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HomeMy WebLinkAbout1983 - 1987 i i I First Texas Medical, Inc. - March 1, 1983 I To; The Honorable Mayor & Members of the Denton City Council The Honorable Judge & Members of the Commissioner's Court County of Denton Ladies & Gentlemen: We appreciate this opportunity to discuss our proposal to lease and operate Flow Memorial Hospital, Like you, First Texas Medical, Inc. is concerned about Flow Memorial Hospital and we want to assuro.continued delivery of quality health care for the citizens of Denton County. We hope the county, city, and First Texas Medical will be able to work together to that end. Please feel free to ask questions at any time during our presentation or to contact us later once you have a further opportunity to review the materials presented herewith. Sincerely, Darrell S, Lummus President DEL;mis 580 W. Main • Suite 201 • Lewisville, Texas 78067 0 (214) 221.2322~~ r r •TABLE OF CONTENTS Introduction i Situation Analysis The Need to Update 1 Capital Expenditures Required 2 The Proposal An Investment in the Community 5 Management of Existing Facility 7 Development of a New Hospital 10 A Plan for Indigent Care 11 Economic Impact on County/City 11 Enter Negotiations 13 First Texas Medical Experienced Hospital Management 14 Innovative Treatment Facilities 15 Economic Impact 19 First Texas Medical and Flow Hospital 20 Appendices Addendum Facilities Analysis Proposed Agreements I i INTRODUCTION This proposal from First Texas Medical, Inc. concerns more than the management of Flow Memorial Hospital. It encompasses the broader perspective of long-term planning and provision for the future of health care delivery in Denton County. Denton County has tremendous potential for bec';ming a major medical center, serving citizens with the most sophisticated care available. Unlike many areas of its size, Denton County already has a large, established medical community providing a broad range of specialty care. But we must also continue developing our hospital resources, expanding services and impr:+ving capabilities. Most importantly, we must have the foresight to plan today for a hospital that will allow us to ' meet our full potential in the future. _ i `F. SITUATION ANALYSIS The Need to U date Exiatin Facilit Flow Memorial Hospital has served citizens of Denton County well for 35 years, providing excellent hospital care and meeting the health care needs of the community. However, to continue this level of excellence, Flow Memorial Hospital must be able to grow, expanding its services and updating its facilities. Flow Memorial Hospital must keep pace with rapidly changing technology and provide a physical plant which meets all life safety and licensure codes. It must also continue to assure patient comfort and facilitate efficient delivery of care. Denton County's population growth will place ever-increasing demands on Flaw Memorial Hospital. And we will experience .increased in-migration of patients from the north Dallas area because of the relative accessibility of Denton as compared with clogged Dallas freeways. In a changing environment, Flow Memorial Hospital must also change to remain viable. 1 I Major Capital Expenditures Required Even more pressing, however, are architectural code deficiencies which must be corrected in order to continue f hospital operations. A recent survey of Flow Memorial Hospital by architects specializing in hospital architecture and construction revealed several such deficiencies.l (The full Furvey report is presented as an addendum to this document.) Theae problems were identified as requiring immediate attentions • Lack of compartmentation for smokestop barriers and fire-rated areas of refuge Lack of complying fire exits . Lack of proper fire-resistive enclosures for hazardous storage areas . Lack of sprinkling in hazardous storage areas . inadequate electrical system Renovation necessary to correct only these deficiencies will cost an estimated $5,100400, an amount which does not even account for the loss of revenues due to closure of departments during renovation. The survey further, cites design deficiencies which, although not regulated by any code, attect delivery of care. Flow f Memorial Hospital's nursing units, for example, require excessive travel by nursing personnel to visually monitor each patient, 1 As outlined by Texas Licensure standards, the Joint Commission on Accreditation of Hospitals and the N.F.P,A. This situation not only requires higher staffing levels, but potentially affects patient care as well, Correction of such design deficiencies would require additional renovation expenditures, Flow Memorial Hospital must also anticipate major expenditures within the next five years to replace worn and obsolete equipment. Much existing equipment has been in service for years and has become worn from normal use. Replacement is required for continued as well as improved diagnostic and treatment capabilities. The County and City of Denton are faced with needs for major infusions of capital into Flow Memorial Hospital in the very near future to simply maintain current levels of service provided by the hospital. Yet, this investment will only serve a stop-gap maintenance function, doing nothing to expand the scope of the hospital's capabilities or provide for the hospital's long-range future. Alternatively, Flow Memorial Hospital can be replaced with a new, modern facility which will allow the hospital to most its full potential as a major medical facility. This option, however, requires an even greater investment of capital, The County and City must evaluate the financial feasibility of improving or replacing the existing hospital and consider whether taxpayers can and will support dither option. 3 i9 ~i Many government entities in the Ua`. =d States have found that hospital care can be delivered more effectively and efficiently by private enterprise while reducing the burden placed on taxpayers. With such an approach in mind, First Texas Medical, Inc. respectfully submits the following r~ proposal. I 4 THE PROPOSAL A Major Investment in the Community First Texas Medical, Inc. proposes to execute an agreement with the County and City of Denton, which provides for lease and operation of Flow Memorial Hospital for a period of five years, during which time First Texas Medical will construct a replacement hospital and purchase the assets of Flow Memorial Hospital. Through this arrangement, First Texas Medical will expend more than 530,000,000 in the community in the form of lease/purchase payments for the hospital, capital expenditures for hospital equipment and taxes paid into the treasuries of city and county governments, As a result, residents of Denton County will enjoy the benefits of an improved hospital medical center without the outlay of tax dollars, First Texas Medical, Inc. will pay the County and City $2,900,818 upon completion of agreement negotiations, representing purchase of current assets and pre-paid lease of $10,000 per licensed bed, In each year of the lease agreement, First Texas Medical will pay the County and City $725,000 for lease of the existing facility, totalling $3,6251000 over the five-year period. Additionally, it will pay $348,834 over the lease period as reimbursement for County hospital bond retirement payments. 5 At the conclusion of the lease period, the County and City can retain rights to the hospital facility and site, either using the property for other purposes or selling it. First Texas Medical will also agree to purchase the existing facility and site for $1,500,000, at the option of the County and City, i In addition to direct payments, First Texas Medical will invest approximately $21,000,000 in the development of a new hospital complex expected to be completed by 1988. And, the company will pay appropriate County, City and school taxes on Flow Memorial Hospital during the lease period and thereafter. i 6 Figure 1 OUTLINE OF LEASE/PURCHASE PROPOSAL LEASE PAYMENTSi Assets Current assets $3,534,782 Bond designated assets 330,942 Total assets $3,865,724 Liabilities Current liabilities $1,592,280 Long-term debt 1975 series bond $270,000 1975 A series bond 160,000 Computer lease 81,699 Equipment note 550,927 1,062,626 Total liabilities 216540906 Net assets of liabilities $10210,818 Additional Consideration Prepaid lease ($10,000 per licensed bed) 116904000 TOTAL AT CLOSING $2,9001818 LEASE PAYMENTS AND BOND RETIREMENT] Annual lease payments 8 725,000 $3,6250000 for five years Additional payments for bond retirement over lease term 348,834 3,973,834 OPTION TO PURCHASE REAL ESTATE AT LEASE TERMINATIONt 10500,000 EE' TOTAL PROPOSAL S8.3~74.~fi~5 f Management of the Existing Facilit As lessor of Flow Memorial Hospital, First Texas Medical agrees to the following provisions regarding management of the facility. 1. MAINTENANCE The company will perform sufficient maintenance and renovation to assure continued quality of care over the lease period. 2. EQUIPMENT PURCHASES First Texas Medical will incur expendituLes for necessary equipment purchases, estimated at $50,000 during the first lease year and $500,000 annually thereafter for the remaining lease period. Total investment is expected to be approximately $2,250,000. 3. MAINTAIN COMPETITIVE CHARGES First Texas Medical will operate Flow Memorial Hospital efficiently, maintaining fees and charges which are competitive with, or lower than, other hospitals in the general service areas First Texas Medical has proven its ability to maintain a schedule of charges and fees comparable to those of other hospitals in their management j of Lewisville Memorial Hospital. (See Figures 2a and 2bs) 1 i fS Figure 2a COMPARISON OF CHARGES LEWISVILLE MEMORIAL VS. AREA HOSPITALS r LMH A B C Private Room $145 140 175 166 Senri-Private Room 120 125 154 134 ICU 275 300 380 346 Labor & Delivery 150 195.25 N/A N/A Nursery 80 95 N/A N/A These charges were effective 2/15/83. Not specifically identified, the hospitals used for comparison are Plow Memorial Hospital, Dedman Medical Center and Westgate Medical Center. 1 'I Figure 2b LEWISVILLE MEMORIAL HOSPITAL PATIENT CHARGE COMPARISON FROM BLUE CROSS COMBINED INPATIENT HOSPITAL EXPERIENCE REPORTI -1 LMH Hosp. A Hoep, a Hosp, C All In Patients Blue Cross Blue Cross slue cross Patient Days 8,607 8,702 60598 7,553 Average Length Of Stay 4.5 9.5 6.3 8.0 Average Charge Per Admission $2,428 $3,447 $2,211 $20969' t Average Charge Per Patient Day 436 362 352 371 Overage Accommodation Charge Per Patient Day 136 164 154 146 Charges Per Admissions Drugs $305 $462 $302 $547 Laboratory 326 493 225 330 Operating Room 260 326 230 371 Radiology 198 246 N/A N/A Inhalation Therapy N/A N/A N/A N/A Physical Therapy 187 224 173 223 1 12 month average as of 12/82, i 1 The company expects to increase charges and fees at plow Memorial Hospital by approximately nine percent in 1983, Based on data indicating the hospital's historic increase in revenues per patient day, this increase will actually be less than increases experienced in recent years (see Figure 3). In an additional effort to control patient costs, First Texas Medical will attempt to decrease bad debt at Flow Memorial Hospital from its present level of ten percent to six percent. Bad debt has increased significantly at Flow Memorial Hospital in recent years (see Figure 4). The ' cause has not been patients classified as indigents, but persons who have simply not paid their hospital bills. The bad debt situation is partially due to a high percentage (more than one-third) of "self-pay" patients treated at Flow Memorial Hospital. Many of these patients can afford to pay but have, perhaps, assumed that a government-operated hospital "owes" them the care they receive. As a result, paying patients must underwrite the costs of those who avoid their responsibility to pay. 4. PROVIDE FOR INDIGENT CARE First Texas Medical will, through an agreement with the Count Yr provide for hospital care of indigent residents of Ir' 8 f ti Figure 3 FLOW MEMORIAL HOSPITAL CALCULATION OF ESTIMATED PRICE INCREASES (Based on Increased Revenues Per Patient Day) r 1979 1980 1981 1982 1983 (3 Month YTD) j Patient Days 29,802 34,657 34,628 33,830 8,505 Inpatient Revenue 6,826,886 8,281,696 10,279,066 12,226,779 3,2350555 Revenue Per Patient Day 229.07 238.96 296.84 361.42 380.43 Percent Increase Over Previous Year (Revenue Per Patient Day) 4.30 24.2% 21.78 5.2% a Figure 4 BAD DEBT VS. INDIGENT CARE FLOW MEMORIAL HOSPITAL 1979 1980 1981 1982 Unpaid Accounts (Bad Debt) $545,903 $5670018 $752,027 SI,189,547 Charity Services (Indigent Carey 382,058 370,288 358,843 449,251 80. urcei Audited Financial Statements E e; t Denton County. (Details are further outlined subsequently in this section.) 5. ESTABLISH A CITIZENS ADVISORY BOARD A. Citizens Board will be established to help direct the hospital, assuring continued community input into hospital policy and direction. First Texas Medical recommends continuation of the existing hospital board to facilitate transition. 6. GUARANTEE EMPLOYMENT AND BENEFITS FOR CURRENT EMPLOYEES. All employees will be assured continued employment at current level of seniority. First Texas medical will also continue employee pension and haalth insurance plans as well as recognize all accrued vacation, sick leave and other benefits. 7. MAINTAIN AN OPEN MEDICAL STAFF POLICY Flow Memorial Hospital's current open medical staff policy will be continued under First Texas Medical, and this same policy will apply at the new hospital to be constructed. As owner and manager of Lewisville Memorial Hospital, First Texas Medical has developed an excellent relationship with the Lewisville medical community. In Fact, the administration of Lewisville Memorial Hospital often assists independent physicians in the community with recruiting efforts to build their practices. (See Appendix A.) 9 Development of a New Hospital First Texas Medical will construct a new hospital and medical office building to be located at the intersection of interstate Highway 35 and Scripture Street in the city of Denton with an expected completion date of 1488. The complex will be developed with private investor capital at an estimated cost of $21,000,000. This new hospital complex will be named First Texas Medical Center Hospital - Denton, and it will be owned and managed by First Texas Medical, Inc. The Hospital Advisory Board will be utilized in developing plans for the hospital, and all existing memorials at Flow Memorial Hospital will be preserved in the new facility. First Texas Medical, Inc. will continue a schedule of fees and charges at the new hospital which is competitive with hospitals in the general service area. Toward the goal of further developing Denton as a major medical center, First Texas Medical will concentrate on developing Flow Memorial Hospital's existing medical delivery strengths into regional capabilities, specifically including obstetrical, neonatal, psychiatric, surgical and emergency services. I I I 10 h A Long-Term Plan for Indigent Care First Texas Medical recommends the County and City use I proceeds of the lease and purchase of Flow Memorial Hospital to establish a permanent trust fund providing for hospital J r care for indigent Denton County residents, thereby assisting local governments with their financial responsibility for such care, These funds can be invested and the earnings used to pay for indigent care. This method of providing for indigent assistance has been implemented in other communities to successfully relieve the governing entities of financial responsibility. Projections indicate the level of indigent care provided by Flow Memorial Hospital during the five-year lease period will exceed revenues from the indigent care fund (see Figure 5). First Texas Medical will absorb these additional costs. Economic impact on County/City E r First Texas Medical, inc,'s proposal offers a potential $38.6 million impact on the County and City over the next five years and beyond. it i Figure 5 FLOW MEMORIAL HOSPITAL INDIGENT CARE FUND/YEARS 1-5 YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 Cumulative Proceeds From Lease/Purchase Proposal $31625,818 $4,350,818 $5,0751818 $5,8000818 $80025,818 108 Annual Return On Investment 3620582 4350082 507,582 580,082 802$82 Projected Indigent Care Requirements For Denton County 493,224 542,546 596,801 656 481 r 722,125 ASSUMP,rioNS3 `r 1) Per the proposal, all proceeds are invested in an Interest-bearing fund. 2) A conservative annual rate of return of 1.09 on the cumulative proceeds Is calculated as the yearly reimbursement for indigent care. 3) Projected indigent care is based on a 108 annual increase using historical data from Flow Memorial Hospital. 4) First 'texas Medical will absorb indigent care costs above the rate of return on investment, Years 1»5. r$A Figure 6 FLOW MEMOR' HOSPITAL ANALYSIS OF ECONOMIC IMPACT TO COUNTY, CITY 1982 1983 1984 1985 1986 1987 Five-Year METHOD OF APPROACH Actual Pro sated Projected Projected Projected Projected Total 1) Continue on Current Course of Action Expenditures f A. Indigent Care (300,000) (330,000) (3639000) (399,300) (439,230) (483053) (20141683) B. Bond Retirement ( 21,961) ( 90,331) ( 87,431) ( 849531) ( 86,541) 0 ( 3480834) C. Renovation Costs 0 0 0 (50100,000) 0 0 (51100,000) Income A. Proceeds From Lease 0 0 0 0 0 0 0 0. Increased Tax Revenue 0 0 0 0 0 0 0 NET IMPACT (3214961) (420031) (4500431) (5,583431) (525,771) (483053) (7,463,517) 2) Lease Facility Expenditures A, Indigent Care (300,000) 0 0 0 0 0 0 B. Bond Retirement { 21,961) 90,331 87,431 84,531 86,541 0 348,634 C, Construction Costs 0 0 0 0 20,000,000 0 2090000000 D. Equipment Purchases 0 250,000 5000000 5000000 5000000 5000000 2,250,000 Income A. Proceeds Lease/Puroh 0 3,716,149 812,431 809,531 811,541 2,225000 8,374,652 B. Increased Tax Revenue 0 259670' 32,700 39435 46065 53,800 198,670 NET IMPACT (321,961) 4,082,150 1,432,562 1,433,797 21,448,847 2,778,800 31,172.156 Annual Economic Differenoe 0 4,502,481 11882093 7,017,628 21,970,618 39261053 38,635,673 Cumulative Economic Difference 0 4,5021481 6,385,474 13,403002 35,373,720 38,635,673 'l The proposal provides for replacement of the existing facility at no cost to County or Cityl direct payments of $8,374,652, investment of which will relieve financial responsibilty for indigent caret and assumption of hospital bond retirement by First Texas Medical, making available $348,834 for other community projects. Furthermore, the County and City will bear no financial responsibility for maintenance or replacement of the existing hospital facility nor for required replacement of hospital equipment. And, as operator of Flow Memorial Hospitai► First Texas Medical, Inc. will pay an additional $198,670 in local taxes over the next five years. If, however, the County and City continue ownership of Flow Memorial hospital, they can expect to spend approximately 57,463017 over the next five years for required renovation of the facility to most regulatory codes, retirement of hospital bonds and payment for indigent care. Even this large cost is conservatively stated because it fails to account for the cost of replacing any equipment or renovations to improve the functional operations and appearance of the hospital (see Figure 6). 1 1 i 12 s± S Enter Negotiations First Texas Medical, Inc. Proposes the County and City enter negotiations with the company at this time to develop a final proposal to be considered by each government entity prior to r execution of a formal agreement. Attached are copies of the proposed lease agreement.. exchange agreement and indigent care agreement (see Addendums Proposed Agreements). 13 ABOUT FIRST TEXAS MEDICAL, INC. First Texas Medical, Inc, is an active provider of health care in Denton County. The company originated as a four-physician medical practice in Lewisville 32 years ago and has grown to a multi-facility system serving the medical needs of local communities with a variety of health care services. Incorporated in October of 1981, the company continues to be locally owned and managed (see Appendix B). Experienced Hospital Manaaement + First Texas Medical, Inc, has gained valuable experience in hospital management through its operation of Lewisville Memorial Hospital, A 110-bed general acute care facility opened in 1976, Lewisville Memorial Hospital is scheduled to break ground on a $7,000,000, 42-bed expansion and renovation project in late summer of 1983. Lewisville Memorial Hospital has established an excellent reputation, not only as Lewisville's primary health care provider, but as an active partner in the community as well (see Appendix C). The hospital is involved in a variety of such community outreach programs as CPR training, prenatal classes and babysitting skills training, in addition to participation in such local projects as the annual United Way campaign and sponsorship of youth activity soccer and baseball teams, 44 r Administrators of Lewisville Memorial Hospital have also worked closely with the City of Lewisville to help establish an emergency medical system (EMS). The hospital contributed half of the tuition fees required to train nine emergency medical technicians (EMTs) for the Lewisville Fire Department and has subsequently cooperated in the instruction and testing of special skill development for EMTs. Lewisville Memorial Hospital also arranged to provide medicine and supplies needed in the EMS ambulance, established and coordinated ambulance protocols, and purchased approximately $30,000 of radio equipment essential for paramedic training and communications. Lewisville Memorial Hospital enjoys a good working relationship with its local medical community. Physicians associated with First Texas Medical's Lewisville clinic work cooperatively with other community physicians to continually improve and expand medical services available to local citizens. Innovative Treatment Facilities First Texas Medical, Inc. provides a broad range of health care services throughout Denton County, aggressively pursuing delivery systems and treatment methods which serve patients' needs more effectively and efficiently. In development of these services, First Texas Medical's foremost concern has been for the quality of care provided, but equally important is J n are efforts to contain the cost of care to patients,. As a result, First Texas Medical, Inc. has developed numerous outpatient treatment facilities which are both innovative and cost-efficient in their treatment methods. First Texas Medical's owned, managed and affiliated organizations are as set out below, DENTON: 1. First Texas Medical Center Denton a 23-physician multi-specialty practice (formerly Medical Surgical Clinic Association). This clinic treats patients from 8:00 a.nt. to 10:00 p.m. Monday through Saturday and from noon until 8:00 p.m. on Sunday, allowing patients greater ease in scheduling appointments. The extended service schedule also assures clinic patients access to a physician throughout the week, 2. North Texas Diagnostic Radiolo Ce~n~ ter provides outpatient diagnostic radiology services. 3, Denton Ambulatory Surgery Center provides surgical procedures for patients not requiring overnight hospitalization, Patients receive quality medical care in a comfortable, safe, and non-institutional setting from a staff especially trained in outpatient surgery. The facility provides surgical services at a lower cost than a ,16 ti u hospital setting, and many physicians believe the recovery process is accelerated when patients return home as soon as safely possible, thus reducing time away from work and other activities. 4. North Texas Medcare, Inc a state-certified health maintenance organization providing care for approximately 1,500 members. 5. Bryan Oaks a 106-bed intermediate care facility providing services for severe and profoundly mentally retarded patients, The state of Texas pays $52 per day to care for patients through this facility, as compared to $70 per day at a state-operated hospital. Private facilities such as Bryan Oaks also provide a less restrictive environment for residents, and the facility pays local taxes, 6. North Texas Radiation Therapy Center First Texas Medical will break ground on this outpatient cancer treatment center within the next 60 days, LEWIBVILLEt 1. First Texas Medical Center Lewisville a 26-physician multi-specialty practice located adjacent to Lewisville Memorial Hospital (formerly Doctor's Clinic), The clinic observes extended office hours of 800 a.m. to 1000 p.m., 17 yl Monday through Saturday and from noon until 8100-p.m. on Sundays. 2. First Texas Medical, Ino. corporate offices are located in the North Texas Medical Center Professional Building. 3. First Texas Medical Center Computer Center located in Lakeland Plaza, the center provides the latest in computer technology support for all First Texas Medical facilities. 4. Lewisville M.amorial Hospital a 110-bed general acute care hospital, scheduled to break ground on a $7 million, 42-bed expansion and renovation this summer. 5. Edmond Oaks a 166-bed intermediate care facility providing serviced to the moderately mentally retarded. The cost-per-day for a patient at Edmond Oaks is $44 compared to $64 at a state hospital. 61 Adult Day Care Center, provides supervised care during the day for geriatric, retarded and disabled individuals. The center can accommodate 100 individuals and'provides an alternative to nursing homes for patients who can still return to their homes at night. The center is open 14 hours per day, providing one hot meal and two snacks daily (planned by a dietician), with drugs required by patients administered by staff, j 18 i kt 7. Medcare Home Service a home health care agency providing care for homebound individuals on a short-term basis. 8. Oak Grove Work Activity Center. a sheltered workshop for 235 handicapped individuals. CARROLLTONs 1. First Texas Medical Center Carrollton a seven- physician multi-specialty clinic which opened February 28, 1983. Economic Imaact on Denton Count+ Through its facilities, First Texas Medical, Inc, employs 803 individuals in Denton County with an annual payroll of $12,583,519. These dollars are in turn spent in local communities, creating a "ripple" effect in their general economies. In 1982, First Texas Medical also paid $166,889 in taxes to cities, schools and county treasuries in Lewisville and Denton. Since First Texas Medical, Inc, is locally owned and managed, the company's profits are reinvested in the local communities and in further expansion of services and facilities. i j 19 First Texas Medical and Flow Memorial Hos ital First Texas Medical, Inc, is a strong supporter of Flow Hospital, The physicians of First Texas Medical Center, Denton utilize the hospital heavily, admitting almost half of its patients (see Figures 7a,b). First Texas Medical, Inc. has worked cooperatively with Flow Memorial Hospital to help develop its services and capabilities. For example, First Texas Medical Center physicians were instrumental in assisting Flow Memorial Hospital in the establishment of its neonatal intensive care unit. More recently, First Texas Medical's Denton Clinic employed an anesthesiologist to work in the Flow Memorial Hospital operating room, allowing the hospital-to increase the number of surgical procedures performed daily. Flow Memorial Hospital and Lewisville Memorial Hospital have also recently agreed to share services of a mobile CT Scanner, increasing diagnostic capabilities of both hospitals at reduced expenses First Texas Medical wants Flow Memorial Hospital to remain a viable member of the community's health care delivery system, but doing so will require either extensive expense at the existing facility or construction of a now hospital, r First Texas Medical sees the need for a new hospital to meet the long-range medical needs of Denton County. In fact, the -In v.