Hospital signs management agreement with McLeod Health; new CEO to start Wednesday
by Breanna Bradham | May 24, 2016 10:18 pm
Last Updated: May 24, 2016 at 10:24 pm
The Clarendon Health Systems board voted Tuesday night unanimously to accept a management agreement with McLeod Health System in Florence, part of which will see the current administration step back from the management of day-to-day activities at the hospital.
“This now sets up a period of time over the next six weeks to develop a formal legal document called the Affiliation Agreement,” said hospital board Chairman Jim Darby. “This will be a legal document that will spell out in great detail the business relationships and financial relationship that will exist in the future between what Clarendon Health District and the McLeod Organization in Florence.”
Darby said part of the new management agreement – just one step in the process toward affiliation – is having Debra Locklair of McLeod come on board with the title of CEO administrator.
“She will be here (Wednesday) morning,” Darby said. “This process will formally begin when we start doing business in the morning. While that might seem somewhat sudden, it is not in the context of the dialogue and the discussion that we have been having now for several months.”
The board began looking at affiliations earlier this year, talking with both McLeod and Palmetto Health Richland. Ultimately, the board decided in March to continue talks with Florence, unanimously approving a letter of intent to that effect.
Darby said at the time that approval was for “more like a second interview, … and the board exploring all of its option to better help the future of the hospital.”
He said then the hospital would likely enter into a business relationship with McLeod, and that now the nature of that relationship is further spelled out. He has maintained throughout the process that the affiliation with McLeod is not a sale or a merger of the hospital.
“The particular document approved tonight would be only the management agreement, which spells out the terms and working conditions that both McLeod and Clarendon Health Systems agree to that will guide how business is going to be run over the next six weeks (to lead toward the Affiliation Agreement),” Darby said.
Interim CEO and CFO Paul Schumacher said in April that the state Department of Health and Human Services, in conjunction with the S.C. Office of Rural Health, appropriated $40 million in “transformation funds” to encourage larger health systems and rural hospitals to affiliate.
The state, he said, would provide up to $4 million in funds for the rural facilities, but required the completion of a sustainability study by an independent agency.
“(They provided) some grant funds to do an in-depth assessment of the capacities of the (Clarendon) system relative to the marketplace,” Darby said. “Their recommendation was, in order to provide the high quality of medical services that we have always done at this facility, that we need to consider an affiliation agreement.”
“The affiliation agreement is essentially an agreement between hospitals such as we have here, with Clarendon Health Systems, and a larger organization that has much greater financial capacities and resources that would be beneficial to this system we have in Clarendon County.”
Darby said the hospital initially passed a letter of intent during the March meeting, and that the board then moved forward into talks of terms with McLeod.
“And then we moved into what was approved (Tuesday) by the board – the management agreement,” Darby said. “It is step by step by step.”
Darby said Tuesday’s vote marks the first time the current hospital administration “will be stepping back and (McLeod) will be managing the day-to-day operations of Clarendon Memorial.”
He did not address the status of CFO Paul Schumacher, who has served as interim CEO since former CEO Richard Stokes left the hospital in December 2015.
Ultimately, the board passed four motions in accepting the management agreement:
Allowing Darby to execute the term sheet related to McLeod Health and Clarendon Health’s potential affiliation;
Allowing Darby to execute the management services agreement between McLeod Health and Clarendon Health;
Engaging Smith Moore Leatherwood LLP on behalf of the hospital to negotiate a definitive affiliation agreement between the entities; and
Naming Locklair administrator to provide and oversee the hospital’s administration.