes in technology) by which the types of services are provided; provided, however, that the
change in magnitude or levels of services does not, as a practical matter result in the significant
reduction in such service so as to be an effective elimination of such service.

THE QUESTION: The Clinic is forbidden to make any changes in any of the above without the approval of Council. When where those changes approved? Who on council approved them?

Council did approve some changes under the Vision for Tomorrow:

http://portals.clevelandclinic.org/Abou ... fault.aspx

The Clinic reduced serves as approved by Council but failed to make any of the investment necessary to implement the Vision for Tomorrow. Instead the CCF began the immediate "decanting" of Lakewood Hospital. Was the CCF dealing in good faith? Is the CCF liable for actions detrimental to the financial health of Lakewood?


From the agreement:

All of the rights set forth in this Section 1.1 shall be exercised by CCF in
a fiscally prudent manner, consistent with Lakewood's charitable purpose and Lakewood's
obligations under the lease, referred to in Section 1.8, below, in order to preserve the operations
of Lakewood as a going concern,

THE QUESTION: Did the CCF operate the Hospital in a fiscally prudent manner, consistent with Lakewood's charitable purposes? Did the CCF act to "preserve the operations of Lakewood as a going concern"?

From the agreement:

Make any material change in its business, including any changes
in accounting principles and practices or make any capital expenditures individually in excess
of $2.5 million or in excess of $5 million in the aggregate ;


The Cleveland Clinic began charging "administrative fees" to run the Hospital some time ago. The City never approved those charges. The City certainly never approved an increase in administrative fees from $14 million to $24 million over a 4 year period.

QUESTION: Is a charge of $24 million per year a material change in business or change in accounting practice? Without those fees Lakewood Hospital would have made enormous profits.

What should the City do?

1. Seek the help of the Ohio Attorney General to remove ALL members of the Board's of the LHF and LHA. They have failed their fiduciary duty in a big way.

2. Join the lawsuit against the Clinic.

3. Seek restoration of all services until the lawsuit is settled or adjudicated.

4. Seek a release from the Clinic to allow the City to seek other offers.

5. Hire a broker to pursue other offers.

6. Ask the Ohio Attorney General to investigate conflicts of interest among the Boards, its members and the CCF.

That's just the start.

What the City should NOT do

1. Give retroactive approval to the looting of Lakewood Hospital.

2. Accept the Clinics offer of a second rate medical office building.

Please join us at the next meeting of Save Lakewood Hospital.

This isn't going to be easy but we can save community health care, physician independence and the economic health of Lakewood.

[Brian Essi]

[quote="Bill Call
From the agreement:

All of the rights set forth in this Section 1.1 shall be exercised by CCF in
a fiscally prudent manner, consistent with Lakewood's charitable purpose and Lakewood's
obligations under the lease, referred to in Section 1.8, below, in order to preserve the operations of Lakewood as a going concern,
[/quote]

Bill,

As always, you have nailed it!

I don't mean to detract from the excellent game plan you outlined for the future, but I could not resist underscoring the above provision you noted.

This one provision you point to alone:

1. Ties CCF to the charitable mission and Lease obligations and creates a contractual breach as a result of the CCF looting.

2. Crushes every one of Butler's obtuse arguments.

2. Knocks Humpty Dumpty off the wall and of his horses and of his men (Kevin, Jenn. Jay and Jay etc.) cannot put that Jeannie back in the bottle again.

Jenn, Kevin, Jay and Jay.

Game Set And Match for this week.

Can't wait for next week's obtuse propaganda....and how our modest, mild mannered Republican accountant, Bill Call, will out lawyer the law director and Thompson Hine.

Bravo Bill!