•ay; r-.aS r Figure 7a FIRST TEXAS MEDICAL, INC. DISCHARGE DAYS TO FLOW MEMORIAL HOSPITAL (2982) June July Aug. Sept. Oct. Nov. First Texas Medical 876 1,218 1,264 1,450 11495 1,254 Percent of Total 324 394 368 464 444 408 ff i 1 + 1t {i t Figure 7b PHYSICIANS 'IN SUPPORT OF FIRST TEXAS MEDICAL PROPOSAL) AS PERCENT OF TOTAL REVENUE (1982) June July Aug.• Sept. Oct. Nov. Revenue by Support Group 382,789 546,380 613,223 609,382 578,195 573,174 8 of Total Revenue 44% 528 558 578 534 55% 1 See Appendix D for physician listing . v. r i..: r r I ...'...1 _Y 0.l.J 1 9'riHfli A{ P~ company has considered construction of a third hospital in Denton but is concerned with the potential negative impact such a facility might have on Flow Memorial Hoapital. Therefore, First Texas Medical has developed this proposal, which will provide a new hospital facility at no cost to taxpayers while preserving Flow Memorial Hospital's tradition of service to the community. 21 >1 1 APPENDIX A CALVIN T, SIMMONS- II, M.D., RA, DIPLOMATS AMERICAN 9OARO O# FAMILY PRACTICE February 25, 1983 TO WHOM IT MAY CONCERN1 I have been asked by the physicians at the Doctors Clinic in Lewisville, Texas to describe my experiences in practice over the past six years with both the Doctors Clinic and the Lewisville Memorial Hospital, As you are probably aware, Lewisville Memorial Hospital is a proprietary hospital owned primarily by the physicians in the Doctors Clinic and the Medical Surgical Clinic in Denton, In addition, this same group of physicians has made a bid to acquire the Flow Memorial Hospital in Denton. Although I have no major feelings in either direction on this particular subject, this letter will address my experiences using a proprietary hospital owned by a group of "competitors" in my past six years in practice, When I first came to Lewisville, I made the decision that my practice would be confined to the Lewisville area and that I would utilize the hospitals which Vera immediately available, Since Lewisville Memorial Hospital was located within two miles of my office, I applied for privileges at that hospital and have used it exclusively sinea?thht time, Although the hospital is owned by a group of physicians which is in competition with me, I have never had any difficulty obtaining privileges nor admitting patients into the bade at Lewisville Memorial Hospital, Although there is a healthy competition between the Doctors Clinic and my own prac- tice, there has never been any interference with my abilities to practice in the manner in which I am accustomed. Moreover, the hospital has been generous in helping me to recruit additional physicians for my practice. Over the years, they have been help- ful in bringing recruits to this area who have expressed an inter- est im-practicing in this general locale and have been financially supportive of the travel axpenees associated with these rearuits. I have an associate in my practice who has been here roughly one and a half years who has, likewise, found the hospital to be fair in its dealings with him. Although I have no ability to foresee the future, I can assure you that my dealings with the Lewisville Memorial Hospital have been cordial and fair in the past, Since Denton already has two hospitals, it would seem to aye that this would offer additional protection for those physicians who fear a takeover with sinister consequences. However, since my dealings with the hospital in Lewisvills,,which is owned by my competitors, have always been acceptable, I have less fears about substantial infringements upon my practice or its ability to grow. During my training in medical school and residency IIa2 Wt6T MAIN eTRCIT L&WINVILl.C. TRXA6 76047 TELEPRONE 436,7031 Y r r if APPENDIX A Page 2 programs, I was generally associated with both private hospitals and city-county hospitals, There has been very little difference in the experiences I had in these settings compared with the exper- iences I have had at Lewisville Memorial Hospital in tome of fac- ilities, bed availability or staffing. If you have questions regarding my experiences with the pro- prietary hospital in Lewisville, I will be happy to discuss these with you at length. Sincerely, Calvin T. Simmons, Ito M.D. CTS/klh i 1I i Appendix a FIRST TEXAS MEDICAL (FTM) Directors and Executive Officers Thomas Blucker, M.D., Director a member of FTM since 1971 Harry M. Burgess, M.D., Vice Chairman as one of the company's founding physicians, a member of FTM since 1951 Conrad M. Garcia, M.D., Director a member of FTM since 1978 David 0. Johnson, M.D., Director a member physician of FTM since 1978 James Hollis Jones, M.D., Director, Chairman of the Board and Chief Executive Officer as a founding physician of the group, a member of FTM since 1951 James R, Jones, M.D., Director a member of FTM since 1973 James R. Long, M.D., Director a member of FTM since 1973 Darrell E, Lummus, Director, President and Chief Operating Officer has served as president of FTM since 1981, prior to which he was business manager for more than five years Harvard L, McBrayer, M.D., Director a member of FTM since 1969 Allen Pierce, Director, Senior Vice President and Treasurer has served as director of special projects for FTM since 1979, and prior to which he was senior vice president and senior loan officer of First Texas Savings and Loan Association David G. Purifoy, Director and Senior Vice President administrator of Lewisville Memorial Hospital since 1976 s Arvin D, Short, M.D „ Director a member of FTM since 1974 Dale G. Swanholm, M.D., Director a member of FTM since 1975 Eugene M. Taylor, M.D., Director a member of FTM since 1969 Ownership I A total of 929,811 shares of First Texas Medical, Inc, common stock are issued and outstanding. First Texas Medical, Denton owns 377,223 shares, or 41 percent] individual physicians employed by the company own 435,637 shares, or 47 percentf physicians not related to the company own 78,237, or 8 percentl and non-physician executives of the company own 38,714 shares, or 4 percent. E Financial For the year ending August 31, 1982, the company had revenues of $22,972,6000 reporting a pre-tax profit of $1,291,500 and net income after tax of $774,900. Outpatient clinic operations accounted for 45 percent of revenues and hospital operations yielded 55 percent of revenues. On August 31, 1902, the company had assets of $11,499,700, current liabilities of $3,601,600, and long=term debt of $4093,600. For the 12 months ending August 31, 1983, the company is forecasting profit before income tax of $2,013,600 and net -OW income after tax of SI,208,A00. Through a subsidiary compar.y, Triangle Management and Investments, First Texas Medical has access to $2,000,000 in cash and short-term investments. Banking relations are maintained with major Denton County banks as well as r/~ tnterFirst/Dallas and Citicorp USA of New York City. LJ I 1 Iy'1 crrroF APPENDIX C uwrsvrur ttx~ 151 West Church St, • tewisvilfe, Texas 75067 • 2141436.2591 Ir February 22, 1983 County Commissioners City of Denton c/o The Honorable R. L. Cole ' 401 W. Hickory Street Denton, Texas 76201 Dear County Commissionerst We have become aware of your plans to receive a proposal from First Texas Medical, Inc, to operate Flow Memorial Hospital. Because this company is a valued corporate member of our own community, and in the hope that the information might be useful, we want to tell you of our high regard for them. The men, and women who comprise First Texas Medical have been closely involved with our community for many years. They have consistently demonstrated responsible citizenship, both through their exemplary operation of our primary medical facility, Lewisville Memorial Hospital, and through their active participation in Lewisville community affairs. Lewisville Memorial Hospital is an excellent facility which delivers quality health care to our citizens, Moreover, the numerous out- reach and community support programs delivered by the hospital staff have served us particularly well. They have provided "wellness" education for our residents, have assisted our students in pur8uinp health care careers and have helped our city establish an emergency medical system (MIS). Their involvement has been so wide ranging that we are including a list of activities and achievements of Lewisville Memorial/First Texas Medical. s . f APPENDU C County Commissioners City of Denton February 22, 1983 Page 2 Through the hospital and other medical facilities they operate, the people of First Texas Medical have had a major favorable economic impact on our community, As private business people, they support our city and our schools with substantial tax pay- ments. And they directly support nearly 600 families by providing good jobs whose substantial payroll has an even broader "ripple" effect on our general economy. We are proud to have the people of First Texas Medical as our 1 neighbors and fellow citizens. Sincerely yours, Wayne D. Ferguson Mayor WDF/ao Enclosure i j r 1 n 1 SS f~ r APPENDIX C William Hatton, M, O./SurgCeanon Vice President, American cer Society-Lewisville Region Director of Medical Education-American Cancer Society Kenneth Goldbarq, M.D./Urologist American Cancer Society-Lewisville Region Emmanuel Desai, M.D./Cardiologist Board of Directors-American Heart Association Lewisville Region Governing Board-First United Methodist Church-Lewisville Edward Kremer, M.D./Internist Board of Directors-American Heart Association-Lewisville Region Speaker for SPAN - Senior Citizens Group re CPR/8P Awareness Program Richard C. Burgess, M.D./Pathology United Way Director of Physician Campaign-Greater Lewisville Region 1982.83 Mark Holt, M.O./Pediatrician President, Denton Co. Chapter, American Oiabetis Association Previous Coordinator of LMH Children's Breathing Club for ASthmatic.Children Participant physician in Denton Co. Health Department Free Clinic through Public Health Department t Russell McDonald, M.0,/Pediatrician Current Coordinator-LMH Breathing Club for Asthmatic Children Public Health Department-Free Clinic for Children James Conyers, M.D./General Surgeon American Cancer Society Date Swanholm, M.D./Family Practice Physician Flower Mound Board for Parks & Recreation YMCA Supporter s I; APPENDIX C fad QndweN Youth Homes Foundation, Inc, PA, Box 61928 AC 817-450.4686 (b(aro) Dahm/4 Worth, Tem 75261 AND Of TRUET118t JLRRYCAMPBELL EXECUTIVE 01RECTOR Rdpr 8UYYSen, CMnmatn e' a-J Andpipn Mrs, Psui AndMson M, 00u1141 Adkiml February 18, 1983 Mrs, Truoil Andrew 006 &VAMI Oon►Id J. C+rldr Tom unary +oe"11,senu~ The Honorable Judge R. L. Cole 505 Pedigo Street Pilot Point, Texas 75258 Dear Judge Cole, It is my understanding that First Texas Medical, Inc, is in the process of making a proposal to the City of Denton and Den.,on County to operate Flow Memorial Hospital, As the Executive Director of the Paul Anderson Youth Homes,, a director of the Greater Lewisville Chamber of 1 Commerce, and trustee of the Lewisville Independent School District, please let this letter serve as a personal en- dorsement for First Texas Medical. During the past several years that Lewisville Memorial Hospital has operated in Lewisville, I have highlyk re- garded Texasi.riedvalue to our community, Those who ical have demonstrated responsible citizen- ship both through the operation of the medical facility and their personal involvement in community affairs. It is without reservation that I recommend those assoc- iated with First Texas Medical for your consideration. JarSincerel/y,, mpball l Executive Director JC:bm APPENDIX C CITY OF HIGHLAND VILLAGE A 948 Kghland Village Road, LeW19V111e, Texas 75087 (214) 221.3842 February 23, 1983 To; The Honorable Mayor Dick Stewart and City Council From; Highland Village City Council We have become cognisant of plans whereby proposal from First Texas Medical, Inc, to operate Flow Memorial Hospital, This letter is a humble attempt to relate our regard for them in our community. Lewisville Memorial Hospital has definitely shown its concern for, and ability to meet, the demands of , fast growing community. This includes the constant recruitment oil qualified physicians and supportive specialists. The City of Highland Village has Just taken on the task of pro- viding ambulance service for its residents. This undertaking was influenced and supporteJ by First Texas Medical through training of EMTs, provisions of supplies and the cooperative ambulance training in conjunction with the staff; In my personal capacity as Mayor of Highland Village I am also involved with the United Way and the many service groups. I will confirm the fact that many of the First Texas Medical men and women are closely involved in the many community affairs. I also know the men and women are actively involved in their churches. In summary, we are proud and grateful to have this First Texas Memorial influence in our area. We highly recommend your favor- able consideration of their proposal to operate Flow Memorial Hospital, Sincerely, , 44r Ray Wright Mayor of Highland Village . RW/rb , cc: Lowsvi)ile Iremoria lospital 1 L} r< APPENDIX C the town of FLOWER MOUND . 2121 Croce Timbers Rd. • Flower Mound, Texa 75028 • phone 214. 436. 7511 'F'low+er'11~cNnn~, i February 28, 1983 The Honorable Judge R. L, Cole & The Denton County Commissioners 1 The Honorable Richard 0, Stewart & The Denton City Council Denton Texas I understand that the corporation of First Texas Medical in Lewisville has approached the City of Denton and the County of Denton with a proposal to operate Flow Memorial Hospital, As the Mayor of Flower Mound, I would like to recommend to you this corporation, Lewisville Memorial Hospital has operated in the community of Lewisville and served the surrounding area for several years now and I have been made aware of their many contributions to this area during those years, The managers and employees of the organization have contributed much to numerous community activities and have demonstrated themselves to be "good neighbors" to the communities it serves as a medical facility as well as in community involvement, I recommend to you, therefore, very highly the organization and tllos iduals associated with it as you consider the offer an propose being made. Air ess e Opmle Y yr APPENDIX C GREATERLZWJSVJU V C8AMf3ERa(COb1MC1qOX i February 15, 1983 Mr. David Purifoy Lewisville Memorial Hospital 500 w. Main Lewisville, Texas, 75067 Dear Davids Congratulations on being able to expand here in the Greater Lewisville AreaTheopeopleofthe i t Greater Lewisville Area are blessed to have such an out- standing medical facility such as yours in our community. I have always been impressed with the support your employees have shown to the United Way Fund, YMCA Drives, and other fund raising projects that are carried on in our area. Your payroll is one of the largest in the area and stim- ulates many, many returns for our businesses. Under your direction, your adminstrative staff and employees have made many contributions to all areas of community deveop- Mont. Congratulations once again on your now addition and con- tinued good luck for an outstanding organization. Sincerely,. Kipp Burnett Executive Vice President KB/mrh r I+. O. OOX 416 L5WISVILL&, TtXAS 75007 t2f4) I3A• 0971 6 , ' APPENDIX C " ' REDMAN Bufiding Products, Inc, QEOSGE S. THUMLERT President February 23, 1983 Y Denton County Commissioners 401 W. Hickory Room 612 Denton, TX 76201 Gentlemenr 1 understand you will soon be receiving a proposul from First Texas Medical to operate Flow Memorial Hospital. In this connection, I am writing to provide information about my experience with their employees. In 1979 I became acquainted with the personnel and operattens of First Texas Medical while President of a company in Lewisville. Subsequently, 1 loomed that the hospital board of directors, administration and key pot-sonnet were supportive of the human needs in the community, This support was extended through almost 100% outreach during the 1980 and 1981 United Way Campaigns. This experience came in my position as Chairman of the fund raising effort for those years. As a member of the Lewisville Chamber of Commerce, Board of Directors, 1 witnessed the hospital support by providing volunteers for community activities and financial support when needed. Later, as the President of the United Way,Fund, a volunteer from the hosp.. it served as campaign chairman for the 1983 fund drive and also served on the board. In 1981, our company was interested in CPR training for employees and again the hospital provided specialists and space. Because of the above experience, 1 recommend the hospital group highly. Sincerely, George S, Thumiert President GTrkm I pedmAn 13414 SAAt 2660 WOW Hill LAA6 OAtlu, Texas 16229 1214} 363~800 e r<nv i~ r.. !i APPENDIX C GflIFAmiLEW 1sv1, CHAMBE$ofCO3NMC CC Page 2 Denton County Commissioners and Denton City Council March 1, 1983 The hospital sponsors an on-going education program for paramedics, and a husband and wife program for baby care. I know with research I can provide a longer list of achievements. The community activities the staff has participated in Lewisville will surely carry over to the Blow Memorial Hospital staff and management, I certainly hope you will look with favor upon the purchase of Plow Hospital by the First Texas Medical Group, Sincerely, Kenneth Shropshire President Greater Lewisville Chamber of Commerce KPS/pf P. O, BOX 414 LEWISVILLK, TCXAS 75047 12141434 - OS71 I APPS nIX C t GREATV1tLtw19vi CnAMBERelCOMME time March 1, 1983 Denton County Commissioners and Denton City Council Dentonj Texas Ladies and Gentlemens I feel it very important to share with you my knowledge concerning the Lewisville Memorial Hospital staff's involvement in civic projects, Lewisville Memorial Hospital became a member of the Greater Lewisville Chamber of Commerce in 1975, and not only has been very cooperative and active in the endeavors they have undertaken but have voluntarily increased their membership dues, On a quick recollection let me list some of the organizations and committees with which the staff has served. Sponsored one Chamber of Commerce Quarterly breakfast in 1982. The sponsor fee is $500,000 in addition arrangements for the speaker and entertainment must be made. The hospital contributed to the Chamber of Commerce for the addition to the Chamber building, Darrell Lummas, President, First Texas Medical was a candidate for City Council in 1982, David Purifoy, Hospital Administrator, very successful Chairman of the United Way Fund Drive 1982 and is presently working with the YMCA Building Fund Drive, and is a Directbr of the Greater Lewisville Chamber of Commerce. Dr, Jim Conyers is active with Lewisville Cancer Society and conducts free seminars on cancer self-examination and treatment. Dr. Emanuel DeSai serves as a director on or. American Heart ` Association Board. Dr. Mark Holt is working to secure a cardiac rehabilitation center, Dr, Edward Kremer is presently on the board of the American Heart Association. Dr. Kenneth Goldberg is presently on the Board of Directors of the Lewisville Cancer Society, P, 0, BOX 418 LEW18VILL1, TEXAS 15067 (214) 436 • 0571 r APPENDIX D LETTER OF SUPPORT 2/9/83 As physicians in practice in Denton County, we are concerned with the quality and cost of health care delivery in this area. We care for approximately 75,000 patients and want to ensure they have access to the best hospital care--today and in the future. We admit 55-60% of Flow Hospital's patients, and thus, are particularly interested in Flow's future, We care about this hospital's ability to grow with the community's needs. We also know that Flow must be up-graded and modernized. And, we believe it should contribute tax dollars rather than drain them away. We urge you to give full consideration to First Texas Medl.cal's proposal to operate Flow Hospital, We support this proposal and believe a full examination of the facts will show its benefits to the community and our patients. Thank you for your consideration. Robert J. Lee, M.D._ I. T. L, Moore, M.D. 2. James V. Palermo, M.D. 3, Edward E. Velayos, M, D, 4.61 44U~C E. M. Taylor, M.D. 5, Thomas 0, Blucker, M.D. 6, William Hatton, MA 7, Mark Holt, M,D, 8 H. 11,_ Burgess, M,0. g, - A~ Charles Wahlert, M.0, !0, L C Thomas E. Grubb, M.O. Harvard L, McBraver, M,D. 12, James _I Jones, 14. D. 134 Douglas Hagen, M.D. 24 n.,o, B. A. Badip, M,00 5uhas P. Mantri, M, D. l6, , , APPENDIX D PAGE TWO LETTER OF SUPPORT 2/9/83 Richard C. Burgess, M.D. 17. Nf~ Marc A. Armstrong, M.D, 18. aWAA Irene Tayem, M.D. 19, l' J. R. Long, M.D. 20 w Rebecca Walker, M, D, 21, 0 Michael C. Burgess, M,D. 22, _ rkon Tim Shepherd, M.D. 23. John Jehl, M.D. 24, Barry Sanders, M.D. 28, Wz~ James A. Conyers, M.D, 26, Kenneth A. Goldberg, M.D. 27.~ I Emmanuel Desai, M.D. 28. ~,v, h•,~QJ Richard Williamson, fl. 0. 29.~i r , end ~(~j Rudy Tovar, M.D. 30, Sender Groswirt, M.D. 31. Eugene Hunt, M.D, ~38 Dale Swanholm, M.D. 33. Albert Thibeaux, M, D. 34. J. P. Albrite, M,D, 36, Conrad Garcia, M.D. 38,;✓ .-~..~~w.7~J~'«~►~ Elizabeth Kondracka, M.D. 37, h,r0 James R. Jones, M,D. 38, , 42 Stanley S. Franklin, M.D. 39, Mary Sender, M.D. ~40. Roy Byrd, M,D, 41, Edward Kremer, M,D, 42. t ii APPENDIX D PAGE THREE LETTER OF SUPPORT 2/`x/83 _ Greg Jackson, MA Q, 43, John Anderson 11, D. 44. Nishendu Vasavada M, O. Arvin Short M,D, Frank McGehee M,D, James R. Williams M,D, 48. r Richard Rivore ' w~ 49, Kiran Naroevat M D, so, RUSSe77 McDonald M,D. Jo_ seph _Dhaneuf, M, D, Arthur Terr M, D, 53, SLZ ~ James A, Kendall U Issac Gans, M.D, John F. Cuchia, M,D, Jules P, Brown, M.D. 57, J. ehatt, M.D, 8I. 83, 64. 6B, . FACILITIES ANALYSIS WITH COST ESTIMATES FOR RENOVATION AND REPLACEMENT I FLOW MEMORIAL HOSPITAL DENTON, TEXAS. COX/CROSLIN,and ASSOCIATES February 1983 n ° 3 TABLE or CONTENTS Sub ect Pie Introduction 1 Codes and Standards Deficiencies 2 Functional Design Deficiencies 4 Operational Considerations 5 Site Considerations 6 Renovation Alternatives 7 Replacement Alternatives 8 Conclusions 9 Recommendations 10 Appendix A 11 Site Plan 16 -ell :a 1~1 INTRODUCTION The purpose of this facilities survey of the Flow Memorial Hospital= Denton, Texas, is to evaluate the architectural, structural, mechanical and electrical components of the hospital with regard to the codes and standards promulgated by controlling agencies and organizations. In no way do these findings reflect upon the staff or opera- tion of the hospital. There are no operational criteria in these codes and standardst therefore, no conclusions regard- ing operations can be based on these findings. The initial portion of the Flow Memorial Hospital was constructed in 1948, thirty-five years ago. Two subsequent renovations and expansions occurred in 1988 and 1968. During the intervening years codes and standards have been revised. The most recent revision is the adoption of the 1981 Life Safety Code by the Joint Commission on Hospital Accreditation on 1 Janu- ary 1983. Obviously, as a result of these revisions portions U the facilities do not comply with these new codes and standards. 1 { h h CODE AND STANDARDS DEFICIENCIES Architectural Deficianc` , This initial survey of the existing facilities revealed the following code deficiency categories. (Detailed listing of code deficiencies is included in Appendix A.) The code and agencies promulgating regulations include, Texas Hospital Licensure Standards Joint Commission on Accreditation of Hospitals N.F.P.A. Life Safety Code 101 Lack ratedoareaspoftrefuge. rimarilyeinocorridorssinnt fire patient care areas, the Lack of complying fire exits. Lack of proper fire-resistive enclosures for hazardous storage areas. Lack of sprinkling in hazardous storage areas. Inadequate electrical system. Es k Mechanical and Electrical Deficiencies Codes and agencies promulgating regulatory standards Texas Hospital Licensure Standards U.S. Department of Health and Human Services NFPA 70 (National Electrical Code) r~ NFPA 90A (Air Conditioning) NFPA 76A (Hospital Electrical Safety) NFPA 101 (Life Safety Code) Mechanical Sample ducts which penetrate rated walls do not have automatic smoke dampers. Fresh air intakes are recirculating air from exhaust ducts and plumbing stacks. Hazardous storage areas are not sprinkled. Electricals The existing electrical system does not have a complying ground component (insulated green ground wire). Emergency lighting in some patient care areas are nonconforming. Major electrical switch gear is'located in boiler rooms. 3 3 FUNCTIONAL DESIGN DEFICIENCIES 1, The Laboratory Department is bisected by a major public circulation corridor. 2. The Departments of Surgery and Laboratory are located on the third floor while the Department of Radiology and Emergency are located on the second floor. 3. The layout of the dressing and lockers for surgery are inadequate and do not contribute to good sterile technique. 4. The minor operating rooms are removed from the main surgical suite center. 5. The nursing units require excessive travel by nursing per- sonnel to visually see each patient. 6. The elevators do not adequately separate patients, visitors, materials and staff. These comments'reflect current design standards, but are not required by any code, 4 ~s ~A OPERATIONAL CONSIbERATIONS Eneray Consumptionr Although energy following observa ctionsonsumptcan ion analysis has not been made, the be mader Since the hospital was constructed in phases, 1948, 1958, 1968, major portions of the heating, ventilating and air conditioning systems are in excess of twenty years old, (portions have been renovated at later times.} Within the last ten years extensive improvements in operational efficeincy have been made in systems which are now on the market. It is reasonable to assume energy costs will continue to increase in the future. Code requirements have been altered to improve energy efficiency& Hospital buildings are no longer designed around the necessity of having long patient nursing wings and an excessive number of zones for heating and cooling, With these assumptions it is reasonable to.surmize that energy consumption within the existing facilities will be in excess of the consumption of an entirely new facility with the same 166 bed capacity, z RENOVATION COST ESTIMATE The estimated cost of construction to renovate these areas which I are in violation have been estimated to bey Electrical $ 825,000 Mechanical 2,3250000 Architectural 1,950,000 $5,100,000 i 1 These improvements are exclusively needed for patient safety, They will have little perceived affect on patient comfort or opereitional efficiency of the hospital. Since a Certificate of Need will be required for this scope of renovation, we have estimated renovation could begin in November of 1983. We have further estimated renovation will require phasing and if performed consecutively will require approximately 29 months to complete. If the renovation schedule exceeds this time frame, escalation of the construction cost estimate must be anticipated. T' SITE CONSIDERATIONS The existing hospital facilities are centrally located in Denton and have ample area for the present time. The general hill top terrain does create problems for some who must walk up hill to get from .the parking area to the front door. Further, ice and snow create a severe problem of access to the Emergency Department and the hospital in general, due to the hill. Future expansion of the hospital on site and the commensurate parking may be influenced by the terrain and the area available. Specifically if the health care services are to include the future potential for providings Physician's Office Building Long Term Care Facilities Consolidated Community Health and Social Services. The existing site may eliminate some of the programs, simply due to lack of useful area. This is not to suggest these services ever will be desired. However, if they should be considered the limitations of the site may preclude some df them. Q 5 PRELIMINARY BUDGET ESTIMATE REPLACEMENT' HOSPITAL FACILITY 166 Bed Hospital Mid Point of Construction January 1985 Escalation at ,55 of one percent per Month A. Building Cost 141,100 G,S.F. 9, Fixed Equipment C. Site Development $13,068,400 1,960,200 ` 653,400 I D, Construction Cost c (A48+C) j 15,682,600 E. Site Acquisition F- Movoble Equipment -0- 0- Professional Foes 2,199,424 H, Owners Construction Expense 1,0971712 r J, Ownex a Reserve Contingency 156,616 1,254,828 K. Total Projact cost $20,386,080 L. Physician's Office Building 25,000 a,S,F. 1,450,000 8 against, each of the existing current liabilities, indebtedness, commitments or obligations of Hospital to the extent such current liabilities are either (a) fully and accurately reflected on the Financial Statements of Hospital; (b) incurred by Hospital subsequent to the date of the Financial Statements in the ordinary course of business and not in violation of this Agreement; (c) created under any contract or agreement described in Exhibit A hereto; (d) any potential Hill-Burton Act reimbursement arising as a result of this transaction; r (e) pension liabilitieel (f) any assassmenta, refunds or required payments or repayments by reason of or connected with Medicare or Medicaid payments or insurance for periods prior to Closing; (g) employee benefits as described in Section 3,7 hereto; (h) Workman's Compensation or unemployment compensation claims filed against Operators after Closingj (i) Workman's Compensation premiums or unemployment compensation insurance payments disclosed in exhibit attached hereto and made a part her~aof for all purpoaee; (j) now unknown to Operators but incurred for normal Hospital operations in the ordinary course of businesal or (k) listed or reflected herein or in any Exhibit attached hereto and made a part hereof for all purposea. 1.3. Payment and Performance of Obligations, FTM understands and agrees that, in paying, performing and discharging the valid and subsisting indebtedness, obligations, liabilities and agreements of Operators assumed by FTM as described in Section 1,2 hereinabove, F'TM shall make such payments to the persons, and perform and discharge ouch obligations, liabilities and agreements in the manner, that Operators may direct including without limitation making payments with respect to the valid and subsisting indebtedness of Operatoro that FTM has assumed to persons or entities that may not be the lender with respect to such indobtednesel subject, however, to the indemnification provisions of Article VIII of this Agreement. f 1,4. Contractual Allowances, The parties agree that any contractual allowances for Medicare and Medicaid for fiscal year 1981 and that portion of Fiscal Year 1982 prior to the Closing Date shall be determined in a manner consistent with that employed in prior years. Operators shall file or cause to be filed, Medicare and Medicaid reports for Fiscal Year 1981 and any portion of Fiscal Year 1982 prior to the Closing Date, After the Closing Date, FTM will assist operators In the prepartion of any of its coat reports not filed prior to the Closing Date at no cost to Operators, ARTICLE II REPLACEMENT HOSPITAL 2,1, Replacement Hospital, The parties hereto agree to cooperate in the development and construction of a now acute-care general hospital (hereinafter called the "Replacement Hospital") that is to be constructed by FTM. The development of Replacement Hospital shall include the following essential commitmentsi (a) Operators agree to delicense the existing Hospital beds as of the date of the opening of the Replacement Hospital, Operators acknowledge that 1 its commitment to close the existing Hospital is a material inducement to FTM to construct the Replacement Hospital; (b) FTM shall ties Its best efforts to obtain the necessary approvals from the appropriate Texas designated health planning agencies necessary for the construction, equipping and operation of the Replacement Hospital, Moreover, it is the intention of the parties to obtain health planning approvals for at least one hundred sixty-nine (169) bade together with all services and programs presently provided by Hospital, FTM shall apply for and assume all costa in obtaining such agency approvals. Operators shall cooperate fully with 'FTM in obtaining the necessary agency approvals. (a) Neither party shall be in breach of this Agreement in material respect at the tims before construction of the Replacement Hospital commences. ~M (d) FTM agrees to use its best efforts to complete the foregoing stepe and to cause the Replacement Hospital to be constructed on a timely basis. (e) 0n the date that the Replacement Hospital opens, FIN agrees to submit a bid to Operators for the purchase of the real estate equipment and structures presently used by Hospital, Said bid shall not be lase than One Million Five Hundred Thousand Dollars and No Cents ($1,500,000.00). At a"y time prior to the delicenaing by operators of its existing beds, FTM and Operators may enter into an Option Agreement providing for the purchase of said real estate equipment and facilities. 2,2. Purchases of Replacement Hospital, During a one (1) year peirod commencing on the date that the Replacement Hospital opens, Operators may purchase said Replacement Hospital from FTM for an amount equal to FTM'a verified construction expense. ARTICLE III REPRESENTATIONS AND WARRANTIES OF OPERATORS Operators hereby represent and warrant to FTM as follcwsi 3,1. Organization and Authority, Operators are political subdivisions designated and existing under the laws of the State of Texas and have all necessary power to enter, acting, through the Commissioners' Court of Denton County, Texas (hereinafter called "Court") and the City Council, Denton, Texas, (hereinafter called "Council"), into this Agreement and to consummate the transactions contemplated hereby, The Agreement has been duly and effectively authorized by all necessary action on the part of the Court and Council required by lawl this Agreement has been duly executed and delivered on behalf of Operators and is a valid and binding agreement and is enforceable against it in accordance with its termal and each of the documents to be executed by or on behalf of Operators pursuant to this Agreement has been duly authorized by all necessary action and when executed and delivered will constitute a valid, binding and enforceable obligation, ARTICLE E TRANSFER AND CONVEYANCE OF INTERESTS OF OPERATORS I.I. Transfer and Conveyance of Interests. For the consideration hereinafter set forth and upon the terms and subject to the conditions contained in this Agreement, Operators hereby assign, transfer, convey and deliver to FTM and FTM hereby accepts and receives from Operators all of the right and interests of Operators and into the following assets and properties of Operators used in the operation of Flow Memorial Hospital (hereinafter called "Hospital"); I (a) cash on hand and investments; (b) inventory; (c) prepaid expenses; (d) Hospital's accounts receivables Including patient, agency and other receivables, whether recorded or unrecorded or referred, assigned or otherwise transferred to third parties for collection, whether known or unknown; (e) patiw and employee records which pertain to the Hospital, including but not limited to, all medical records, equipment records, patient billing records, all accounts receivable records (including patient, agency and other receivables), and medical and administrative libraries] and (f) all of Operators' rights, benefits and Interests in contracts, professional contracts or agreements between or among Operators and third parties as set forth in Exhibit A attached hereto and made a part hereof for all purposes, 1,2. Consideration. In consideration of the assignment, transfer, conveyance and delivery to FTM of the right and interests of Operators in and to the assets and properties described in Section 1,1 here'inabove, and in consideration of the assignment and transfer to FTM of the rights, interests, duties and obligations of Operators under contracts, professional contracts or agreements between and among Operators and third parties as set forth in Exhibit A, FTM shall pay to Operators the currant book value of the Hospital's cash on hand and investments, inventory, and prepaid expenses and the book value of the Hospital's accounts receivables, and'wili deliver and pay over to Operators a sum equal to lose the book value of the Hospital's current liabilities and FTM shall assume, and shall indemnify, save and hold harmless Operators from and CONCLUSIONS Due to time limitations this is a preliminary review of the facilities conditions within the Flow Memorial Hospital. This is not a complete list. The deficiencies which have been docu- mented are accurate however, there may be considerable more deficiencies which can be identified only by extensive survey and system testing. This report has not quantified energy consumption. When con- e j sidering long range costs of providing patient care this will be one of the mayor cost factors. Within the last fe%v years energy cost have been one of the fastest rising components of health care costs. The impact of renovation phasing has been taken into account in estimating costs of construction. However, the lost reve- nue due to renovation activities has not been taken into acocunt. 0 RECOMMENDATIONS I• If additional detailed documentation is required, analytical studies should be continued to specifcally identify all of A. Capital costs to renovate B, Operational costs of renovation C. Financing of renovation, as it may effect the amount of renovation in each phase 2, Preliminary plans and space programs be developed to more accurately define the services, capacities and costs of a replacement hospital, Y i r 10 i FUNCTIONAL REQUIREMENTS TEXAS HOSPITAL LICENSING LAW 1, All roof top air intakes - drawing air from exhaust vent,, and plumbing stacks, Maximum exhaust and plumbing vent within 25' or 50' of laundry or dietary, morgue to patient opening or air intake. Outside air intake must be 3' above roof deck to bottom of grille opening, Supplement Mechanial TDH, November 1, 1973, 2. Nursery must be on exterior wall, THL 0-9 page 58, 3. Three nurseries with only one work room. (12 bassinets/nursery) One work room for each 2 - nurseries, THL F-3 page 14. 4. Soiled linen holding room not shown in patient nursing floors. THL N page 47, 5. Isolation Room in ICU to small not 120 a.f. (Room 3105) Position Paper 5 and State Planning Manual (Texas Depart- ment of Health, HHS Minimum Construction Standards, Plant Evaluation Survey), 6, Corridor through ICU (Room 3103) is nonconforming. 8 foot corridor. TH*. J.1 page 26 requires 8 foot corridor, 7, O,R. Sterile Room 3212 should not be connected to 3215 Clean-up, HHS Minimum Construction Standards, 8. No scrub sink at Minor OR, TDH F-5, Separate facilities for each 2 OR's, 9. ICU HVAC nonconforming, 90% Filtering 1008 Exhaust Fan coil units don't meet code Humidity Control See TDH Supplement November 1, 1973, 14 ,Y Page 3 17, Emergency lighting does not comply with NFPA 76A and NFPA 70. Other lighting is on same circuit, Essential electrical systems for hospitals, Emergency system must be separated into 4 separate branches - Life Safety Branch, Critical Branch, Equipment Delayed Auto and Equipment Auto or Manual Connection. NFPA 76A 4-3 and NFPA 70 517-44, 18, Entire electrical system has no ground component, Grounding system use of conduit, NFPA 70 517-59 and 517-11 (a), 517-131 THL 0,9 page 52 V,3C page 67, 19, Electrical wiring is #141 012 is minimum, Wire sizes minimum of 012 AWG for conductors - 20 amp, circuits. NFPA 700 THL 0-6 page 53 Existing Facilities, 20, Laundry chutes are not sealed properly, Laundry chutes 2-hour, THL J,3 page 29. Shaft enclosed by 2-hour fire resistance rated construction. 13 lip, F r I Page 2 7. Smoke compartment at 2198 and elevator (poor B-106); L.S.C. 13-3.7.31 L.S.C. 13-3.6.4, NFPA 90A 4.4, OPPA 90A 4-5.2, NFPA 72E Exit thru stair #3 exceeds 100'. L.S.C. 13-2.6.2(e), L.S.C. 5-6.6. 8. Fire door B-105 at deck. Door to exterior not 1~ hour fire door. Location within 15' of stairway. NFPA 101 5-2.4.3.9 wall opening pro- tected within 10' of stairway door B-105. 9. Corridor 2214 less than 8 feet wide. THL J.1 page 26 requires 8 foot corridor. 10. Dead end corridor in Surgery 3228. i THL J.1 page 26 requires 8' corridor. 11. Exit through ICU is nonconforming, exit through a use space. L.S.C. 13-2,4.1 and exceeds 361. L.S.C. 12-2.5.8 and ? THL Standards J.1 page 25. 12, Liquid oxygen with Bituminous paving, NFPA 50 minimum distance 8' x 10' concrete ramp or pad NFPA $0, 13. Exhaust riser ducts are not enclosed in 2-hour separation. A, Enclosure of HVAC ducts (risers) must be enclosed by 2-hour fire rated construction, THL J.3 page 29. NFPA 90A 3-3.3.1. B. Fire dampers not installed in floors of shaft penetra- tions 3-3.2,1, 14, Smoke dampers were not specified. HVAC ducts lack Smoke dampers - NFPA 90A 4,4, 15. Room 2193 is a fresh air supply without 2-hour separation, Mechanical Room 2193 Serves more than one floor, must be enclosed by 2-hour walls. Equipment location NFPA 90A 2-5.3. 16, All exit corridors must be on emergency circuit. Old "B" Wingt emergency corridor lighting switched, NFPA 101 12-2,8.1 and Section 5-8, 12 APPENDIX A FIRE SAFETY SAFETY CODE SMOKE PARTITIONS ~C---A ANDARDS j 1. Smoke Compartment in Corridor 1274 First Floor North Check for door at Junction of Corridor 1243 and 1250 A. L.S.C. 13-3.7.3 smoke barrier not constructed if a minimum 30 minutes, due to ru,merous holes around penetrations of duct conduit, etc. Texas Hospital Licensing Standards 2.1 page 25. S. Corridor Partitions - L.S.C, 13-3.6.4 transfer for grilles in partition walls (Corridor 1274), Check more corr. for Oef, C. HVAC ducts lack smoke dampers - NFPA 90A - 4.4 D. HVAC units lack duct type smoke or fire detectors in both the main supply and return air ducts at air handler, and installed per NFPA 72E, Activation of detectors shall sound fire alarm and shut down unit. NFPA 90A 4-5.2 2, Corridor 1164 does not go through to Corridor 1141, dead end. Dead and Corridor. T,H.L. "Building Exiting Code." NFPA 101 13-2.5.5, 13-2.4.1 at least 2 exits from labor suite and delivery suite, Exits through work room from exit. Dead ends shall not exceed 30 feet. NFPA 12-2.5.8. Travel distatice is 741+. THL J,1 page 25. 3, Corridor 1176 must be 8 feet wide. 8 foot corridor. THL 0.1 page 26 requires 8 foot corridor labor delivery corridor 1176. 4, Dead cnd Corridor 1234 (stair must be 8' wide at exit through) Corridor width less than 8 feet exits through ntairway No. 2. T.H,L, Standards 0.1 page 26. 5. East wall of Corridor 1141 must be smoke partition (smoke damper) L.S.C, 13-3.7,31 L.S.C. 13-3.6.4, NFPA 90A 4,41 NFPA 90A 4-5.2, NFPA 729 6. Pharmacy window needs smoke device, Pharmacy pass-thru window in smoke partition, T.H.L. steel frymglass 8.C, 13b-3.6.2 and (doors shall be self closing) 13-3.7.5 L.S,C, and wire glass - fixed glass, 1 33 Page 2 10. Gift Shop not separate from Loboy - 1-hour separation required (Room 1115), Return air above corridor. Corridor partitions - L,S.C. 13-3,6.4 transfer for grilles in partition walls. 11. Medical Records file storage area is not sprinkled, 12. Electrical switch gear is located in each of the boiler rooms. THL Q-2 page 51. 13. Newest boiler roam is not enclosed in a 1-hour fire rated structure. H,H,S. Minimum Construction Standards Article B page 9, 0-2 page 37. 14. Dishwashing area is not separated from the food preparation area. THL Section I. 18 l I I PARKINO I 41 •~I I t'~j~4~x rf 1 ~ yP `f 1 { 1 ry ' fi)) ~alylt{q { ~ f 4 {f Nr 9tl tt~21 {{f %.Y.l~ ~I~ I I f y I •~t' I I ,r S P' {s P1 ydl '.+I JT ~~~IN F IIH p0 N h~ `F••~0' N I ' u I I I I I { I j I F I I ~ 'I PAA INO PAR INd I j ` I rr~111 1 • RORIATURN I I 1 ~ fff ' 1 1 f PROPOSED EXCHANGE AGREEMENT THIS EXCHANGE AGREEMENT (this "Agreement"), made and entered into this day of , 19839 by and among FIRST TEXAS MEDICAL, INC,, a Texas corporation (hereinafter called IIFTM"), DENTON COUNTY, TF;XAS (hereinafter called "County") and THE CITY OF DENTON, TEXAS, (hereinafter called "City") (County and City being sometimes hereinafter called collectively, the 'Operators"). W I T N E S S E T H; WHEREAS, City and County have entered into an agreement dated July 27, 1971, which pursuant to the provisions of Texas Revised Civil Statutes, Article 44941-1 obligated the parties to operate Flow Memorial Hospital, an acute-care Oity/County hospital licensed for one hundred sixty-nine (169) beds and located in Denton, Texas, WHEREAS, FTM has been formed for the purpose of operating medical facilities to include the operation of acute-care hospitals{ and WHEREAS, FTM desires to purchase certain assets presently used in conjunction with the operations of Flow Memorial Hospital; and WHEREAS, FTM desires to lease Flow Memorial Hospital until such time as FTM shall complete construction of a replacement hospital Intended to serve the residents of County and City, NOW, THEREFORE, in consideration-of the premises and of the mutual oovenants and agreements hereinafter set forth, FTM, County, and City do hereby i reprosant, warrant, oovenant and agree as foilowst I ~'s 1 3.2, Financial Statements. The audited financial statements and all notes thereto of Hospital for the fiscal years ending September 30, 19190 1980, 1981) and 1982, certified by Peat Marwick and the audited financial statements for the month prior to closing and year to date from and after September 30, 1982, (hereinafter collectively called "Audited Financials"), copies of which have been delivered to FTM prior to the date hereof, are true, correct and complete in All material respects and fairly and accurately present the financial and business condition of Hospital as of the dates thereof and results of the operations of Hospital for the periods covered by such statements Audited Financials; all such Audited Financials have been prepared in accordance with generally accepted accounting principles and practices consistently maintatned and applied; all such Audited Financials reflect or adequately provide for all claims against and all debts and liabilities of Hospital, fixed or contingent, existing at the date thereof; and there has not been any change between the d+ e of the 1982 Audited Financials and the date of this Agreement which has materially adversely affected the financial position or results of operation of Hospital except as otherwiso disclosed in writing to FTM. 3.3, Ownership end Condition of Hospital. spit 1, Operators are the record and beneficial owner of all of the assets comprising and being operated as Hospital free and clear of all liens, encumberances and claims whatsoever and subject to no options or rights of first refusal or any other agreements or reatricttone, except as disclosed in Exhibit Attached hereto and male a part hereof for all purposes. 3.4. Contracts and Commitments. Except as set forth or described in Exhibit attached hereto and part a part hereof for all purposes, County does not have any material contracts or agreements relating to Hospital, including, but without limiting the generality of the foregoing, any material commitments or obligations, contingent or otherwise, under any contract or Agreement) I (a) for the purchase or sale of inventory which Is expensed and in excess of One Thousand Dollars and No Cents ($1)000.00) in any one instance; (b) for the purchase or sale of supplies, services or other items in excess of One Thousand Dollars and No cents ($1,000,00) in any one instance; (c) for the purchase or sale of any equipment or machinery which is capitalized or which is expenoed and in excess of One Thousand Dollars and No Cents ($1,000,00); (d) for the performance of services for others other than Hospital patients in excess of ~i One Thousand Dollars and No Cents ($1,000.00) in any one instance or extending I beyond the and of the current calendar year; or (e) with any County or City officer or employee in excess of One Thousand Dollars and No Cents ($1,000,00) in any one instance or incurred otherwise than In the ordinary course of business, obligating it to sell or purchase or perform after the and of the then current fiscal year, other than as listed in the aforesaid Exhibit or as consented to in writing by FTM. Operators have performed all obligations required to be performed under any such contract or agreement and are not in default or in arrears in any material respect under the terms thereof. Each contract agreement listed la Exhibit is in full force and effect as of the dat, creof and true and correct copies of each thereof have been delivered to FTM. Litigation, There is no litigation or proceeding pending or, so far no known to Operators, threatened against Operators at law or in equity before any court or other governmental agency which could have'a materially adverse effect upon Hospital except as disclosed in Exhibit _ attached hereto and made a part hereof for all purposes. A brief description of all ligation or legal or other proceedings in which Operators, to its knowledge 1s threatened in connection with Operators' business, affairs, properties or other assets In regard to Hospital, an estimate of Operators' exposure with respect to all such matters and a description with respect to each such matter of the coverage, if any, of any insurance are contained in Exhibit Copies of all pleadings , or other significant documents relating to such litigation or legal or other proceedings have been delivered to FTM. 3,6, insurance, Exhibit sets forth a complete and accurate list of all insurance policies owned by Operators with respect to the operation of Hospital, together with the names of the issuers of such policies and a brief description of the type and amount of coverage afforded by each such policy. True and correct copies of all such policies, and any endorsements thereto, have been delivered to ?TH. 3.7, Labor, Employment Contracts and Employee Eanefit Programs. Operators have no obligations, contingent or otherwise, written or oral, under any employment contract, collective bargaining agreement, pension or retirement plan, bonus plan, stock option or purchase plan or any other employee contract or nonterminable agreement, group insurance, group hospitalization or other employee benefit plan relating to Hospital other than those listed in Exhibit attached hereto and made a part hereof for all purposes, true and correct copies, certificates or description of which have been delivered to FTM, Operators have performed all obligations required to be performed under all such agreements and plena and are not in default or arrears in any material respect under any of the terms thereof, Except as set forth in Exhibit , County has not within the past five years engaged in discussions with respect to any collective bargaining agreement or has not been the subject of any election with respect to the unionization of any of its employees at 8ospital nor are any such discussions or elections now pending, or in the best of the knowledge of Operators threatened or contemplated. Operators have complied with all applicable federal and state laws relating to the employment of labor at Hospital, including but not limited to the provisions thereof relating to wages, hours and collecting bargaining, and to the beat of its knowledge, Operators are not liable for any arrearages of wage's for failure to comply with any of the foregoing laws, The names and currant,compensation'rates of each employee of Hospital, as of 1 1983, or as of the pay period immediately preceding such date, are set forth in Exhibit attached hereto and made a part hereof for all purposes, There is no employee of Hospital whose employment is not terminable at will, except as set forth in Exhibit attached hereto and made a part hereof for all purposes, 3,8. Compliance with Laws. Operators are not in violation of or default with respect to any applicable statute, ordinance, rule, regulation, judgment, writ, injunction or decree of any court or any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumantalicy, damestic or foreign, or any restrictive covenant or deed restriction recorded or otherwise, affecting Hospital, Hospital has been continuoua{y for the last ten (10) years accredited by the Joint commission on Accreditation of HoapttaLa. Except as set forth in Exhibit , Operators have not received any notice relating to Hospital not heretofore complied with, from any federal, state or other governmental authority or agency having jurisdiction over its properties or activities, or any insurance or inspection body, that its operations or any of its properties, facilities, equipment or business procedures or practices failed to comply with any applicable law, ordinance, regulation, building or zoning law, or requirement of any public authority or body, 3,9. Permits and Licenses, Operators have all licenses, permits, franchises and other authorizations (both governmental and nongovernmental) which are required in conjunction with the ownership, use or operation of Hospital, its respective business or Ito other assets and properties, Exhibit attached hereto and made a part hereof for all purposes sets forth each material license, permit, certificate or authorization, in the applicable expiration data, if any, operators have delivered to FTM true and correct eopica of such licenses, permits, certificates or authorizations as well as most recent fire, safety and other inspection reports relating to Hospita l- 3,10, No Other Liabilities or Adverse Conditions, With the exception of the liabilities set forth on the Audited Financials referred to in Section 3.2 hereinabOVe, or ad otherwise set forth herein or described in the Exhibits attached hereto and the liabilities incurred in the ordinary course of the business of Hospital since the date of such Audited Financials, there are no liabilities of any nature, whether absolute, accrued, contingent or otherwise, or whether due or to become due (including, without limitation, any liabiLitiea for federal, state or other taxes, any contractual adjustments relating to Medicare, Medicaid, Blue Cross or other payments or receivables except prior year contractual adjustments), now existing or asserted of Operators in regard to Hospital. Except as set forth In Exhibit attached hereto and made a part hereof for all purposes, there are no conditions existing with respect to any of Hospital's patients, facilities, properties, assets or personnel, which might materially adversely afRe.ct any of Hospital's properties, business or prospects, 3.11. Reaorts_and Returns, Except as described in Exhibit attached hereto and made a part hereof for ell purposes, the Operators have filed all significant reports and returns heretofore required by federal, state os municipal authorities and all reports and returns to the various governmental authorities which control, directly or indirectly, any of its activities, FTM agrees to assist in the preparation and filing of any such reports or returns not heretofore filed, at no expense to Operators, 3,12, Defaults, Operators are not in default under, nor has any event occurred which, with the lapse of time or action by a third party, could result ' In a default under any outstanding indenture, mortgage, contract, or agreement relating to Hospital, Except as provided in Exhibit attached hereto and made a part hereof for all purposes, the execution and performance by Operators of this Agreement and the traneaction,contemplated 'hereby will not violate any provision of, or result in the breach of or constitute a default under, or require any consent under any order, writ, injunction or decree of any court, governmental agency or arbitration tribunal, or any contract, agreement or instrument by which Operators are bound, with the sole exception being the Texas Health Facilities Commission (hereinafter called, "THFC"), 3,13, Inventory. The inventory of Hospital reflected on the Audited i Financials which have been supplied to FTM, was valued for the purposes thereof at coat on the beats described in the notes to said Audited Financials, All items as to which values are ascribed consist solely of items currently suitable for use or sale in the normal course of Hospital's business and no value is ascribed to any items (including pharmaceutical products) which are obsolete, outdated or unusable. 3.14. Trademarks, T eat etc Exhibit attached hereto and made a part hereof for all purposes, sets forth all, if any, of Operators' trademarks, tradenames, service marka, patents, copyrights, registration$ with respect to Hospital, and licenses or rights under which the same are presently owned, used or intended to be acquired or used by Operators and to the extent indicated in Exhibit the same have been duly registered in such offices as are indicated therein, 3.15. Endorsements, Except for checks and drafts in the course of collection and agreements disclosed in Exhibit attached hereto and made a part hereof for all purposes, as respects Hospital, Operators have not guaranteed, endorsed or indemnified the obligations of any third person, firm or corporation. 3.16, Additional Documents Suaplied by 0 eratare. Operators have delivered to FTM true and exact copies oft (a) all cost reports it has filed with Medicare and Medicaid for the last three (3) yearal (b) all correspondence it has sent to or received from Medicare or Medicaid pertaining to these three (3) years, concerning disputes with, audits by or settlements with such entitiesl (c) all Hospital appraisal reports, surveys or other documents which d" I evaluate or describe any of the Hospital's assets; and (d) a copy of Hospital's equipment ledger or list, the date of its purchase by Operators, its cost to Operators, its estimated life, the amount of depreciation accrued thereon by Operators, and any other material information with respect thereto, 3.17. Brokers, Operators have not employed or retained any broker, agent or finder or paid or agreed to pay any brokerage fee, finder's fee, commission or other similar payment to any broker, agent or finder and no broker, agent or finder is entitled to any such brokerage fee, finder's fee, commission or other similar payment on account of this Agreement or any matters contemplated hereby of any agreement, arrangement or understanding made by any Operators and FTM, ARTICLE IV REPRESENTATIONS AND WARRANTIES OF FTM FTM hereby represents and warrants to Operator as follows. 4.1, Corporate Status, FTM is a corporation duly incorporated, validly existing in good standing under the laws of the State of Texas, 4,2. Legal Proceedings, No litigation or other legal or administrative proceedings are presently pending (or, to the beet of FTM's knowledge threatened) against FTM relating to this Agreement or to the transaction contemplated hereby, 4,3, Authority, The execution and delivery of this Agreement, the consummation of the transaction contemplated hereby and the performance by FTM of all of its obligations hereunder have been duly and validly authorized by all necessary corporate action on the part of FTM and FTM has full corporate power and authority to execute and deliver this Agreement' and to perform its obligations hereunder, No consent, approvAL, permit or license from any governmental authority or third party Is required in connection with the execution and delivery of this Agreement by FTM or in connection with the consummation of the transaction contemplated hereby other than that ae may be required by THFc, 4.4, Binding Agreement, This Agreement constitutes a valid and binding agreement of FTM, enforceable against FTM in accordance with the terms hereof, except as the enforceability and binding effect of this Agreement are limited by any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally, and subject to the qualification that general equitable principles may limit the enforcement of certain remedies (including the remedy of specific performance), , 4.5, confliote, Neither the execution and delivery of this Agreement by FTM and its compliance with the terms and conditions hereof nor the consummation of the transactions contemplated hereby will (1) conflict with or result in a breach of any provision of the Articles of Incorporation or the Bylaws of FTM, (ii) constitute a breach or default or give to others any right of termination, cancellation or acceleration under any agreement or instrument to which FTM is a party or by which it or any of its estate is bound, (iii) result in the creation or imposition of any material lien, charge or encumbers nce of any nature whatsoever upon or give to others any material interest or right in or with respect to any of the assets, contracts or business of FTM, or (iv) violate any order, decree, rule or regulation of any court or governmental authority, which order, decree, rule or regulation is applicable to FTM or any of Its assets or business. i I 4,6, Brokers, FTM has not employed or retained any broker, agent or finder or paid or agreed to pay any brokerage fee, finder's fee, commission or other similar payment to any broker, agent or finder and no broker, agent or finder is entitled to any such brokerage fee, finder's fee, commission or other similar payment on account of this Agreement or any matters contemplated hereby or any agreement, arrangement or other understanding made by FTM and Operators, ARTICLE V CONDITIONS TO OBLIGATIONS OF FTM The obligations of FTM to consummate the transaction contemplated by this Agreement are subject to the satisfaction of the following conditioner r 5,1, Representations and Warrantiea, The representations and warranties made by Operators and set forth In Article III hereof shall be true and correct in all material respects on the date of this Agreement, 3.2, Performance of Obligations. Operators shall have performed In all material respects all covenants and agreements required to be performed by it under this Agreement, 3.3, Authorization, All actions, approvals, coneente, permits and authorizations necessary to authorize the execution, delivery and'performance of this Agreement by Operators and the consummation of the transactions contemplated hereby shall have been duly and validly taken or obtained by Operators. A 5.4, Examination by FTM. Operators will accord to FTM, its legal counsel, accountants and other representatives full access throughout the period prior to the closing hereunder to all of the properties, books, contracts, commitments and records of Operators acid will furnish FTM during such period, with all such information concerning the business and properties of Operators as FTM reasonably may request. 5.5. Delivery of Property, Operators shall have transferred to FTM its property and its other assets and propertied covered by this Agreement. 5.6, Legal Proceedings, No action, suit or other proceeding shall have been instituted by any gov<irnmental authority or any other person or entity, or threatened Ly any governmental authority to restrain or prohibit the consummation of the transaction contemplated hereby or to recovery title to the Property, or any part thereof or any interest therein, or attacking the validity of such transaction, or soaking to collect such damages or other relief in connection with this Agreement, 5,7. Conduct Prior to Closing, Prior to the Closing Date, and except as otherwise consented to or approved by FTM in writing, with respect to Hospital, Operators shall not: (a) enter into, renew, amend or terminate any contract or agreement to which it is a party relating to Hospital without the written approval of FTM; (b) fail to use reasonable efforts to obtain the consents of the third parties to the assignment to FTM of the contracts described in Exhibit and all licensee or permits under which Operators operate Hospital in order that FTM shall be able to carry on the business of Operators as heretofore conducted; (c) increase the salary of any Hospital employee except in the ordinary course of business; (d) pay any bonuses to any employee or other person or entity involved In the operation and management of Mospital; (a) cause i , Hospital to suffer any damage, destruction or losa, whether or not covered by insurance, materially and adversely affecting its business and prospects; (f) cause Hospital to suffer any labor trouble or any other event or condition of character which has adversely affected the financial condition, assets, liabilities or business of Hospital; (g) sell, lease or transfer any of the assets or subject same to a mortgage, pledge, lion or other encumberance; or (h) cause Hospital to incur any other obligation or liability, absolute or contingent other than current liabilities incurred in the ordinary course of r j business or make any loans or advances to an I y person, firm or corporation, or assume, guarantee, endorse or otherwise become liable for the obligations of any person, firm or corporation, other than for legal and accounting expenses of Operators in connection with these transactions. 5,8. Statue of property, On the Closing Date, the property or any material part thereof, shall not be threatened to be materially adversely effected in any way as a result of fire, explosion, earthquake, disaster, accident, any action by the United States or any other governmental authority, flood, embargo, riot, civil disturbance, uprising, activity of armed forces, or act of Cod or public enemy, 5,9, status oP im rovements. On the Closing Date, the improvements and the fixtures forming a part of Hospital shall be in good condition and repair, ordinary wear and tear due to normal conditions accepted, 5.10, Licensing Applications, Operators will cooperate in all reasonable respects with FTH in its application to obtain such licenses, permits, and governmental approvals as may be necessary in order for FTH to operate Hospital as an acute-care general hospital, to connection with each such application on the part of FTM, Operators shall furnish FTH with such information and date as may be necessary or desirable and shall otherwise assist FTM in any reasonable way requested, i i ii 5,11, RemedLes . The sole remedy of F'TM for any failure of operators to perform as called for herein and for the breech of any covenant or warranty or representation herein made by Operators shall be to elect not to close hereunder, and in the event F'TM so elects, Operators shall be relieved of all obligations hereunder. However, promises and agreements made herein by Operators for acts and/or cooperation to be provided or performed after closing shall, if Closing occurs hereunder, be fully binding on Operators, and F'TM may obtain specific performance of such future obligations if breached as its exclusive remedy, 5,12. Related Agreements, Operators shall have executed a Lease Agreement to lease the land, building and equipment comprising the Hospital on or before the Closing Date. ' t t 1 , L ARTICLE VI CONDITIONS TO OBLIGATIONS OP OPERATORS The obligations of Operators to consummate the transaction contemplated by this Agreement are subject to the satisfaction of the following conditions; 6.1, Representations and Warranties. The representations and warranties of FTM set forth in Article IV hereof shall be true and correct in all material respects on the data of this Agreement, 6.2. Performance. of Obligations. FTM shall have performed in all material respects all covenants and agreements required to be performed by it under this Agreement. 6.3, Authorization. All actions, approvals, consents, permits and authorizations, necessary to authorize the execution, delivery and performance of this Agreement by FTM and the consummation of the transactions contemplated hereby shall have been duly and validly taken or obtained by PTM. 6,4. Payment of Consideration,. FTM shall have issued and delivered to Operators any and all consideration as required by it under Article I. 6.4, Legal Proceedings, No action, suit or other proceeding shall have been instituted by any governmental authority or any other parson or entity or threatened by any governmental authority to restrain or prohibit the J consummation of the transactions contemplated hereby, or attacking the validity of such transactions or seeking to collect damages or other relief in connection • r with this Agreement, 5 b,6. Opinion of Counsel, FTM shall have delivered to Operators an opinion dated the Closing Date, of Legal Counsel of FTM, in a form acceptable to Operators, to the effect thati (a) FTM is•a corporation duly organized and validly existing in good standing under the laws of the State of Texas; (b) this Agreement constitutes the valid and binding obligation of FTM; (c) there are no legal impediments to the performance of this Agreement or any other agreements of even date herewith by Operators known to such Legal Counsel; (d) there are no ,sresent or future liabilities, contingent or otherwise, of Operators net being assumed by FTM, in any way connected with Operators' operation of Hospital or with this Agreement, so far as it known by such Legal Counsel, 6.7, Legal Matters, All actions, proceedings, instruments and documents required to carry out this Agreement or incidental hereto and all other related legal matters shall have been approved by Legal Counsel of Operators, which approval shall not be unreasonably withheld and such Legal Counsel shall have been provided with such documents and instruments as they shall have reasonably requested in connection with the transactions contemplated herein, ARTICLE VII THE CLOSING 7,1. Time and Place of Cloeina, The consummation of the transactions contemplated by this Agreement (the "Closing") shall take place at (locat(on, day, date and time), or on such other date and at such other time and place as the parties hereto shall mutually agrep upon in writing (the date and time of the Closing is herein called the "Closing Date"). Ri i 7.2, Action to be Taken at Closing. At the Closing, the parties hereto shall deliver or cause to be delivered all items provided for in this Agreement to be delivered on the Closing Date or at the Closing or necessary to p-srform or satisfy any covenant or condition contained herein which is required to be performed or satisfied on or prior to the Closing Date. r-1 ARTICLE VIII INDEMNIFICATION 8.1, Indemnification of Operators. FTM shall indemnify and save harmless Operators and any of its agents or employees from any and all suits, claims, demands, damages, coats and expenses, including reasonable attorneys' fees for the defense or settlement of such suite, claims or demands arising from or on account of (a) any failure of FTM to pay, discharge or perform any of the indebtedness, liabilities, obligations or agreements of Operators assumed by FTM pursuant to this Agreement or (b) any claim for a brokerage fee, finder's fee, commission or other similar payment based upon any agreement, arrangement or understanding made or alleged to have been made by FfM. 8.2. Inaemnification of FTM. Operators shall indemnify and save harmless FPM and any of its directors, officers, agents or employees from any and all suits, claims, demands, damages, coats and expenses, including reasonable attorneys' faes for the defense or settlement of such suits, claims or demands, arising from or on account of (a) any claim for a brokerage fee, tinder's fee, commission or other similar payment based upon any agreement, arrangement or understanding made or alleged to have been made by Operators, b) any indebtednese, obligation, liability, agreement, lien or encumberance relating to the property, the facilities or any other assets or properties of Operators which has not been and is not disclosed by Operators to FTM and specifically accepted and assumed by FTM or (c) any payment by FTM of the valid and 41 subsisting indebtedness of Operators, and any performance or discharge by FTM of the valid and subsisting obligations, liabilities and agreements of Operatore, assumed by FTM pursuant to Section 1.2 of this Agreement and paid, performed or :tacharged by FTM in the manner that Operators shall have directed, ARTICLE IX MISCELLANEOUS 9.1. Expenses, Whether or not the transactions contemplated by this Agreement are consummated, each of the parties to this Agreement shall bear all expenses incurred by it in connection with this Agreement and the transactions connected herewith. 9.2. Survival of Representations, Warranties and Agreements. The respective representations, warranties and agreements of FTM and Operators contained in this Agreement shell survive the Closing Date and shall be effective regardless of any investigation that may have been made or may be made at the time by or on behalf of the party to or with whom such representations, warranties and agreement were made. 9.3. Waivers and Consents. No waiver of compliance with any term, provision or condition of this Agreement and no consent provided for in this Agreement shall be effective unless evidenced by instrument in writing duly executed by the party sought to be charged with such waiver or consent. Ho , waiver of any breach of any representation, warranty or covenant or other term or provision of this Agreement shall be deemed to be a waiver of any proceeding or succeeding breach of the same or any other repreeentation, warranty, covenant, term or provision. No extension of time for or consent to the performance of any obligation or act shall be deemed to be an extension of time For or consent to the performance of any other obligation or act, t; 9.4. Entire Agreement. This Agreement, together with the Exhibits attached hereto, constitutes the entire agreement among the parties to this Agreement with respect to the transactions contemplated hereby and supercedes all prior agreements, arrangements and understandings, whether oral or written, among them with respect to the subject matter hereof. 9.5. Governing Law. This Agreement and the rights and duties of the parties hereunder shall be governed by and construed in accordance with the laws of the State of Texas. 9.6. Amendments. This Agreement may not be amended, modified or changed except by instrument in writing signed by the parties hereto. 9.7. Notices. Any notice or communication required by or given pursuant to this Agreement by any party hereto to any other party shall be in writing and shall be delivered in person or sent by certified or registered United States mail, postage prepaid, or prepaid telegram or addressed to such other party at its address eat forth below or at such other address as it shall have theretofore designated by written notice (a) If to FTMr 560 W. Main, Suite 201 Lewisville, Texas 75067 (b) If to County: (c) If to Cltyi (d) if to Operatorsi S.ki 41'r Hr S4 :I N Successora any d As sib, This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, 9,9. Fieadinas, The descriptive headings of the various articles, sections and paragraphs of this Agreement have been inserted for convenient reference only and shall not he construed to enlarge, diminish or otherwise change or affect the meaning or construction of any provision of this Agreement, 9.10. Counterparts, This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the game instrument, 9,11. Invalidity of c. % provisions, it is the intention of the parties hereto that the provisions of this Agreement shall be enforced to the fullest extent permissible under the laws and public policies of the State of Texas, and that the unenforceability (or the modification to conform with such laws or public policies) of any provision hereof shall not render unenforceable, or impair, the remainder of this Agreement, IN WITNESS WN$REOPt each of the parties to this Agreement has caused this Agreement to be executed and delivered by its duly authorized officer or representative, as of the day and year first written above. I 11 1} f FIRST TEXAS MEDICAL, MG, By~ Darrell E. Lummus President C THE CITY OF DENTON, TEXAS By COUNTY OF DENTON, TEXAS By 4 1 WON= o;dwpl { f., t Si PROPOSED LEASE I THIS LEASE, made and entered into this day of 1983, by and among DENTON COUNTY, TEXAS, and THE CITY OF DENTON, TEXAS (hereinafter collectively called "Lessors"), and FIRST TEXAS MEDICAL, INC., a Texas corporation (hereinafter called "Lessee"), W I T N 9 8 S E T H WHEREAS, City and County have entered into an agreement dated July 27, 1971, which pursuant to the provisions of Texas Revised Civil Statutes, Article 44941-1 obligated the parties to operate Flow Memorial Hospital, an acute-care City/County hospital licensed for one hundred sixty-nine (169) beds and located in Denton, Texas. WHEREAS, PTM has been formed for the purpose of operating medical facilities to include the operation of acute-care hospitals,, and WHEREAS, FTM desires to lease Plow Memorial Hospittl from the City and County until such time as FTM shall complete construction of a replacement hospital intended to serve the residents of County and Oity, NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements hereinafter set forth, FTM, County, and City do hereby represent, warrant, covenant and agree as followsi e'o r ARTICLE I LEASE 1Operations Leased, Upon and subject to the terms, provisions and conditions contained herein, Lessors hereby lease to Lessee and Lessee hereby leases from Lessors, all right and interest of Lesaora in and to the business operations of Flow Memorial Hospital (the "Hospital"), and the real property upon which the Hospital is located as more fully described in Exhibit A attached hereto and made a part hereof for all purposes and all of the Lessors' equipment and other furniture, furnishings and fixtures (the "Property") located in the Hospital on the Effective Date (as hereinafter defined), whether owned by Lessors or leased from third parties, ARTICLE It DURATION 2,1, Term, The initial term of this Lease respecting such business and operations shall commence on the first day of the calendar month of the date of execution hereof (the "Effective Date"), and shall continue and extend for a period of five (3) years from such Effective Date unless this Leese is terminated at an earlier date as provided for herein. ' 2,2, Renewal. At the conclusion of the initial five-year term of this Lease, in the event Lessee has not completed construction of a new acute-care general hospital (the "Replacement Hospital") which will serve the community in a similar capacity as the Hospital presently does, this Lease shall continue on a month-to-month basis at the option 'of Lessee up to a maximum of three (9) additional years on and subject to the. same terms, provisions and conditions as are contained herein, for an additional month-to-month period commencing on the date the preceding term expires, s' s i 2,3. Construction of Replacement Hospital. In the event the Replacement Hospital is completed prior to the end of the initial five-year term, Lasses may vacate Hospital; provided, however, that Lessee, pays in full the remaining portion of rent due during the initial five-year term of the Lease, f ARTICLE III RENT 3.1. Amount, (a) On the Effective Date of this Lease, Lessee shall pay Lessors One Million, Six Hundred Ninety Thousand Dollars and No Cents ($1,690,000.00) in cash. (b) Lessee shall pay Lessors as annual rental during the initial five-year term hereof for the business and operations of the Hospital, an amount equal to Seven Hundred Twenty-Five Thousand Dollars and No Cents ($725,000.00) per year. (c) In the event this Lease continues on a month-to-month basis an provided in Section 2.2 hereinabove, Lessee shall pay Lassoes rent in the amount of Sixty Thousand Five Hundred Dollars and No Cents ($60,500.00) per month, payable in advance on,the first day of each calendar month, 3,2. Method of Payment. The annual payment of Seven Hundred Twenty-Five Thousand Dollars and No Cents ($7250000,00) per year as required to be payed by Lessee to Lessora, shall be payed on a quarterly basis, Said quarterly payments i sha.~ be made no later than the fifteenth (15) day of the first month of any tt calendar year quarter (January, April, July and October) and shall be payed to I Lessors In such amount and at such location as Lessors shall designate in ~t writing, III j I ~i ARTICLE IV PERSONNEL 4.1. Employees. All employees of Lessors, with the exception of physicians shall become employees of Lessee on the date of the Effective Date of this Lease. Lessors hereby assign to Lessee, and Leases hereby accepts and assumes from Lessors, all of Lessors' rights, duties, liabilities, obligations and agreements relating to such employees, including, but not limited to, all liabilities and obligations for compensation of such employees. ARTICLE V COVENANTS OF LESSEE r 4.1. Condition of Lease Property. Lessee shall make or cause to be made, at its expense, all needed repairs, replacements or reconditioning of said Property. At the termination or expiration of the Lease, Lessee shall return the Property to Lessors in as good condition and repair as at the Effective Date of this Lease, ordinary wear and tear accepted. If material structural damage is caused by the removal of equipment from the Hospital at the direction of Lessee, Lessee shall restore Property to its previous condition. 4.2. Utilities. Lessee shall pay when due all charges for electricity, gas, water and other utilities used or consumed by Leases upon the Property during the term hereof. In the event that charges are assessed during any period which Lessee is not in possession of the Property for such full period, such charges shall be apportioned between Lessors and Lessee. 5,3, Insurance, (a) Lessee shall obtain and keep in fort and effect during the initial term of this Lease and each succeeding term, if any, adequate and appropriate liability insurance policies. All such insurance shall be in the form and amount and with companies approved by Lessors and shall be in the joint names of Lessee and Lessors; provided, however, that insurance covering equipment and other personal property owned by Lessee, need not carry such endorsements, (b) In the,event of damage by fire or other casualty to the Property, which 1 is covered by insurance, subsequent to the delivery of possession to Lessee, the 1 proceeds shall be paid into an escrow account with a bank mutually agreeable to Lessee and Lessors; provided, however, that sit proceeds of insurance policies insuring equipment or personal property owned by the Leases shall be paid directly to it. Thereafter, Lessee, at its option, may use any insurance monies received as a result of such damage to rebuild the improvements or repair the damages. If Lessee should elect not to exercise its option to restore the improvements, Lessee may give Lessors written notice and the insurance proceeds shall be paid to the Lessee and Lessors to the extent of their. respective interests therein, provided, however, that in no event shall Lessors receive lees than in the event of full toes, or the proper portion thereby in the event of partial lose and Lessee's interest in such policy shall only be to the extent coverage exceeds such amount, Anything herein to the contrary notwithstanding, it is agreed that, to the extent any damage to the Property is covered by insurance, neither party shall be liable to the other in the absence of willful misconduct causing such loss or damage. During any period of reconstruction of or repair to the Property following the original term hereunder, Lessors shall pay Lessees rent, Said rent shall be abated according to the unusable portion of the buildings, but not to exceed the total holdover rent, until the expiration of this Lease, completion of the Replacement Hospital, or completion of repair of reconstruction, whichever occurs first. I Ili 6 5.4. Taxes. Lessee shell pay and discharge all taxes, general and special assessments and other charges of every description which during the term of this Lease may be Levied on or assessed against the Property and all Lessee's interests therein and all improvements and other property thereon. 5.5. Use of Premises. It is agreed that the use of the Property is and shall be limited to the operation and maintenance of a public acute-care general hospital, nursing care facilities, outpatient facilities, and related facilities incidental thereto, including but not limited to adequate parking facilities. 5,6, Organization and Standing. Lessee, is a corporation duly organized and validly axiet!ng in good standing under the laws of the State of Texas, with full corporate power to carry on its business as now conducted. 5.7. Authority for Agreement. Lessee Is authorized to perform the obligations hereunder and no approval is required by any governmental agency or I regulatory body other than what miy be required by the Texas Health Facilities commission. 5,8, Consents, The execution and performance of this Lease will not violate any provision of, or result in the breach, or oonsi.itute a default under, or require any consent under any law, or any order, writ, injunction or decree of court, governmental agency or arbitration tribunal, or any contract, a agreement or instrument by which Lessee or its assets and properties may be bound. ,;r ARTICLE VI COVENANTS OF LESSORS 6.1. organization and Authority. The Lessors are political subdivisions designated and existing under the laws of the State of 'Texas and have all necessary powers to enter, acting through the Denton County, Texas, Commissioners' Court (County) and City Council of Denton, Texas, (City), into this Lease and to consummate the transactions contemplated hereby. The Lease has been duly and effectively authorized by all necessary action on the part of the Commissioners' Court and City Council required by law; this Lease has been duly executed and delivered on behalf of the County and City and is a valid and binding agreement and is enforceable against both the County and City In accordance with its terms; and any document to be executed by or on behalf of the County and City pursuant to this Lease has been duly authorized by all necessary actions and when executed and delivered will constitute a valid, binding and enforceable obligation. 6.2. Ownership and Condition of the Hospital. Lessors are the record and beneficial lease holders of all of Lh G equipment, facilities and properties comprising and being operated as the Hospital free and clear of all liens, encumberances and claims whatsoever and subject to no options or rights of first refusal or any other agreements or restrictions, except as disclosed in Exhibit 8 attached hereto and made a part hereof for all purpoo6s. Lessors have the right and power to lease thn Hospital in accordaiica with the terms of this Lease. axcept as has been disclosed in writing to Lessee prior to the Effective Date, none of the assets or properties constituting the Hospital, nor the occupancy or operations of the Hospital is, or operation thereof by the Lessee, will be in violation of any law or any building zoning ordinance, code or regulation. Except as disclosed in Exhibit 8 hereto, the Hospital Is in good condition and repair in all material respects, free of defects of materials or workmanship, r, and is suitable for the use for which they are being used, without the present need for any major additional equipment, repairs, construction or reconditioning being required by Lessors. The warranties of this section are only to the beat of Lessors' knowledge and belief, 6,3, Quiet Enjoyment, Lessors covenant and agree that Lessee on paying the rent and other charges herein provided for, and observing and keeping the covenants, conditions and terms of this Lease on Lessee's part to be kept or performed shall lawfully and quietly hold, occupy and enjoy the leased premises during the term of this Lease and any extensions thereof without any hinderance, disturbance or ejectment by Lessors, their successors or assigns, or by any other person or persons lawfully claiming the same except such portion of the Property, if any, as shall be taken under the power of eminent domain, The warranties in this section are only to the best of Lessors' knowledge and belief, ARTICLE VII DEPAULT 7.1. Events of Default. The following events shall be deemed to be and shall constitute events of default by Lessee under this Leaser (a) Lessee shall fail to pay any amount of rent due hereunder and such failure shall continue for a period of thirty (30) days'from the date the same is due and payable (b) Lessee shall, in the sole and absolute discretion and judgment of Lessors, mismanage the business and operations of the Property, profeeaionally or financially, such that the business and operations of the Property are detrimentally affected thereby; (c) Lessee shall file a petition under the federal Bankruptcy Law or under any similar law or statute of any state, or %eases shall be adjudicated bankrupt ti r~ or insolvent in any proceeding filed against Lessee and such adjudication shall not be vacated or stayed within the time permitted by law; (d) Lessee shall make an assignment for the benefit of creditors; (a) A receiver or trustee shall he appointed for all or substantially all of the assets of Lessee and such receivership shall not be terminated or stayed within the time permitted by law; (4) Lessee shall desert or vacate or cause the desertion or vacation of any substantial portion of the Property for a period of ten (10) days or moral other than as provided for in Section 2.3 hereinabove; or (g) Lessee shall fail to comply with any terra, condition or covenant of this Lease, and such failure shall continue for a period of thirty (30) days from the date Lessee receives written notice of such failure from Lessors, 5,2. Remedy, Upon the occurrence of any event of default specified in Section 5,1 hereinabove, Lessors shall have the right to terminate this Lease upon fifteen (15) days prior written notice to Lessee in which event Lessee shall immediately surrender all Lessee's right and interest in and to the business and operations of the Property. Lessors, their agents or attorneys, may resume possession of the Property and relet the same for the remainder of the term at the beat rent, Lessors, their agents or attorneys, may obtain for the account of Lessee, (o shall make good any deficiency, ARTICLE VIII INDEMNIFICATION 8.1, Indemnification of Lessors. Lessee shall indeminify and hold ' harmless Lessors against any and all claims, demands, damages, costa and expenses, including reasonable attorneys' fees for the defense or settlement of such olalms or demands, arising from the conduct of busi-isse or operations of the Property by Lessee or from any breach by Lessee of any of the conditions of thin " Ise or from Any act or negligence of Lessee, its agents, i 1 r.' contractors, employees, guests or invitees in or about the Property, In case of any action or proceeding brought against Lessors by reason of such claim, Lessee, upon written notice from Leonora, shall defend such action or proceeding by Legal Counsel acceptable to Lessors. ARTICLE IX MISCELLANEOUS 9.1. Entire Agreement. This Lease constitutes the sole, only and entire agreement between Lessors and Lessee with respect to the subject matter hereof and supercedes all prior agreements, arrangements or understandings, written or oral, between Lessors and Lessee with respect to such subject matter, 9.2. Amendment. No amendment, modification or a.teration of the terms, provie ons and conditions of this Lease shall be binding unless the same shall be in wri:ing and duly executed by Lessors and Lessee. 9.3. Notices. Any notice or other communication required by or given pursuant to this Lease shall be in writing and shall be delivered in person or sent by certified or registered United States mail, postage prepaid, addressed to the other party to this Lease at its address set forEh below or at such other addresa to such other party shall have theretofore designated by written notice! If to Lessors If to Lasseer 560,w. Main, Suite 201 Lewisville, Texas 73067 i 01 9.4. Construction. Should any one or more of the provisions contained in this Lease be held for any reason to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision hereof and this Lease shall be construed as if such provision had never been contained herein. 9.5. Time of Essence. Time shall Sa of the essence of this Lease. 9.6, Governing Law. This Lease and the rights and duties of the parties hereunder shall be governed by and construed in accordance with the laws of the State of Texas, 9.7. Parties Bound, This Lease shall be binding upon and inure to the r benefit of Lessors and Lesaee and their respective legal representatives, successors and assigns, 9.5. Counterparts, This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument, IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the day and year first written above. AENTON COUNTY, TEXAS By 'M CITY OF DENTON, TEXAS By ;5Ak4Yti'y:Y~ 'l FIRST TEXAS MEDICALO INC. BY Darrell E. Lummuo rte-- President v?Y PROPOSED INDIGENT CARE AGREEMENT THIS INDIGENT CARE AGREEMENT (this "Agreemea"), made and entered into this day of , 1983) by and among FIRST TEXAS MEDICAL, INC., a Texas corporation (hereinafter called ,FTM" FLOW MEMORIAL HOSPITAL FOUNDATION, INC., a Texas non-profit corporation (hereinafter called "Foundation"), FLOW MEMORIAL FOUNDATION, INC,, a Texas non-profit corporation 1 (hereinafter called "New Foundation"), DENTON COUNTY TEXAS (hereinafter called ~ "County") and THE CITY OF DENTON, TEXAS, (hereinafter called "City"). W I T N E S S E T H: WHEREAS, the parties have entered into various Agreements among FTM, County and City dated the day of 1983 and, WHEREAS, pursuant to one Agreement, County and City have leased Flow Memorial Hospital (hereinafter called "Hospital") to FTM1 and WHEREAS, the Board of Directors of the Foundation, pursuant to Article X of the Articles of Incorporation, as amended on January 28, 1970, have dissolved the Foundation and transferred its assets to the New Foundation, WHEREAS, FTM 'intends to provide for medical care to Indigents of Denton County, Texas, and the New Foundation intends to partially reimburse FTM for such indigent care, NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements hereinafter set forth, the parties do hereby represent, warrant, covenant and agree as followsi ARTICLE I INDIGENT CARE SERVICES I.I. Services Provided. Upon and subject to the terms, provisions and conditions contained herein, FTM hereby agrees to provide indigent care medical services to the residents of Denton County, and the County hereby agrees to reimburse FTM through the New Foundation for such indigent care medical services provided by BTM, ARTICLE II DURATION 2.1. Term. The Initial term of this Agreement shall commence on the date hereof and shall continue and extend for a period of five (5) years from such date unless this Agreement is terminated at an earlier date as provided for herein, 2.2. Renewal. At the conclusion of the initial five-year term of this Agreement, this Agreement may be renewed by mutual consent of County and FTMI provided, however, that new amounts of reimbursement for indigent care costa shall be negotiated by the parties. Notice of an inteniicn to renew this Agreement shall be provided to the other party six (6) months prior to the expiration of this Agreement. 2.3. Termination. This Agreement shall terminate in the event the Lease Agreement of even date herewith (the "Lease") by and among County, City and M shall terminate by any provision of Article VII of said Lease. In the event this Agreement shall so terminate, FTM will have no'additional obligation to provide indigent care, i F. ARTICLE III PAYMENT FOR INDIGENT CARE SERVICES 3.1. Amount. New Foundation shall pay PTM for indigent care services as provided by FTM an annual amount equal to the New Foundation's return on investments but in no event less than ten percent (10%) of its total assets or more than the total cost to FTM for indigent care services. 3.2. Method of Payment. FTM shall, on or before the tenth day of each month, notify the New Foundation in writing of the total amount of indigent care services (as hereinafter defined) provided by it for the immediately preceding month calculated in the manner set forth in Section 3.1 above. New Foundation shall have ten (10) days from the date of receipt of such notice by FTM to reimburse the amount set forth in such notice at the principal office of FTM or at such other place as FTM may from time to time designate in writing. 3.3. Monthly Indigent Care Services. As used herein, the term "monthly indigent care services" shall mean the amount of all eligible indigent care services (any cost or expense reimbursable by the Medicare Program) provided by FTM lees any reimbursement for such care paid to FTM by Medicaid and/or third party health insurance carriers. The total amount of reimbursement for indigent care services over any twelve (12) calendar months shall not exceed the amount due as required by Section 3.1 hersinabove. 3.4. Hooks and Records. For the purpose of ascertaining the amount of indigent care services reimbursable hereinunder, FTM shell prepare and maintain adequate books and records which will accurately reflect all revenues and expenses of such services, N.iw Fol.;tiation and/or County and any authorized representatives of either shall have the right to examine such books and records of FTM during the regular business hours of FTM. ARTICLE IV COVENANTS OF FTM 4.1. Serv'ces Irovlded. FTM agrees to provide for and care for all persona who are residents of Denton County, Texas, and their respective family members without regard for the ability of such Individuals to pay for services rendered. The following services shall be provided. (a) emergency services in FTM's emergency room; (b) the delivery of babies, either through FTM'a emergency room physician(s) or through the medical staff of FTM'a hospital and the Replacement Hospital; and (c) hospitalization care for patients diagnosed by a Hospital staff physician(s) as requiring such care. To effectuate the purpose and intent of Section 4.1(a), (b), and (c) hereinabove, FTM shall Ascertain the ability of such patients to pay for services rendered by requiring each patient to complete the form as set forth In Exhibit A attached hereto and made a part hereof for all purposes. In addition to those patients that qualify for indigent care services by meeting the qualifications founte, in Exhibit A and as verified by the completion of the form as set forth in Exhibit S, attached hereto and made a part hereof for all purposes, indigent care shall also cover any patients who are in the custody of law enforcement officials for purposes of detention in County adult or juvenile fevilities as well as infanta under the age of two (2) years old who are in the protecti'vo custody of County because of neglect, abuse, parental desertion, birth defects, or for any other reason, ARTICLE 7 f COVENANTS OF NEW FOUNDATION 5.1. Reservation of Funds, The New Foundation agrees to annually set aside funds which will be applied to reimburse F'PM for indigent care services provided pursuant to Article III, k~ z ii ,r ij h~ I 5.2. Investment of Assets, New Foundation agrees to establish a Board of Directors of at least five (5) members and which includes at least one (1) Certified Public Accountant W one (1) Attorney-at-Law. The primary function of this Board of Directors shall be for the purpose of investing the assets of New Foundation, ARTICLE VI COVENANTS OF COUNTY 6,1, Contributions to New Foundation. The County agrees to contribute the entire amount of the proceeds it receives upon dissolution of the foundation to New Foundation, Ilia County further agrees to contribute all o° the proceeds it receives from the Lease Agreement dated , 1983, by and among the City, County, and FTM to the New Foundation. ARTICLE VII COVENANTS OF CITY 7.1. Contributions to New Foundation, The City hereby agrees to contribute the antiro amount of the proceeds It receives upon dissolution of the Foundation to Now Foundation, ARTICLE VI11 COVENANTS OF FOUNDATION 8.1. Disa:.lution. The Foundation hereby agrees to dissolve upon the consummation of the Lease Agreement by and among the City, the County, and FTM. The Foundation further agrees to distribute its assets pursuant to Article X of the Articles of incorporation as amended by the Board of Di-actors on January 28, 1970, such distribution being fifty percent (50z) to both G:ty and County, ARTICLE IX DISPUTES 9.1. Resolution o£ Disputes. In the event of any dispute arising under this Agreement among the parties as to a patient's eligibility for financial responsibility and if the parties shall fail to resolve such dispute within fifteen (15) days following written notice thereby from any party to the other parties concerning the existence of such dispute, any party by written notice thereof to the other party may request in writing resolution of the dispute by a Resolution Committee. The Resolution Committee shall be composed of a representative chosen by the New Foundation, a representative chosen by FTM and a representative chosen by the County, The Resolution Committee shall decide the dispute within fifteen (15) days of its receipt of the written request for resolution of the dispute. The decision shall be binding in the parties and shall be implemented within fifteen (15) days of the Resolution Committee's decision. ARTICLE X MISCELLANEOUS 10.1. Entire Agreement. This Agreement constitutes the sole, only and entire agreement among the parties with respect to the subject matter hereof And supercedes all prior agreements, arrangements or understandings, written or oral, between the parties witv respect to such subject mattar, 10.2. Amendment. No amendment, modification or alteration of the torms, provisions and conditions of this Agreement shall be binding unless the same shall be in writing and duly executed by the parties hereto, it is the intent of the parties hereto that tho attached Exhibits,,A and B, will be reviewed annually, If any any time the present Medicare or Medicaid laws are amended, the parties agree to review this Agreement including Exhibits A and B in its entirety. : 10,3, Notices, Any notice or other communication required b given pursuant to this Agreement shall be in writing and shall be delivered rin person or sent by ceri:ified or registered United States mail raon addressed to the other ~ postage prepaid, parties to this agreement at the addresses set forth below or at such other address as such other party shall have theretofore designated by written notice: I If to FTM: 560 w, Main, Suite 201 Lewisville, Texas 75067 If to the Countyg If to the City: If to the New Foundation: If to the Foundations I0,4, Construction, Should any one or more of the provisions contained in this Agreement be held for any reason to be invalid, illegal or unenforceable in any respeot, Such invalidity, illegality or unenforceability, shall not affect any other provision hereof and this Agreement shall be construed as if such provision had never been contained herein, f . 10,5, tlover~y This Agreement and the rights and duties of the parties hereunder shall be governed and construed in accordance with the laws of the State of Texas, ule5o. 2 10.6. Parties Bound. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective legal representatives, successors and assigns. IN WITNESS WHEREOF) the parties hereto have executed this Agreement as of the day and year first written above. FIRSr TEXAS MEDICAL, INC. By Darrell S. Lummus President DENTON, COUNTY, TEXAS By THE CITY OF DENTON, TEXAS By FLOW MEMORIAL HOSPITAL FOUNDATION, INC. By FLOW MEMORIAL FOUNDATION, INC. By t EXHIBIT A INDIVIDUAL WRITTEN NOTICE TO ALL PATIENTS NOTICE OF AVAILABILITY OF CHARITY CARE Patient eligibility for charity care is determined by measuring family income i against the Income Poverty Guidelines established by the Community Services Administration. The current income requirements are: Poverty Income Guidelines for Denton Corw;y I Family Size Nonfarm family Farm family 1 $4,680 94,010 2 6,220 5,310 3 7,760 6,610 4 9,300 7,910 S 10,840 9,210 6 12,380 10,510 For family unite with more than six members, add $1,380 for each additional member in a nonfarm family and $1,170 for each additional member in a farm family. ,a ~i EXHIBIT B General Hospital A. 'EQUEST FOR DETERMINATION OF ELIGIBILITY FOR UNCOMPENSATED SERVICES Date of Requests As provided for in Federal Law, I hereby request that make a written determination of my eligibility for uncompensatee servacesi4t)_ (name of fecilr it ) I understand that the information which I submit concern ng my annual income and family size is subject to verification by (name of fa.c-ilitY) I also understand that if the information which I submit~- determ nei d ro be false, such a determination will result in a denial of 1 providing services as uncompensated services, and that I will be liable for charges for services provided. I , l• NAME: rat M ddle Last ADDRESS, Number an Street C ty State Z p Co e TELEPHONE NO,i ( ) 2. OCCUPATION; EMPLOYER; 3. INCOME; List income for family from: 'total for Total for Last~hs Last 12 months Wages.,.......r..rr,.,r..r,.........,.r.r,...... . Ferro or self-employment,,,,,,,,`_ Public Social Security ....r,,,.,.,.,r,,,,,,,,,,,, Unemployment Compensation,,,,,,,,,,,,,, Workman's Compensation,,,,,,,, r..........r....r,,~~_ - Strike Alimony „ ...............r,,.,,..~,.,..,,...~.,.,^ Child Support . . . . . . . . . . . r ............-+~.r""~., .."".r"~'..~...... Military Family Pensions..r..rr .................r.,............. Income from Dividends, Interst, Rent.,,,,, 4. FAMILY SIM Name S. Type of Service requiradi ..-w I affirm that the following Information to true and correct to the best of my knowledge, ate 9 gnatura Farson Making Request Exhibit B, Page 2 B. DETERMINATION op ELIGIBILITY 1. Income a, Total Income for last 3 mos. $ X 4 b, Total income for last 12 mos. 9 2. tf the patient's statement of income was verified by the time the determination was made, stipulate exactly what information was used, the content of the information, and the source (name and phone number) of the person providing verification, i 3. The applicant iss Eligible For., No-Pay ~ Part-pay care. Ineligible If part-pay, indicate the percent of the charges or the dollar amount, which will be charged to the patient 4. The type of service requestedr is , will be was , available to the patient (date), S. If uncompensated or part-pay care is denied, state the reasons for the denials Date of determination of eligibility or denial or uncompensated services: Signedi a gnature o person ma ng eligibility determination) Date Applicant was provided with a copy of determinations E EXTRA PILE COPY til/-~Ga[2tZ+ ' {For Working Papers. Pre•Audi►, e)c.) DALLAS/PORT WORM OFFWV FROM DALLAS/!OIT WORSE iwHi, t•. PILES RICHARD W. >KUUTZFAT.QT JANUARY 91 1984 /e4l- -Ac~. CITT OF DENTON - STATEOUT 3 IMPLICATIONS ! I OF FLOW HP,MORZAL HOSPITAL Attsaae are the following documents relating to the forwttioa and operation of Plow *teworial dospitalt - Ine last will and testament of if, 8. Flow - Flow Memorial Hospital agreement between the City and County A resolution L>y the City Council of the City of Denton relating to funding of operating deficits - State statutes relating to joint City-County hospital boards 'Tns significant provisions of these doc uaeate are outlined. I The following are the key provisions of these documents as they relate to the potential inclusion of the hospital in the financial state- cants of trio County sud;or City under the provisions of NCCA State,eeat 3, 1. Uadar the last will and testament of ft.a. Flow, he Sava the bulk of his estate to to a t,ity and County to be used to crests a Flow voworial dospitbl far the oendfit of the City of Denton and Denton County, TLd City and County subsuquantly dnt4tad into in agreement resulting in tns formation of a joint City-County hospital board in accord- uute with state statutes, the key term of this agreement are as followel a. The City and County retain title to all hospital, land, physical assets and facilitLes. b. The City and County agree to provide funds as necessary to balance the budget of the hospital. The Agreament of fiscal yetr 1971 was for each entity Co provide 502 of such aaount, with this percentage to be negotiated thereafter. c. Three board aatw ors are appointed by the City and four by the County. . R 17 i :pV •6. ~.rCWM1 tp 4pt ,4• EXTRA FILE COPY (For Working Papers, Pre-Audit, etc.) CITY OF DOTOlf OFFICE FROM OFFICE Jan January 9 n d.' The City and County have access to the hospital's b records and reports. a. The City and County shall approve hospital mppsaditurss in excess of budget. i 3. The state statutes govaraing the formation sad operation of joint City-County hospital boards have the following key provisional a. The hospital board is the Joint agent of the City sad County. b. Although acting as agent, the hospital board shall constitute a separate eotity in the exercise and performance of its powers, duties, and !unctions. e. The hospital board may ous and be sued separately. d. The hospital board may buy, sell and own property, e, The City and County shall approve dispositions of property. E. T'he hospital board say issue revenue bonds, although the issuaacs must be approved by they City and County. S, The hospital board may not levy taxes, RICHARD W, KRBUTZnLDT Pat ?;TM?: t C. rLON MEMORIAL BOSpfrn 1. fte:Yili 2 ,.plov (Bee txhihit 44• att►cAe4 hereto.) i, left the residue of bis.Eetate to the following Trustoost A* County nudge of Denton county - b. Nayer of the City of Denton a. Cashier of the bdntaa County National tank d. Cashier at the first tt;te task bf Denton The residue was left to the trust*** to create a City.eeusty Nestital for the "Alf" of the City of Danten and Destoa County, Texas. . 3. Os July 190 1971, the City of Denton, County of Denton, and the,NCard of Directors of flow memorial Nospitai ente,ad into an agroaaent to reYorgaAisa the Morl(ltal under,V,A,C,B. Article 1194E-1. The City and "the county retaine& title to all hespita,l lands, physical assets and faaillties, (Bat txhibit "30 attached hereto.) the city and county agreed tq provide all funds necaesary to balanae' the budget after the budget As exaxisgd, aacapted and 1 ap roved by the City and County, I rot the fiscal yut October 'I, 1971, threugh September 34, 1972, the City And County agfresd to fund the amount dacessary.to balance the budget on a 30/30 basis for 1 year only, to lie ri-nagotlato'd thersaftat 4. On October 6, 1973, the City of Denton ;and the County of Denton pasAs4 Resolutions agraoing to each annually transfer to the .Hospital Soird, the ledger oft , A, an amount equivalent to the principal of and interest on the Series 19'i$ and the Series 1973-A bonds (in the process ef'haiAO issued by the Mospital teardt,this requires ,$44,902.00, for 1980), or b, the amount that a tax of 106 an the $100 valuation would produce an the County tax roll (Assuming the then current rate of collection)' this is based, on the 1978 tax roll.) This joint resolution was ( passed at the regwrt of the prospaetive purchaser of the above mentioned bonds, (Bea Exhibit 06" attached hereto, The minimum amount datirmined by either "a" ar'"b" abovs Page, 24 v: Ai 1 TABLE OP CONTENTS Page. wwmbar 4 A. VaNTON COUNTY PUBLIC HEALTH DIMICT .hYy 'r:~ Spmmary...4.rrrr..r44.4r.4....4'4 r4.r.r...44.4.rr.rr..........1 ' Pormation Agru rant.,,......... r....ri ........rr..r.r.s ,Texas state Dapartmant of Health \greemsnk, .............0..6 Newspaper Artiole raportinq an first -Public Health District....r.........4,lr.r............ 40 List of ve ntributions by county town' .4.....4..1............8 and cities to Health District.... V.A.C,S, Article 44494 to statists under which Health District was arutad4............ 0404.....'... 0-...f B. COUNTY-MYAE PUBLIC rAEE LIBRARY PRIVILEGES Summary.r..$ ................r........... ~............i......12 Tormation A9Yesment.0.... 4....4. I... ...4.444 r....4.r..13 Revision of Agreement..,....... r.....444.4..4..4.......rr.4.19 Latter to,City of Daatou from Caemidelonars, Court informing of option to reduce contributlgn.... r ...............................29 C. PLO.N MEMORIAL EOSPSTAL ' SummAryr4.r.......r.........rr....... 4.44...4 r. ...4024 . 1 1. will of E. E; flow. r . . ...4.04...0 r.r ........26 Plow Memorial H049itA1 AgreeAtht I. ..430, V.A.O 8. Article 44941-1 - statute 'under which Joint county-City NospitAl was orestod...4............ 038 Various Resolutions relating to bonds.lysusd , 4 RCOISTER exaot'pt showing, District ....1...'4.4 42 Attorney',a (Jerry Cobb) request for 'Attorney Generals opinion regarding indigentii......... 46 Latta, froa4 Jerry John Crawford, County Judge, transmitting all ?low Hospital ' documents to mark white, Attorney Central 1 .1010.47 V.A.C.B. Article 4438 regarding indigent siek ...............46 D. CITY-COUNTY CIVIL OETENSU , Summery.44..4.40.r............ ........................1.....60 Pormatida Agre usnt..'...r.....4.4.......4......04.44..,...• , E. CITY-COUNTY MEDICAL SERVICES summary, ...r4i.4...v..4. .44i.4...4.r............ .'.4..4......57 Excerpt from City Council Minutes.,....... 0..10.644 .........S6 Exasrpt from Commissioners' Court Hinutes..4.....,..,..4.4..b9 Description of Services provided ....4..4.4.4..4............ 60 :u i ,a,•. ~u~r; r ;m e„ a~syoi . x!~ _,~-,►,.a ti s:• 't"o 1 1 1 Art. 44941-1 s>rar.Ta_pzrsrac Title 71 ~ Etnfaent doraLia Sec, 18, For the purpose of carrying out any t function authorized by this Act, said power, duty, or Hospital Board shall have the right to acquire the fete simple title or any other any other interest in land and property by condemnation in the manner provided by Title Revised Civil Statutes of Texas, 1928, as amended,' eminent domain, Said Hospital Boards relating to counties and cities under Article 3268, as ena~ a see rights The amount of Title a2. us t and character of interest in land or other propperty bus to be acquired shall be determined by the Directors, 1 ArtlelA J9es et ip, rnVORMent of fends Set. 17, The law as to the security for, and the investment o!, funds of counties and cities shall be applicable to fends of said Hospi- -1 tal Board. The Bond Resolution, or any trust indenture executed in connection therewith, may further restrict the securing and Invest- ment of funds'of said Hospital Board, Also, said Hospital Board shall have the power to invest all or any part of the proceeds from the sale and delivery of its bonds, until such Proceeds are need. ed, in direct obligations of the United States of America, to the ex. tent authorized In the Bond Resolution or any trust indenture execut. ed in connection therewith, Cu+nulsdoe efteoti cortflletinglaws Sec' 18, This Act shall be cumulative of all other laws on the sub. Ject, but this Act shall be wholly sufficient authority within itself for the issuance of the bonds and the performance of the other acts and procedures authorized hereby, without reference to any other laws or any restrictions or limitations contained therein, except as herein spe- oifically provided, and when, any bonds are being issued under this Act, then to the extent of any conflict or inconsistency between any provisio and any s10as Ofnths Of is A t shall prevail and provisions of any other law, the however, provi. that any Hospital Board shall have the right to~use rthe provisions of any other laws, not in conflict with the provisions hereof, to the extent convenient or necessary to carry out or Implied; granted by this Act, any power or authority, express Acts 1986, 69th Leg„ p, 1030, chi 6L1, :s TWO of Attf X"teirleal Nato 41160 An 'Lot Aufhorillnr the erutlen of Joint f 'or tthe old eeJoInt etroih opitAi oardaf provide ' tountY•ety hospitLi beards, Without t Joint peweril provldln fulmir 1108, And fLnotiene e( uld JontwhosD hospital top funouans of oounuie and t ol. lupoivth raised hoards, Ineludln And deliver rev nue bonds. orovidiAr forlL 98 t. would be less than 30%-of Plow Hospital's projec% d deficit.) S. The-funding of the amount needed to balance Plow Hospital's . budget continued on a SO/90 basis until Budget Year 1979, when the city of Denton pledged 251 of the amount of projected, losses and the Copp ty of Denton pledged 501 of the amount of projeetsd losses. 6, Vernon's Annotated Texas Statutes, Article 4430 p,rovidws as followni i *if there is a regular established public hospital in the county, the commissioners court shall provide for sending the indigent siok at the county to such hospital. If more than one such hospital exists in the county; the indigent patient shall have the right to aslant which one of them he shall be sent to,.' 7. Plow Hospital is antioipating charging off ;325,000.00 for providing medioal services to charity and medically indigent during 1980, which is also the approximate amount headed to balance the 1980 plow Hospital Budget, 4 V e S T I 0 N 9 8, In view of all of the above faotif a. 'Is Denton County fulfilling Its statutory requirement to "provide for sending the indigent sick of the county to ths,public hospital by providing' and jointly owning Plow manorial Hospital? , b, -Are Denton County and the City'of Denton required to jointly end equally fund.the amount needed to balance flow Memorial Hospital's budget2 e, Is Danton,0ounty solely responsible for providing plow Memorial Hospital with funds necessary to balance the , budget, up to the amount of the charge-off for inalgant ogre, even though Denton county is providing a hospital facility for the Indigent sick of the county? ' 9, City of Denton funds budgeted d114,S63.00 Denton County funds budgeted v'...$220,126,00 t page 25 ' i~ia2.^..1rr•1~ .~•'v.~'. :'M:~,'J~.,'L.g1iWl ..3 •':"'n'?'t'~~~Y~'~'~'Ji~.~al-mil 1 M F i',• , ti•..,~,w,•+r.....,,• 4A P. 10 y._ THE STATE OF TErtASS sz . 1 0OVNTY OF DL-1 TCM i $NOW ALL MEN BY THESE FRESEHTSs. - „ that-:8 S.E.Flow) a single mars of the Count? ot~Iknton' Sts'te Of Texas, being Of sound mind and dia Oei P ng memory,do make, Pub~isq'and dedla re t!}is'my last Mill and Toatamanb, hersb7• revoking 'all wills by me at'an L1, L* 1 " 7-.time beretofbre made' 'ITEM 1•, X desire •and direo,t that all of my Just debts sad fut#erat exy4naee'and the cosi of such mor:tuaent as may be' suitable be paid out of ti7 Sets, to, ae sobu after my death as may be found r. XTEL1 84 I,givs devide and bequeath to my beloved,,C'oueins', Otis Ihmon;Earl Inmon,Ethel xnmon.and Loli Campbell'of Desiton, ' Texas; Alioo Oolf of Sheriaan#,Texae•,Birdia Looey of ballaa,Texas p J,N.Ruasell of nioo;Taxasp,Mo,, 14 $e • ndlin of ptaoo,Taxie and • ' On* Oivson of Dbam*ing,Now. lfexioo, Saab the auto of $6000.00. r r'I give; d'e'via"e and bequeatli' to Lira' "rd' o 1 ' . .Lydia Fo Denton, w Texas ae''a'• token of my ippreoiation ;of the 'a ra'and attention she rendered • .m7 beloved eiater,'itiea pertie Plow,in her life ' time, and the eare'.and attention she has rendated and ik'now "-rondoring me the ' , etlm at $10,000,00'. • ITEM 4 ' in the event of the death of any'of, the' benefiolariea 4 mentioned in ~ " -Items Tiro and Tbree of this •Will 'befo're m7 death, an such bequest Shall lapae and beeoms null and void, I,. 1. XTESd 8. , , 'give;deviae and bequeath to the • • Seobtiah'tLtghta t no Rams " for Crippled Childron,,,ot , Dallai,Texas, the sum of 410,600.40. X'give,deviee•nnd boquooth to Duokner+ t" ~ e Orphan* lfeele ' at Dalloo,Toxos, tbo sum of Y100000,00, ' ' EXHrozr ~ ' ' wr, or" Y give,deviss and bequeath to the Cumberland Presbyterian Orphans game atuntoa,Texas, through its Board of MInidterial ' ! a Relief, the aua of $2000.00, _ 2T= B. I j Y..give,deviss and bequeath to the Kiwanis Club at Denton; Texa's, to bs wed as apart of the Crippled Cbildren'Fwfdr 'tho sum of $10000 00 Yn'order to oreata's Flow Memorial Hospital for the benefit •of'ti,JCiby of Deitoa and Denton Oounty,Texas as a City -Count7 Hospital,'Y give,deviae and bequeath to, tb Ey Judge of Denton C yexaa, the ao-_r of theCitr f Denton the Cashier of s Denton County National Back of Denton, and the Cashier of The First State Bank qt Denton; and to their respective aueoessors ' In ofa'Yoe, ae trustees, all of the remainder,reet and residue of.my estate in trust, 'to-be uaad bl, them,as,a Board of Truatess of the .Flow ! amoridl Hospitel,,, to oonstruot'snd'dquip a 'modern and efficient ROepital, and I authOrizo and empower such Board of Trosteea to mike such axrengement.nith the City of Denton and County 'off lientoa acid/or anp.other'Organitation that might , undertake to properly administer suaV'Hoapita,, such arrangements as may in the. of. said Board 'of. Trustees be to'the beet intereat of said Hospital and the people of Denton and Denton OOunty, im 10. ,Y noainate, oongtituto and appoint my good-friend R,M.Baias eia executor of this my last will and toatament, and Y direct that no bond or other see urity be required'of him aa'auoh executor, and that no other action be had'in,thoCountyCOurt in the Adminis- tration and settlement of my optate. than to probato and record ' this will and return-an inventory; appraieoment and list of claims of my estate. . 11TU 11. r In the event of the death of the sold 11,1d,tbarne or his ina- billty Lo carve no such executor from nny anuoo, I nominate oonntltuta and sp!joint yr.W,d,ltipibroweli no exooutov of tliia my r , last will and Ee Eom , 4 anb And direct that no bond or i other so. ourity be roqutred of htm as such expcuior, and that no Other. aotlon ba had in tho CounEyCourt in tna administration and settlement of m7 satote and other than to Probate and record this will return ao•trv&ntorY,'aPpraisement and list of claims or by estate. _ r the evens; of the death or inability of both, oE h the acid R.M.Barns and Dr,W.q,gimbrough to pat as exeputora constitute And app oint J,Z-,,Savage as t nominate, 411 and teetameat; with the ayae °outor of this my last powers end under the 8a4e conditions with reference to bond and the ootian of the ()curb as is preoaribed for the t&id R.M ' Barns and Dr.W.C.Himbrough, X TEM 13,, Y expressly AUthorits my aaid ezeoutor to se.ll,.such real estate and personal property belonging to my, estate sa may be neoeaeary to Properly darry out the purposes of , . Y , ;.;T,. ;^~TE~I 14. . .'t. hi,.a,w, il2 expressly authorize and empower, the Bosrd,.ot Truater,a ' for such Plow Memorial yoapttal to aall.any and all real estate and . p1 'p : ' ' Personal ro er,ty belonging to said Trusted, to loose for mineral' development and Sor gone ral'purpoase aay and all real,eetits balonging to said trdat estate, to invest•And re- ' h Invest the pro' eeda of aa163 and oolleatione) to cortatruot and hive constructed auoh buildings and other improvements, and buy , such' equfpmeat'and other property as maybe neosaaa ' i proper aonae;uction and operation of such hobpitil andrto the vest end re- in. invest the funds that may be on hand not',immadiaLa. ly neoded, and •use the Proraods seaport of the trust 7 ,or eaii! Trust Estate for 4be ¢bnefit of such plow t.Oe1Or ld BoapiLal, and asks such arrangements ae f`::• mor deem beet for { the operation tbereof, 211DI 18 ' X further donire find direct that all buildinga aonntiyntad .L'...: .t/!~•~t.•L'aY „f1l'. =m,..Yr+u.- ~•;,y :it42!•✓.wt :i '.:-`M.t' . L•~2~. .:~ik w•Y" .f. M}h~'~ JI ,.i. ••.r,~ y.a I for the use of such Flow Memorial Hospital shall be of modern ' fire proof conatruotion, and that if ifl the judgment or I the" Trustees icy preacnt home should be a suitable'plaee for such ;hospital,they shall have the right in their judgment t6 'move the dwelling now 'on said premiaea to the rear of the lot for a nurses or ether auxiliary' building. T=1e. executor shall receive further desire and.direot that %7 f as compensation for hie services the sum of•03500.00, to be paid sither.'At one tl'mb'"Oo ib'two:or-three installments as the "work pt, settling m7 estate progreasee, and aa'may be found convenient by my said 'ixe.outor. I TF]d 170 It,ie' my desire that there be nb'litigation over my'eetate, and to that end'I rill,dev`iaa an4 direot•tb4't each of the beneficiaries 'accept the bequeata berein made to siob rea'peotively,. end if any of tb,e legatees named herein ihould'oontest this-will, sue to set the same, asi4e,,or in any way render aid and comfort to any otber Arson or persons who might b'e contesting this will, •,auing.to set the same iside:oi•,seeking to Defeat the purposee of 'tbia will, then 1t'. is my desire that sueh,legateejor Legatees take no part o!' my, estate' and that th ~ ;egaoy,or~legdoiee heroin .:tiequepthed'~io auoh legates or legateei bhail lapse and beocma ot part of th4r;aidue of my. estate. , ' YN 'Tf MORY a'HMOF I have hereunto met my band on this the 17tJa day of Sanuarg:• A.b,19480 in the presence of Oso.lt.Hopkins and Nettie pse.n,, who atttaat'ihe acme' at my requist and in my presence and is the presence of sac oth~. ~f signed' by 11.f.Flott; the the, above inatra rent was sVAh Teatatcr, in our preaonou and hie raqutaL and n hie prosonoe end in the preaenoo that signov names Ins borate cc attasting witnoac t~ :M• K• •F, L.~, • •:fW •4'L.RY•a++:.VY•~~/~M 4,~'M a., ~ti: ..-IUi. :Ii. .a. •q. '!4L'.,lA'i~af.~i1,. •~i,.w~e'1Mt~M3.Y1HY4 1 THE STATE Or, TCy,A9 x rzos4.pcEwnnsAt aoarrrnt A?11CGMEttT I COt7UTy OF O UTOU X , WE, the undorsigned three parties, being the Commisaiogerss court of the County of Denton, Texas, the City of Denton, Toxaa, I and the 9oard of Oirsctoxe of Flow Memorial Hospital, alb oE'Danton ' -County, Taxas, pursuant io mutual Resolutions heretofore passed by the Commissioners' Court of the County of nonton,and the City of Denton, hereby dissolve the organization of said Hosrital.undar RaviaaWCivil Statute Article ,44941.and,hereby re-organ12* Plaid J gospltal under the provisions of Texas Revised Civil statutes, Article 44941-1, which.Ar•tiols is incorporated into this contract, with and subjoct to the following conditions, terms,'and,covenants to which all parties hereto, and their successors in office, shall ' :be mutually bound, to-wit+ X. 1 The City of Denton, h®rainafter,referred to as 61TV#'and the County of Denton, hereinafter rsfazred t- aa•COM I. shall xetain title to all hospital lands, physical Plseats and facilities, 0%xcopt as may be hereafter gs+nted by resolution of the'reap,eative govern- ing bodies. Any matter requiring a vobe•on the pare of both the . City and County other than the expenditure or transfer of funds shall be passed upon the affirmative vote of any six (6) mambas of said combined governing bodies at 'a joint meeting, and any eight (s) mombors o: the combined Carvnisaioners' Court and city council shall constittto a quorum to act on any hospital matter requirs,.j approval of City and County, other thin the transfer of City or County funds, t.')e plodi+ing of any City or County asset, or the term- ination of this contract si provided bolow, Any deoision'on tho part of aithar of said bodies to authoriio the transfer of fundu, or plodgo nneota, to Clci hcmorial `Icspital, horoinaftor raforrcd•to an j . HOSPITAL, shill be docidud under axietinry Saw pertinent to the ras- j yrootlvo boltion, ' poryo 70 ' ~'!"~'.:C'MiVlb.:.~-.. ~'I ,'-w:firr..'~..,w`.r~~.i r .M nM•. ~ n ,i'ho City and County shall exorcise all authority ovor'the board of Diroctora of Flow xoawrial Hospital, harcinaftcr referred , to as BOARD, .consistent, with the intont of said Article 4491-1. The Director of Finance of the City, and the Auditor of the county, { shall each have the authority as authorized under- Ithe laws of the i State of Toxas to examine all hospital boors and recoris at any j reasonable time, either separately or together:' hll donations and grants for the benefit of the hospital, in- cluding benafits of trust funds, may be made directly to the Board of Directors of the Noepital but shall be subject to approval by City and County if-any condition, obligation or limitation is con- neoted with any such donation or benefit., All fundr. transferred by the City and county to, or for the '•oenefit.of, the Hospital shall be based upon &-written detailed budget,-as described below, and no special t")nsfer of City or County funds within a budget year may be made without the submiss- ion and approval of a budget amendment or supplement prior to any such transfer, The. said City and ,county 'agras 'to provide ,all funds . necessary to balance said budget aftez said budget is examined, accept ed 'ahd approved by the acid City and, County: 5 The City and county shall transfer funds to, the Hospital in the 'followin 9 proportionst 'For each dollar transferred, the City shall commit 50 o_r•cont f and the County shall commit 50 per cent, aftor the amount of each tronsfer has been authorized by. both, This percentage of fundinq is valid only or the year October 1, 19110 through Saptembar 30,1972, to be rs-nogotiazad thereafter. Y2, The initial Board shall consist of the following seven appoint- ments, three of which were appointed•by toe City, and four of which ware appointed by the County, with tho,torms of office as sot out j by each name, the Corms shall begin on the o.Ncoution daio of thio contract, and it.is specifically provided that the terms shall ax- .2 CX SA Pago 31 :...rw,'Y,~Wp2'Jy,`l~N•~~•u'Y~~iLii~,~4,,.~.FlY'1...1nwlMM.•d~'I'M.a.-iy W..•:.'A>~+, w!!1 .~.~,j1,.1.`i~,•,,,i...:..7 .r J',',•..JL.~~.i•,Y6Y4,~ :.;'4hM~•. Y ~ i.rw,,, ,..-~"'/r ~ 4 Piro on the firat and second nnnivozsnry ol.tho loot day o9 the 6xt comploto fiscal yonr of said hospitnl, daponding on the, I initial term', then each now appointment or roappointmont shall be for a term of two yoars boginning with .the aspiration date of the initial term, as provided in'said Artiolc .44941-1. Nd membor shall , l carry over into a new term unless properly roappointed, as All. terms automatically expire as indicated. '~be initial appointees and their torma are As followss f TERN ' COUNTY AP"OIyTECr3 UpI kTXON DATE . 1. Mrs. Paul N, Simpson /00-/`7 Z , 2, M•r. welter nay //0•~~ ~7?~ 4. : Mr. Al Testa 1rt r2TY nPPOXNTEE9. 1E1i14 EXPInATXON VA 1 - Not.- 7.1 1. Dr. Charles Saunders /0,/-•~ L 1 2: Dr. John Carter 3. /0-I.7 pr.. Hsteail Ye1+r+9~d~i.Y7!°~,ran~ ' County appoints two members for t'1ae year term and two for Ono year term, City appoints two members for two ysar'torm and one for one year term. Xt shall be the duty of the Board to appoint A, Hospital Ad- ' miniatrator having the qualifications ostAblishod in the By-Laws, and to confirm the appointmont of the AssistanL Administrator and ..the Comptroller (or'Controllor). The Board shall exoeuto a written contract with the Administrator for hic'sorvioon with such provis- ion* as MAY be agreed upon, but no. such amploy"int contract shall axoeod a tore of four (4) yaurs, and shall provide for removal for oauso. The Roard shall conour in Ano 'appr6vo Any written aontr.Act tho Administrator may nogotinta for tho'employmont of tho Assistnnt Wndnistrntor and tho Comptrnl)or (Controller) I>ridr to. any much omploymonL. ' 7'116 slonrd shall Ituvu Linnl ou}11nvgy in All mattorn of hoe-' Vital huliol, ina1u11ing manrw)1rmmlb 1,nlicion, in tho govormment and e+Iu,r;1lillin of thu 11oolsILa), TI1o mnt,totoi nf,liuarum and voiJig nr.n r1n <Juv,•rdr~1 )~y nul~t Asttlvlr, 44!f41»l. A111I 0hu'Ily-Ir1w11, A11 OffisNa1 atttn or I,hn 1111+1s•1I .111'uuLllgl 6Iu, uuns,nlrua1111: ru' r,lnnvttiurl nP thn 4c X. 5B •.»..f.y'`!'+efY.i•~!•. 1,/' Ir.. , I"r6rh?.W"_~w..J.',J~•.'~:Y,J hospital shall be by written roaolutLon. x^11'-`'L All said resolutions duly psesod upon during an official Board mcoiing'shall be-rofloct_'.. sad,in the minutes of the Board. All expandituras of Fospital funds in excess'cf the total bud- get allocation shall be approved 1+y the Board, the City and the Ir-1 ! County prior to any Such,oxpenditure: ' i, It shall be the duty and zdapcnbib41 ty Of,ths.Board during each fiscal year to engage as independent auditing firm, to make an audit'of that fiscal year. 'such engagement cont;aot, or letter, shali'ba approved •Jointly by, the city and County, as to its farms, and it shall provide that ',true copies of all audit keports and mat-' axial, including the auditors managament'letter and confidential information,, shall be furnishad simultaneously to the Board, the City and the County. The Board may appoint advisory committees, to serve without compensation, under terms and for purposes which said Board deems proper. All committees other than advisory shall be as provided in the By-Laws, All meetings of the Board and its Executive Committee shall be open to the public according to the provisions of the open seeoion Act, Texas Revised Civil Statutes, Artiele'62$2-17, as amended, The Hospital Adminiatrator shall have the authority and rem- ponsibility to do any and all acts necessary and sporopriato in the administration and operation of Flow memorial Hospital with in the framowor, of t,1e policies sat by the Board in its By-Lasirs and by Resolution. The line of authority from all employees and „ personnel of tho,11ompita2 ohall be to and from maid ndminictrator, who shall appoint and dinchargo all hospital salaried porsonnal, ..and omployoons provided that the Board must approve tho appoint. Rant of tho hnsintant''Adminiatrator and the Comrtrollor (Controllor); 5 C ~ . r!y~ S ;ly'Yj~ py'!~„'riJ.'~P_~ ~t-~' a" fir'.- • -.'~r_'.I..~ ~.'=•N. , •Mly~A•.rW,Y.y..~y'li• ~,4y if who shall each or both bo entitled to a hear ng bofaro'tho board ^r..• prior to dismissal by the Ac4ainistsator, as sat' forth in the By-Laws. Thu Administrator aha11 each. menth P'rovido the. Board, tha city, and the county with a summary of accounts and o _ xpenditures, and with a list .of,all'accounts to be designated uneollectible. Iv. The annual budget for each,fiscal year, of the hospital shall rte- ~1 be prepared by the Administrator and prosanted.'to the Beard no later p than the first day of flay preeoeding that ,fiscal year, and the Board { shall present same to the County and the City within thtrt i \ of Sts raceipt thereof, or no later than, the first day of JunaOpreays 1 needing that fiscal year. ' The hospital budget shall he ccnaidared a pub 140 record and be readily; available at all times.' The budget shall sat cut estimated indigent care and bad debt loss in one account, to be separate acc- ounts when determinable by the county Medical Services Consultant, The budget shall be compatible with the organizational chart, which shall divide the hospital organization into departments and ' sub-departments. i. The hospital budget shall be consistent with • the form of . accounts and method suggested by the American Hospital Association, and sufficient in detail to show all'income, revepuss, losses, ax- pendituras of funds, and salaries of all hospital Personnel. The fiscal year of the hospital shall begin the first day of 4otober. and end the 30th day of September. The Oy-Laws of the hospital, and all amnndmonts thereto, shall be prepared by the-Board and 6 • PProvad by the City and the County ~ prior to adoption, Such by-Laws shall bo made purauant to the terms and conditions of this 'contract, and gonorally, follow guidolinoa,establiahod there for by the American hospital,Asnoointion, f ryr 1 f • . Pago ~`'•"""""`t'y'•'s~+f~}.t"•-1. atftlra:.ee.-».i:ai;YSf!'1 ' ~ :A...,. +a Saw.-.,.e.:+, : a~rw......--.. .yy A, copy of such By-Lnua And amondmonts shnll be furnished to the city, the County, and the Administrator, 40 y-Lswa, are superior ' to any resolution of the Board, and no rosolution or other 'act of f1 the Board shall be contrary- tjorst0, , 1 VI1 The t•rans'.er of the funds approved by the City and the County, upon acceptance of the regular annual hospital budget, shall ba, made to the Doard in one of the, following manners in cash on or be- fore February 1 of the approved budget years or, not lens than 1/12 of said sum on oz before the tat day of eaoh month during such bud- Oat l'oart or, in throe (3) epua1 payments of 1/3 each, beginning 7'ebraary 1 of such approved budget year. The payment option shall be maue by City and County, respectively, at the time the budget is finally approved. Viz. The Board shall .require bonds,of the Administrator, the Assiut- ant Administrator, the Comptroller,(or Controller), and of all other ..hospital employses'uho receive or pay out any monies of the hospital. The amount of such bonds shall b® determineduy the Board, and the cost thereof shall he borne 'by the ;hospital. No such bonds;' however, shall be for less than Ten 'thousand ($10,000,o0) Dollars, VIII. , This cont=act shall remain in full force and effect until amend- ad or terminated by a majority vote of all oi the three parties here- to, separately, unless sooner terminated by the dissolution of the organization ,under Article 4494i-l.'by joint act of the City and County, Such dissolving of the organization shall automatically terminate this contract. This contract to become offootive en'ootobor 1, 19711 when approvdJ by all partica horoto. ; _ rage 10 . r. r.. ~,~:.,t'i.ii.a 4^rr:''~.bMt'6"„A~L.~,.u.AY-e 4.~.r.r,/..,7 i ~ t :.,..t•~.h+r .d:~'. .~~Y• to t AI . tOVLb 19ty d;y 19` A'~f'r9'1T\~lJ Y1~t/ b~,I^GC~~'~•'L\ r4a.~^•01~ ~ y Y,I . 1 COUNTY cwr`,RR i, r• - /"~C o ' C . 1wJ~V , 11~~~I CCURT,Y L'~s^~;y ^C'" ;y 'P»e/3 y % M3, 43L :•.SV co ' ~ 7ra3.r,,3n \3, :t `""^Lssio;,,;;;• I e_4 Y~7 4 ~ y~ ~ APt'I:ot'LO l•hLe~g...L~ d' :a`• 1.3, ti, ' ay of CIYI, 0r U Ir'rll s ALL~f' ~ bRl aAls.lr.: ca+lu3%I"is~,` ' • " ,~••.y i l• I / l:"UrioflhfaH- r ~ 4YLI. r:av, co n ~n 1 ArI+pAV_b t6La ~ • 1 day o ! ~ ' .._.....,.z„-,.:,,.••/ 1941. bOAA~ Of otArcraurs of ' ' 1'L/A•I1I 1'H::Ipf,f;IL L'G'fir7, ~ ' +111.. CII'1 II {I.i II ii it UlwI r r..l l't$1'11 ,lI,1 :AaJ 1.,nC ' ' 1 ' •YI•r1'11 ~YI,V 11~' Y ' ltlit~;fUllll f:11'I?I:II . w ~ • •E•' dpy,Nw.utiR~3117,~~ ' .Yt~ ~'1 , ,r: ~ ~1'. L~ti°""~~'OtbY1MST73'rf.M!Y1k~Y`•~r9 •A y .►S'C'~'+~T /wiiw.•^.+`':..I+rYw~' r.: i. f ~ .,...s„,.,.. s :.t-u.~r+~~'!'~~.'~".~.!w' ~'!~'►'t'u4y"1"s'~3`~#tns• r Ull . ;airiL;ut;trr;/its/,y,•/w~t . ' kA431;f1 5i"' i 'rlns.,rnutr n. ~xrlrsorv te • . • n \.L111' Y u • • .y • ,.Y. 5 r✓rF 1. ~,'r: ~i,.;.i 'W r 1 1 s r E A RESOLUTION by tha City Council of the City of Denton, Texas, relating to making provision for the operation of tho Flow Memorial Hospital, I ~e ns 'WHEREAS t" ComnissionersI Court hofCDonton County, have huratofora executed a contract affecrivO October 1 1911i ' wheroby both political subdivisions agreed to prov~da jontly funds for the operation of the Flow Memorial Hospital, and WkREAS, the Denton County-CIt of Denton, Texas, Hospital ( Board, the operator of said hospital, as the joint agent of a said City and County, is in the process of authorizing the issy' of bonds in order to provide for hospital improvements, and the prospective purchaser of one of the seriea of bonds has requested the existing arrangement of the City and County be clarified; now, therefore, ' THE COUNCIL OF THE CITY OF DENTON HEREBY RESOLVES: SECTION 1: The resolution heretofore adoptod by the CommiM ones' Court of Denton County, Texas, a true copyy of which is attached h+irsto as an Exhibit (and made a part haroof for all purposes) is hereby approved, furnislia cnreifiedacopyoofithistresolutiond(withcits attached Exhibit) to the County Ju of Denton County, and (ii) sign Denton,oTexas,athrough this dggegoverninggbodyroval by the City of SECTION j: This resolution shall be in force from and aftor es passage and it is so resolved, r PASSED AND APPROVED, this the 7th day of October, 1975, p ajar, ty o ant0n, euea ATTEST: ty bill ratory, tY o :n ton, Taxes + (City goal) ( s Art. 44941 HEALTH--PUBLIC Title 71 aoad of managers of city-county hospl- 2 Purchases and contrasts tat wet not required to anevute bond condl• llon6d ferred to slush lose of beardt but county board funds memb rs A board of mnunuant to this article, hospltW, Oparatln If D tree IlAble for any mleappllcatlon Of funds did not have to adverti an se for bids for put. and wen to follow all aD011cable >tCaNtes these 01 materlala ■nd supplies In excess ralating to use sad Can 0( Publlo funds, of 1110, and wu not required to advertise op.Atty.0en.10e0, No. Y-001, for bids on contra/ls In ex0ees of 02 DOO Ud-timum tax na which could 6r teVled 00.A1ty.0en.1040, No. 11.411, by cOn awwonars court of bear County The provisions of arts, logo, lade, and p 1 Jointboeetrationuof M*Mortal ho 0IILI with 01146 ands to the bids fulnmanis ve sla- city of Ban Aatonlo wu not to exceed 10t advtrtislhg for 6lda by pounnes andv111148 on 1100 valua110n. rd, d0 n01 apply to a OityCD4nlY hOlDktal es• Ineorp rated city and tounlY 101n11 tabilshed Pursuant to this anl0ta, 0p, rw ntaintaLting and Operating ho ltal under Atty,Qen.1002, SA 1VW-L322, ' "Atuto wen A04 liable for damages for The Corn tnlssionora- Court of Nolan C oup• 15MOnal Inlurles Iuetakned by omoloyess, tY may leplly approve and ar(OrMlA h0ilpltih eavieldgbyduties netligencenof officers, aoatd OfnJfaaagftWof a CIAdllu ranrei, of a pro. the servants, or emPloYess. 00.Atly.0en,1062, tal If they $es fit. Id. y No, N-1430, t ±C Art. 4494i--I• Joint county-city hosplw boards s ' Resolutions treating bonrdel desigaatioa Section 1. The commissioners court of any county, and the toy. erring body of any city (Including any Home Rule Charter city) lo. cated wholly or partially In said county, shall be authorized to adopt resolutions creating a joint county-city hospital board, without taMar 3 powers, to constitute a public agency and body politic and to be des. ignated the '1County-City of Board." Texas, • Hospital a. Dir"torst nppointmontl boards u separate entitles _ Sec. 2. Said Hospital Board shall consist of seven Directors, to be ; appointed and serve as hereinafter provided, and said Hospital Board shall constitute a joint agent of said county and city for hospital pur. poses, and shall act solely for the joint benefit of said county and 0. city, Although acting as such joint agent,.said Hospltal Board shall r constitute a separate entity in the exercise and performance of the powers, duties, and functions authorized by this Act, and with refer. once thereto said Hospital Board shall act and proceed independently, and may sue and be sued separately, in its own name, capacity, and behalf. Tornio of dfreetOrst reitnbunlemint toe, erpenseoi ChOrMn And secretary, ottloers ` Sec. 3, In the resolution of the commissioners court creating said Hospital Board four Directors of said Board shall be appointed, with two being designated to serve for two-year terms of office, and with two being designated to serve for one-year terms of office, At the expiration of the term of office of any Director appointed by the ' 42 I I - _11111313111M Ch. b COUNTY HOSPITAL Art, 4494i- j commissioners court, said commissioners court shall appoint his sue. censor to senile for a two-year term of office. In the resolution of the governing body of the city creating said Hospital Board three Dirac. tors shall be appointed, with two being designated to serve for two. Year terms of office, and with one being designated to serve for a one-year term of office. At the expiration of the term of office of any Director appointed by the governing body of said city, said gov erring body shall appoint his successor to serve for a two-year term of office. It is the intention of this Act that at all times said Hospi- taJ Board A.all consist of four Directors appointed by said commis- sioners cofirt and three Directors appointed by the governing body of said city. All Directors shall serve until their successors are appoint- ed, except.,that In.'the case of any vacancy the unexpired term of of- fice shall be filled by the appointment of a Director by said commis- sioners court or the governing body of said city, as the case may be, which appointed the Director whose death or resignation has caused the vacancy.. All Directors shall be eligible to succeed them. selves in office. Directors shall not receive any remuneration or r emolument of office, but they shall be entitled to reimbursement for their actual expenses incurred in performing their dutier, as Diret. tors, to the extent authorized and permitted by the Hospital Board. The Directors shall elect one of their number as Chairman of the Hospital Board, and he shall preside at meetings of said Board and perform such other duties and functions as are proscribed by the Board. The Chairman of the Hospital Board shall have a vote the t same as the other Directors, The Directors shall elect a secretary of the Hospital Board, who may or may not be a Director, and who shall be the official custodian of the minutes, books, records, and sail of j said Board, and who shall perform such other duties and functions as are prescribed by the Board, The Directors shall be authorized to a elect any other officers of said Hospital Board as they deem neces. ri sary or advisable; and said Directors shall be authorized to appoint or employ such agents, employees, and officials as they deem neces- sary or advisable to carry out any power, duty, or function of said Hospital Board, Said Hospital Board shall act and proceed by and through resolutions adopted by the Directors, and the affirmative vote of four Directors shall be ; equired to adopt a resolution. AeW6111on of hotp(W fecillUeel purchase ar- tale of propertrl donatlone q Sec, 4, Said Hospital Board shall be authorized to purchase, con- t struct, receive, lease, or otherwise acquire hospital facilities, and to improve, enlarge, furnish, equip, operate and maintain the same; Further, the Hospital Board shall be authorized to own, hold title to, receive, encumber, sell, )ease, or convey, any interest in real or person. Al property, Including gifts, >Z'r'ants, and donations from any source. 48 !R I 1 'J Art. ►4494i- I HEALTH-PUBLIC Title It Transfer of hoepttar faolrities to boards, eoatraets for eare and tremment of needy pacientat federar and acme funds Sec. 6' The county and the city, respectively, which created said Hospital Board shall be authorized to lease, or to convey and transfer the title or any other interest in, all or any part of their hospital is. ` cClides, including all real and personal property pertaining thereto, to said Hospital Board, upon such terms and conditions, if any, as shall be determined by the parties. It is provided, however, that said Hoy pitai Board shall not be authorized to encumber, sell, lease, or convey any real or personal property unless such encumbrance, sale, lease, or conveyance is approved, prior to the final consummation thereof, by resolutions of the commissioners court of said county and the govern- ing body of said city, respectively, Said county and said city, respec- tively, further shall be authorized to enter into contracts with said Hospital Board for the care and treatment of Indigent or needy pa- tients, or for any other hospital services, and each shall be authorized to expend money and make payments to said Hospital Board pursu. ant to such contracts, and to levy ad valorem taxes, and to pledge any of their funds or resources, for the payments to be made under said contracts. Said Hospital Board shall be authorized to apply for, re- ceive, and expend'any available funds from the federal or state gov. ernment for hospital purposes. Further, said county and said olty, respectively, may adopt resolutions authorizing and designating such Hospital Board as the lawful agency to apply for, receive, and expend any available funds from the federal or state government for county or city hospital purposes; and to the extent of such authorization the Hospital Board may apply for, receive, and expend any such funds. Bond ieeus Sec. S. For the purpose of carrying out any power, duty, or func• tlon authorized by this Act, said Hospital Board shall be authorized to issue its revenue bonds to be payable from, and secured by a pledge of, all or any part of the revenues, Income, or resources of the Hospital Board and the hospital facilities of said Board. Said bonds may be additionally secured by mortgages and deeda of trust on any real or personal property, and said Board may authorize the execu- tion and delivery of trust indentures, or other forms of encumbrances to evidence same, Said Hospital Board shall have no right or power whatsoever to levy taxes of any oaturs, and all bonds issued by said Board shall contain substantially the following statement; "The own- er hereof shall never have the right to demand payment of this obli- gation from taxes levied by said Hospital Board." If so provided In the proceedings authorizing the Issuance of the bonds,'any required part of the proceeds from the sale thereof may be used for paying In. terest on the bonds during the period of the construction of any hos• 44 I Ch. S COUNTY HOSPITAL Art. 4494i- I pital facilities to be acquired through the Issuance of said bonds, and for the payment of operation and maintenance expenses of said hospi• W facilities to the extent, and for the period of time, specified In said q proceedings, and also for the creation of reserves for the payment of r the principal of and interest on the bonds ; and such moneys may be Invested, until needed, to the extent and in the manner provided in the Bond Resolution or any trust indenture executed in connection I therewith. ~ Interest stet uddldonal pyyty bonds j Sea 7, Said bonds may be issued to mature serially or otherwise I within not,to exceed 40 years from their date, and may be issued to bear interest at any rate or rates not to exceed 6 o per annum. In the authorizatiop of any such bonds, the Directors may provide for the subsequent issuance of additional parity bonds, or subordinate lien bonds, wader such terms or conditions as may be set forth in the proceedings authorizing the issuance of said bonds, all within the dls. cretion of the Directors. Said bonds, and any Interest coupons apper• taming' tbereto, shall be negotiable instruments !provided that such bonds may be made registrable as to principal alone or as to both principal and Interest), and they may be trade redeemable prior to maturity, and may be issued in such form, denominations, and man- nor, and under such terms, conditions, and details, and shall be exe- cuted, as provided by the Directors In the proceedings authorizing the issuance of said bonds. Said bonds may be sold at public or private sale and at a price and under such terms as shall' ba determined by the Directors, provided that the interest cost to said Hospital Board, Including any discount on the bonds, shall not exceed 6ryo per annum calculated by the use of standard bond Interest tables currently in use by insurance companies and investment banking companies, Approval of bond issue Sec, S. Notwithstanding the foregoing provisions of this Act, said Hospital Board shall not deliver any bonds unless, the Issuance there- of is approved by resolutions adopted by the commissioners court of said coumty and the governing body of said city, respectively, ch"" for servtca and f"wel" Sec. 8. All hospital facilities of said Hospital Board shall be oper• ated for the use and benefit of the public, but it shall be the duty of said Board to establlsh and collect sufficient, charges for services and facilities, and to utilize all other available sources of revenues and In. come, in order to pay all expenses In connection with the ownership, ; operation, and maintenance of Its hospital facilities, to pay the princi- pal of and interest on its bonds, and to create and maintain reserves and any other funds as provided in the proceedings authorizing the 46 .r S t Art, 4494'i-1 HEALTH-PUBLIC Title 71 issuance 041ts bonds, In the proceedings authorizing the issuance of its bonds said Hospital Board may prescribe systems, methods, rou- tines, and procedures under which Its hospital facilities shall be oper- ated and maintained. \otice of bond rwwlutlon; petition for eiecgoa~ adopUon of bond resolutjoa Sec. 10, (a) Before authorizing the Issuance of any bonds, other than refunding bonds, the Directors shall cause a notice to be pre- pared statin.n that the Directors of said hospital Board intend to adopt a resol pion (herein called the "Bond RVOlution'l) authorizing the issuance of bonds, on a named date, and stating the maximum amount and maximum maturity thereof, Such notice shall be pub. llshed once each week for two consecutive weeks In a newspaper hav- ing general circulation in the county and the city, with the fiat pub- lication thereof to be made at least fourteen days prior to the date set for adopting the Bond Resolution. (b) If, prior to the date set for the adoption of the Bond Resolu- tion, there Is presented to the secretary of said hospital Board a peti- tion signed by not less than ten per centum (10110) of the qualified voters residing within the county and any part of the city which is not within the county, praying that the Directors order an election be - -held on the proposition of the Issuance of the bonds, such bonds shall not be issued unless an election is held and such bonds are duly and favorably voted at said election. Such election shall be called by the Directors and held within said county and any part of the city which is not within the county, substantially in accordance with the proce• dures prescribed in Chapter 1, Title 22, Revised Civil Statutes of Tax- es, 1925, as amended-I If no such petition is filed, the Bond Resolu- tion may be adopted on the date set therefor, or within not to exceed thirty days thereafter, and the-bonds may be Issued and delivered without any election in connection with the issuance thereof or the creation of any encumbrance pertalaing thereto. It is provided, how. ever, that the Directors may can such election on their own motion, If they doom It advisable, on the proposition of the issuance of such bonds, without the filing of any petition, t a+'~.lele f01 et top, &LMIzation and approval of boadst regutrattoa Sec, 11. All bonds permitted to be issued under this Act, and the appropriate proceedings authorizing their issuance, shall be submit. ted to the Attorney General of the State of Te.~cas for examination, If he finds that such bonds have been authorized in accordance with this Act he shall approve them, and thereupon they shall be regis• tared by the Comptroller of Public Accounts of the State of 'texas; and after such approval and registration such bonds shall be incon- 46 I ..Y / ci,. S COUNTY HOSPITAL Art, 44941-1 testable in any court, or other forum, for any reason, and shall be valid and bindings obligations In accordance with their terms for all purposes. Reloading bond, Sea. 12. Any bonds issued under this Act may be refunded by the issuance of refunding bonds for such purpose, in such manner as may be determined by the Directors; and any such refunding bonds shall be issued as provided herein for other bonds authorized under this Act, except that the refunding `•onds may be issued to be exchanged for the bonds being refunded thereby, In such case, the Comptroller of Public Accounts shall register the refunding bonds and deliver the same to the holder or holders,of the bonds being refunded thereby, in accordance with the provisfoha of the proceedings authorizing the re• funding bonds, and any such exchange may be made in one delivery, or in several installment deliveries. t nonds as leg*) and authorised investment Sea 13. All bonds Issued under this Act shall be legal and autho. razed investments for all banks, savings banks, trust companies, building and loan associations, savings and loan associations, insur• ance companies of all kinds and types, fiduciaries, trustees and guardlans, and for all interest and sinking funds and other public funds of the State of Texas and all agencies, subdivisions, and instru- mentalities thereof, including all counties, cities, towns, villages, school districts, and all other kinds and types of districts, public agencies and bodies politic. Said bonds also shall be eligible and law. ful security for all deposits of public funds of the State of Texas and all agencies, subdivisions, and Instrumentalities thereof, Including all counties, cities, towns, villages, school districts, and all other kinds and types of districts, public agencies, and bodies politic, to the ex- tent of the value of said bonds, when accompanied by any unmatured interest coupons appurtenant thereto. DeposJtor~ Sea. 14. Said Hospital Board may select a depository or deposito- ries according to the procedures provided by law for the selection of county and city depositories, or it may enter Into a depository con- tract with any depositor7 or depositories selected by the county or the city, and on the same terms, Exemption of Gcllittes foam us;ation Sft HospitalgBoardcwiill~be held efor fact th all hospital public purposes facilities of be said do- voted exclusively to the use and benefit of the public, such hospital fadUtias shall be exam t from taxation of every character. 47 I Art. 4494i -I ErEALTH-.PUSZrc Title 7I A e Earlasnt dotnafa Sec. 16. For the purpose of carrying out any power, duty, or function authorized by this Act, said Hospital Board shall have the right to acquire the fee simple title or any other interest in land and any other property by condemnation in the manner provided by Title 62, Revised Civil Statutes of Texas, 1926, as amended,' relating to eminent domain, Said Hospital Board shall have the same rights as i counties and cities under Article 3268, as amended, of said Title 62, The amount and character of Interest in land or other property thus to be acquired shall be determined by the Directors, •V; I Article 2214 et sy, lrivestmeat of lands Sec, 17. The law as to the security for, and the investment of, funds of counties and cities shall be applicable to funds of said Hospi- tal Board, The Bond Resolution, or any trust indenture executed in C connection therewith, may further restrict the securing and invest. ment of funds of said Hospital Board. Also, said Hospital Board shall have the power to Invest all or any part of the proceeds received from the sale and delivery of its bonds, until such proceeds are need. ed, in direct obligations of the United States of America, to the ex- tent authorized in the Bond Resolution or any trust indenture execut- edin connection therewith. CumulaUrs effete; conflictfng Jews Sec, 18, This Act shall be cumulative of all other laws on the sub. Ject, but this Act shall be wholly sufficient authority within Itself for the issuance of the bonds and the performance of the other acts and procedures authorized hereby, without reference to any other laws or any restrictions or limitations contained therein, except as herein spe- cifically provided; and when- any bonds are being issued under this Act, then to the extent of any conflict or inconsistency between any provisions of this Act and any provisions of any other lau+, the provi- sions of this Act shall prevail and control; provided, however, that any Hospital Board shall have the right to use the provisions of any other laws, not in conflict with the provisions hereof, to the extent convenient or necessary to carry out any power or authority, express or implied; granted by this Act. Acts 1989, 99th Leg„ p, 1030, ch. 6LL :l msterleal Note Tllte of Asti ends to said joint hosolW boardst prorld- An Aet authorttlng the drlatldn of )plot IoM toe the centre!, operation, pewee, du- county.elty hosplW boards, without taxing ties , and tunetlona of said Joint hospital torrent providing for the powers and beards, Including the power to Iseue, 9411, funeuons of deuntlea and dltlu with refer. and deliver revenue bonds, providing for a 48 N 1 moll 1 11 Art 4494c-1 HEALTH-PUBLIC HEALTH-P Art. 4494a-L Use of hospital operating funds for improvements to hospitals In minutes of sa counties of 23,000 to 25,200 all or any pa In III couatjps in this State with not less than 23,000 inhabitants or more than clam the hosl 23,100 inhabitants according to the last preceding federal census, the Commission. county h al em Court may use excess money in the county hospital operating fund for making county shall l permanent Improvements to the county hospital and for the payment of county bonds Issued for the construction and improvement of county hospital facilities: See. 2 .Amended by Acts 1981, 87th few, p. 589, ch. 737, § 117, eft, Sept. 1, 19SL operating its Att. 44946L Joint county-city hospital boards such county t to fix a time • which date ab Sec. 15. Repealed by Acts 1979, 68th Leg„ p. 429, ch. 841, § 6(a)(1), elf. from the datr Jan. 1, 1982 such time aat said county a • • • . . . „ • . • selling or Ions Section I of Acts 1919, 66th Leg. <h, 841, hosplul for corotruaton of a medjgl olAce of their right repaling § 15 of this. ankle. fin=ed the building by private indlviduals. Corot. Art action the coo Propemy Tax Code. constituting Title I of 3, § 52 requires that the lease serve a pubile a week for t the Tax Code. purpose and provide for payment of add- considering et quote rentals OpA1ty,0en.1917, No. H- least lourteez 966. there is no nr ' Notes of Decisions Absent valld contractual srrangemenu S►vea by Post Denton County is liable for medical expenses days prior to + 1, In general incurred In treatment of county's resident This anicla authorizes the Clty-County indigents at Utycounty hosplwL Op.Atty. Hospital Board to lease land adjacent to the 0en,1919, No. HAY-33. Seo 3. 1 Court, as mat Art 4494). Sale or lease of county hospital in counties having assessed valua. county shall F Non under $20,000,000 d vote the % leoas eased or she Any county in this State having an assessed valuation of property for ad Court shall ao valorem tax purposes of less then Twenty Million Dollars ($20,000,000) and having or lease the s a county hospital belonging to said county and operated by such county, may, and sustained by t such county Is hereby authorized to self or lease such hospital, provided the held under an Commissioners Court of such county shall find and determine by an order entered Statutes of 1S in the minutes of such Court that it is to the best interests of such county to sell If such pt or lease said county hospltal. The proposed sale or lease shall not be considered by such Commissioners Court unless and until said proposed sale or lease shall be selling or It" approved by a majority vote in an election to be hold in such county for the Court in ersor purpose of determining the will of property taxpaying voters living In the county, such county ho in reference to such subject. Such election shall be ordered by the Commissioners time to time c Court of any such county upon petition of not less than ten per cent (10%) of such - hearing the cc voters and shall be otherwise held under and governed by the election provisions determining w of Article 4478, Revised Civil Statutes, 1925, of the State of Texas. f such petition 1• Amended by Am 1979, 68th Leg., p. 2316, ah. 841, § 4(b), elf, Jan. 1, 1982 its discretion t Section f of the 1979 unendstory act on. its final data, ' acts the Property Tau Coda, constituting Ti. ' rte I of the Tart Coda t the Cominissit Art 4494L Sale, tease, or closure of county hospital by county r been given, nc Text of article as amended by Acts 1981, 87th Leg„ p. 2366, ch. 183, § 7 such hospital , Authority to Bell, lease, or cioee court may MA Section 1. Any county In this State having a county hospital which is such county he operated by said county, may sell or lease such hospital, proAdod the Commission. authorized and am Court of said county shall find and determine by an order entered in the hospital by cl ' ~1stee.~, d r q j M K } 1 tf 1 Y. /k 1 [ 1 1 y ~Y M i ~1~ 1 '1 1 1 • 1 , A ~f M i PREFACE INTRODUCTION AND BACKGROUND This Statement by the National council on Guv. ernmental Accounting (NCGA) provides authoritative 1) Accounting and financial reporting for state and guidance on defining the governmenrui reporting en. local governments is guided by the principles set forth lily. The NCGA due process procedures were followed ( N the National National Statement tement Council on Governm n al Accounting in developing this statement, The NCGA issued a Dis• c 1, Oove les, Issued In 1W. Accounting cussion Memorandum. "Definition of Reporting En. and Financial Reporting Pnce, Statement In 1979, lily," In December 19811, Public hearings on the issues Through widespread acceptance, rement I and sub. raised in the discussion memorandum were held in the sequent NCGA pronouncements ore acknowledged as April 1981, NCGA deliberations, including c(nsidcra• primary authoritative stae m lic3 le generallyad lion of comments received on the discussion memnran. CePted accounHn pp dum, led to issuance of the June 1981 "Definition of local governments. Hnwe ter, Iheso principles do not eRxposure draftrled to furother NCGA del beet `its on that provide explicit guidance to defining the "reporting on. thy" for governmental financial reporting, to the approval of this statement. 2) NCGA Statement I states: "A comprehensive annual financial report cn%-. Bring all funds and account groups of the gov bi merits: n d.n combining, nand tIndividual appropriate state. notes r t schedules;narrative explanations; and statisti: cal sables- should be prepared and pub. lished." This requirement does not, however, indicate the or. ganizations, activities and functions to be included or excluded from the reporting entity, 3) Statement ) also uses the term -entity" to refer to the level of aggregation to be used in the financial re• Potts of a governmental unit; the Individual funds and account groups should continue to be the basic entity reported upon in the CAFR (comprehensive annual (i• naneiul report), but that the primary reporting entfr) focus of separately issued 00S (general purpose financial statements) should be upon fund type and account group financial informa- tion." This statement considers only the organizations ac. IlVities Lind functions which should be included in GPFS, 4) The NCGA believes that the criteria for defining the reporting entity of a governmental unit should he ' established to clarify the orgganizations, functions and activities of government which should he included in the general purpose financial statements (OPFS) of that governmentul unit, In particular, there Is u need for critter o for Inclusion In the financial statements of u reporting entity wish a sepurotely elected legislative body of financial data on separate agencies of govern. man(, such as public authorities, whose officials are .up, pointed rather Ihun elected, 5) The NCGA believes that criteria for defining the reporting entity should he developed for several reasons. Among these are; A) Comporablllly. Users of financial reports coati wish to muke compurlsons among units of gov. NCO srATSMerrr 3 - PAat t ernment or between time perlods for a given nificantly Influence operations and accountability for govei n of 1. Crileriuor t c I Inclusion assist fiscal matters, Oversight responsibility implies that a users making sof goovero n i nt governmental unit is dependent on another and the de- in compa, B) re Comprehensiveness. Criteria for defining the pendent unit should be reported as part of the other. g The manifestatlons of oversight responsibility are des- porting entity would help the users of the fi• cribcd In paragraphs 10 and 13, below. nancial reports by reducing the possibility of arbitrary exclusions or inclusions of various or. 10) The most significant manifestation of over, ganizations, sight-which ordinarily is accompanied by other . C) ResponsiblIffy and*control, Users Interested in pects of oversight as described in paragraph 13--is fi- evaluating the performance of governmental nancial Interdependency. To the extent that a separate entities need to be able to identify the opera. agency produces a financial benefit or imposes a finan- lions for which their officials are responsible, clal burden on a unit of government, users of financial Specific criteria for the reporting enllly inclu• statements need to know the magnitude of such activity sion or exclusion can help fulfill that need, and Its present and prospective impact on the reporting entity, Manifestations of financial interdependency in. ENTITY DEFINITION CRITERIA too surpluses andig nrenlees of or "moracl responsibility" ity" 6) Several different sets of criteria for defining the for debt, reporting entity have been proposed. The NCGA be. 11) There may be circumstances where factors other lieves that specific criteria should he established since a than oversight are so significant in the relationship be. concept without specific criteria may be impractical for tween a particular agency and a reporting entity that use in implementing a definition, exclusion of the agency from the reporting entity's fi• nancial statements would be misleading. These ether 7) The NCGA believes that the definition criteria factors include: a) scope of public semice (defined in should be broad enough to include all governmental ac- paragraph 14), where there may be only partial over- tivities, organizations and functions necessary to sight: and b) special financing relationships, where achieve the desired objectives of comparabilit%. com- there is no oversight, There may also be circumstances prehensiveness and responsibility and control. A broad where the degree of oversight is so remote (as In the definition may cause inclusion of some separate ugen- case of certain industrial development corporations) cies that have not been previously included by all re- that the relationship of the agency to the entity is best porting entities, However, the NCGA believes that a described in a note to the financial statements rather broad definition, Is necessary to provide users with all Ilion in the financial statements. necessary information, g) In 'developing the reporting entity definition APPLYING TIME CRITERIA criteria, the NCGA assumed that all functions of gov- ernment ore considered to be responsible to elected of- 12) The NCGA believes that a positive response to ficials at the federal, state or local level. Therefore, all the foregoing criteria indicates that the agency should functions of government must be a par( of either fed, be Included in the reporting entiy. The NCGA recog- eral, state or local government and should be reported nizes that professional judgment is necessary in Indi- at the lowest level of legislative authority that is consis• vidual foci situations to determine whether a particular tent with the criteria of this statement. There may be organization should he included in the reporting entry. instances, other thun joint ventures, where it Is difficult ?'he Appendix includes several llioatrations intended io to determine whether the statements of a specific sepa. assist in the application of these crite, iu, rate agency should be included in the financial state. ments of a state or a particular local government of the 13) MANIFESTATIONS OF OVERSIGHT. The state. Staic and local government fiscal officials should following further guidance is provided concerning the confer to resoh,e such problems; a possible solution various manifestations of oversight set forth In para. might be to Include the agency in the finuncial state- graph 9. meats of one reporting entity and disclose it In the notes to the one financial ernunts of tits other entity. Al Selection of go+erning ouihorliy. The gmern• ing authority is that person or psrsans, board. 9) The NCGA concludes that the basic -but not the commission or other hod) which possesses only-criterion for including a povernmenial deport- final d1cuccounta le fur deci r decii and is held menf, agency, Institution, commission, public authority governing i a authoutho itrity it y is si appointed ons by . lecte the When or other governmental orgunizatim, in o c,,vernmenwl fivi eaaled to unit's reporting entity for general purpose financial re- wheth u datarminut(on must he mode as to ports Is the exercise of oversight responsibility over whether the leciedtmant is Ituthnc~uiho One such aggencies by iha governmental unit'seleewd offi• made sh on atoned ufciall o%il n,l - h r utbc • ciula. Oversight responsihillly Is derived from the guv. position hy is in an oflitul p(Ihs waste the ernmenrul unit's p<,wcr and includes, but is not limited iha person It appetoted to has little (o, financial interdependency, selection af overning p} appoi tme link of to the n for a harit le. c- authority, designation of manugement, ability to slit. Is nt of u chairman for u charitable acv Ilvlly}, is not uwhuruuUva. An uuthurliutisr PAGE 2 • NCGA STATeMgNT 3 hpputntmcnt Is One where the elected official maintai the s a si „,rife officio! with respect to chip disbursement of funds? (Trust and Agency ~kith type funds would be Included, Who holds ruing out important public functions, i tic to assets? (Ownership of asset$ would 111 pesignnUon of managemenl, The manage. Indicate Inclusion.) Who possesses the l ment of an agency consists of those individuals to require audits? ( right This may show ability to responsible for the dayto•day operations of control.I the governmental agency. When management 4) REVENUE CHARACTERISTICS, Where is appointed by and held accountable to a gov. revenues are derived by means of a public urning authority tAl is Included In the entity, levy or charge, in contrast to being grant re. Ihu activity being managed will fall within the ceipts, there should be the entity. A governing authority may be ceremo• include the agency's revenues Or expendii. nial in nature and not possess the powers of ap• lures within the reporting entity, For pur• poiniment over management. In this case, the poses of this criterion the following defini• / i organizational relationship must be examined, (ions apply: and the terms and conditions of an employer. employee relationship should be used as an in. a) "Pubfic, " The origin of authority for dication of whether the activity should be in. Wed making the levy or charge lies with t 1 kh lit I10t slgnin,ontly influence operations, elected officials the the entity, officials persons The ability to significantly Influence operations there appointed exists by dele elegationelected 't notan or ab. should include, but is not limited to, the au• rogation,but not an ; thorny to review and approve budgetary re- the t, of the power to levy c charge; quests and budgetary adjustments and amend. ability to determine the naturInclude and type ments, sign contracts as the contracting au• of tax Imposed or fee collected. rhorly, approve the hiring or retention of key b1 "Levy or charge. " The imposition of a managerial personnel, exercise control over to • cilities and properties and determine monetary payment, the out. which are applicable Proceeds of come or disposition of matters affecti the ng the ut fit of the c erved and byfor t level n. re. itizens t Aetoutnrabllly for fiscal mailers When ebso• government imposing the levy or charge, iscal funds is vested within The power to levy would Include the de. lute authority over fall rite jurisdiction of either a constitutional of. termination of the terms of levy and es• ficer, a management official Ora governing au. lion, hment of the method of administra• rhould that Is within the entity, the actlvlq 14) SCOPE OF PUBLIC SERVICE, This criterion shoulii be included in the entity. When respon• for determining whether the statements of a specific sibility for the fiscal condition of an agency is agency should be included oIhorityutsideorthe direct purview of a govern in the financial sta management statements of ing au• a reporting entity embraces the following aspects: deemed within the en, City. judgment is required to determine the line A) Whether the activity is for the benefit of the re- f fiscal anwithind Its billitt itto B Miller entity and/or its residents, Likewise, judgment is necessary when the ov )Whether the activity is conducted within the erning uuthority or management of an a enc geographic boundaries of the reporting entity may not be clearly within the entity, butfiscal end is generally available to the citizens of that ucllylties, or the results thereof, ate directly re. entity. Wed to it. When the lines of fiscal responsible. IMPLEAf ENTATION AND ty' are not clear, the following specific areas of EFFECTIVE DA'L'E fiscal responsibilities should be reviewed In de. terminfng the classification of an agency for 15) The criteria used in determining the scope of the purposes of defining the reporting entity,. entity for fGtanclhl reporting cribed in a note to the finunc ul statements, The note 1) BUDGETARY AUTHORITY, Who should refer to how the specific elements of oversight sasses the aathorfl,v for final approval o test responsibility and other criteria were considered in de. ciding whether in include or exclude specific agencies the aulhorizations of budgetary appropri. from the entity definition. In any. instance where there ations? Who may authorize revisions to the Is a positiya response to the critrrle sal forth herein, The approved bud¢grt1 spccifir reasons for excluding such agencies from the 5 RPLUS/D$FICITS, Who is responsible entity shall be disclosed, f or funding deficits and operating deficien• cies? cite? IWhusg°vcroslcbIliconlegal o ru m o! d) F 16) Legal constraints should not be a controllin surplus funds? now are surplus funds dis• for In defining the reporting entity, Ahhuugh legal con. posed °f? truinis may exist, the NCOA believes that they do not MANAO! hjENT, Who curios prre'ludu implementation of the entity definition ISCAL the process controlling Iho colicrtlun and criteria, Legal eontruinis may cnmplicule reppooMing but would not preclude implementing the delnition. NCGA 91AYEMENT 3 • PA0111 3 '171 Implementation problems will vary and, in some (no the reporting entity definition criteria to the previ• jurisdictions, significant Implementation efforts may be ous year, and the existence of the pro forma statements required, in some instances there may be reluctance to of prior years should be indicated by appropriate foot. deviate from statutorily mandated reporting require. note disclosure. merits; in others the responsibility or authority to issue general purpose reports will be unclear, Therefore! It may be necessary to solicit the support of the executive The provisions of this statement need and legislative branches at both the state and local level not be applied to immaterial items. to effectively Implement these reporting entity criteria, 18) This statement shall be applied prospectively to This statement was adopted by the affirmative votes of financial statements for fiscal years ending after De• members Cormie, Farrell-Donaldson, Greathouse, cember 31, 1983, Earlier application is encouraged but Grossman, Harmer, Ives, Malloy, Murphy, Grne, not required. These criteria for definition of the report. Points, Rafterv, Rogan, Sthirman, Schlanger, Vaughn, ing entity are broader than what many officials consid• Wallison and Williams. Member Nay dissented on the ered the reporting entity in the past, and comparative grounds that provisions of the statement are not financial statements comparable with print years may worded with precision sufficient to provide useful gui- he difficult to prepare. Governmental units should at. dance to preparers and auditors of governmental com• tempt to prepare pro rormu financial statements apply. prehensive annual financial reports. PAGE 4 NCOA STATEMENT 3 APPENDIX 3) Focht A city holds title to the land on which a museum Is constructed. The museum is operated by a The following examples illustrate the application of the nonprofit corporation which is supported principally C, entity definition criteria to particular situations: through citizen contributions and endowments, The city levies an annual tax, however, for the purpose of 1) Factsi A school system is separately chartered partially deferring the cost of maintenance of the from the city in which ft exists. The school system was museum building and grounds, The proceeds of this tax established by an act of the state legislature which de• are remitted to the nonprofit corporation and expended signated a school board l the governing authority, by it. The nonprofit corporation operates under the. Members of the school board are elected by the public. governance of a board of directors elected by contribut- The school board has control over hiring and firing em- Ing members and leases the property from the city for ployees, the power to contract for schools, purchase $l per year. Facilities of the museum are free to con, equipment, etc„ and has the power of eminent domain, tributing members and open to the public tot a mini. The school board Is required by an act of the state legis• mum fee on weekends and no fee on other days. Ware to submit an annual budget to the city council for Conclusion: The property is part of the city entity, approval and is prohibited from spending or obligating but the museum corporation Is not. The tax levied for funds In excess of the maximum amount approved by purposes of the museum should be reported in a Special j the city council. Taxes are levied by the city council and Revenue Fund if Its purposes are so restricted. This E are collected and distributed to tire school system by fund should also record the distribution of the proceeds the city, The school system also receives funds from the to the museum, In addition, the notes to the city's fi. state and county. The school board does not have the nancI,l statements should describe the m1mlonship authority to borrow funds or issue bonded indebted- with the museum. ness. but the city, council may and does borrow funds and issues bonds for the school systems. Conclusion: The school board is a part of the report. 4) Facts; A public benefit corporation was created ing entity of the city, even though the school system is by a city to facilitate urban renewal within the bound- separately chartered from the city and is governed by aries of the city, A governing board is appointed by the an independently elected school board. The overriding city and title to various properties transferred to the factors are: The city council is responsible for approv corporation, which then proceeds to raze existing struc. Ing the school board's budget and establishing spending lures, operate temporary-use facilities (such as parking limitations. The city council Is responsible for funding lots) and provide additional infrastucture necessary to deficits. The city council is responsible for levying taxes attract new development. Financing of its activities is in and coilecting and distributing the funds to the school the form 'of federal grants and city advances or sub. board. The school board cannot borrow funds, but the sidies in money and services. City advances or subsidies city may and does issue bonds to finance school system In turn may be financed from the sale of bonds to be re- operations. (But a school district governed by an tired out of city taxes, elected school board might be excluded from the city Conclusloni The corporation Is part of the city entity, entity if the city council has no approval authority over even though the majority of its financing may be pro. the school district's budget, is not responsible for vfded through federal grants. The overriding factors financing the school district's deficits and does not issue are: The governance is by city appointees, the public bonds to finance school district construction.) services rendered are wholly within the boundaries of the city and the activities and transactions are intended 2) Foclst A public benefit corporation was created to benefit the city by returning property to Its tax rolls by a city to provide subsidized public housing in actor. and providing employment for its citizens. The corpo• dance with federal legislation. The mayor appoints ration's transactions should be included in the city en• members of the governing board for staggered terms; tity's reports and its activities described In the notes to they, In turn, elect a chairman. The governing board the city s financial statements, empioys executives; authorizes contracts of subsidy witb~ the U.S, Department of Housing & Urban De- ve(opment pursuant to the latter agency's regulations 5) Foctst An industrial development corporation is and statutory authorltations: and causes the corpora- created by an act of the state legislature (or city court. tion to construct, own and operate public housing facili• cit) for the specific purpose of promoting and develop. ties within the boundaries of the city. The financial lia• ing commercial, Indust riul and munufucturing enterpise bility of the housing agency is essentially supported by and encouraging employment within the boundaries of the operating and debt service subsidies received under the specific city. The members of the board are all up• contract from the federal government, although ser• pointed by the mayor, except for several other elected vices or cash subsidies may be, and from time to time officiuls who are board members ex offirfo, The law uu• are, received from the city as well, thotius the corpuratlun to Issue industrial develop- Conclusfoni The housing agency is part of the city on. merit bonds after approval by the cit)- council. The tity, even though the financial support is primarily pro. bonds do not constitute indebtedness of either the city vided by the federal government. The ovelrlding (ac• or the mute and are secured solely by revenues received tors are. The city created the corporation; the gover• from the cummurciul urgunizutions tin %hase hahnif the name Is appointed by the city: and the puhtic service is hands are issued. The city assumes no responsibility for rendered wholly within the boundaries of the city, The the day-to-day operuting expenses of the corporation: agency's transactions should be included in the eltyen. such expenses are financed by fees charged to the com- MY's reports, merciul enterprises, NC4A STAt8M8NT 3 • PAN 6 t 1 M ConSlusiorrs The corporation is not a part of the city statement,) The corporation's transactions should he entity since the city has assumed no financial responsl• shown as a debt service fund of the city, and the corpo• bility whatsoever for the corporation. The corpora. ration's outstanding debt should be reported in the gen. lion's activities and debt should be disclosed in a note eral long-term debt account group of the city. The cor• to the financial statements, (But, where the corpora. poration is also a part of the state entity, because of the lion's debt is secured in part by the city's moral obliga• oversight relationship and the "moral obligation" re- tion to replenish the corporation's debt service fund. lationship; Its activities and the scope of the "moral ob• should that become necessary, or where the city issues ligation," should he reported in a note in the state's 6. bonds on behalf of an Induttrial development corpora. nancial statements. Lion to create a revolving fund to make loans to com- mercial enterprises, the Industrial development corpo- 8) Factst A public benefit corporation was created ration should be treated as part of the city entity.) by a state to provide mass transit (subways and buses) activities entirely within the geographical boundaries of 6)' F'aclst A county (food control district was created a city. Of the 15-member board of directors, 11 are ap- by state statute as a flood control and reclamation dis• pointed by the governor and four by the mayor of the trict. It is a political subdivision of the state as is the city. The city owns all the transit facilities and provides county, and has the same boundaries as the county. capital construction funds for new facilities, Operating Since the creation of the district. the county has relit. subsidies are provided by the city, state and federal quished all of its flood control and water drainage ace governments. tivides to the district. The governing body of the district Conclusions The corporation is part of the city entity, is the governing body of the county, Among its duties, even though the majority of the governance is sp- it approves the district's budget, determines the dis• pointed by the state and the state provides some trict's tax rates. serves as the board of equalization for operating subsidies. The overriding factors are; All the the valuation of property within the district for ad vol. facilities are owned by the city, the corporation is heav. orem tax purposes, approves contracts and determines ily subsidized by the city and the public service is ren• when to issue bonds authorized by the voters of the dis• dered wholly within the boundaries of the city. The cor, trict. The manafement of the district Is the responsibili• potation's transactions should be reported within the ty of the district s director, who is appointed by the gov. appropriate fund types of the oil$, The corporation's erning board of the county. The district has 700 em• activities and transactions should be described in the ployees as compared with 6,500 employees for the notes to the state's financial statements rather than in. county, The annual general fund budget of the district ciuded in the state's financial statements. is about $I$,UU0,D00 as compared with about $148091.0W for the county. 9) Factss A nonprofit corporation was organized by Conclusions The district is a part of the county entity a city-and the city was the sole member of the corpo- since it is governed by county elected and appointed of. ration-for the sole purpose of conducting an elec- ficials and is performing what is essentially a normal ironic data processing service activity, The city entered county-type function (i.e., flood control within the into a contract with the corporations providing for the county's boundaries). The district's transactions should purchase of data processing services; permitting the be reported within the appropriate fund types of the sale of such services to other governmental entities; county. A capsule summary of the district's operations granting the city power to approve capital and operat• should be disclosed in the notes to the county's finan• ing budgets; and providing for distribution to the city cial statements, and other customers of earnings from operations, as de• fined, pro rata to purchases. The city is the primary cus• 7) Factst A public benefit corporation was created tamer, accounting for approximately 90 percent of by a stale for the sole purpose of assisting a financially sales, This separate organization was established in distressed city to refinance its outstanding short-term order to provide flexibility deemed necessary in ucquis- debt and to finance new construction. All board mem. ition of physical facilities, computer hardware and soft hers of the corporation arc appointed by the governor ware and skilled computer personnel outside the con. of the state. Certain city taxes were declared to be state straints applicable to city government's ucquisitlon of taxes and diverted to the corporation so that the corpo- facilities and personnel. generally, ration could make debt service payments on its debt, Concluslont The corporation is purr of the city entity and the stale assumed a ,moral obligation" for the cor, for financial reporting purposes, evan though legal sep• i poration's debt, aration exists and certain administrative requirements Concluslont The corporation iv u part of the oily on. of the city are not applicable to it. The city creulvd the lily, even though the city has no oversight responsloiMy corporation and controls the operations of the corpora. for the corporation, because the corporation's transac• tlon through its membership, its contractual rehuion. tions are integral to a complete comprehension of the ship, Its right of approval over budgets and its right to city's financial standing, (See paragraphs I1 and 14 of receive earnings derived from its purchases, PAOi 0 - NCOA STAMMENT 3 ON GOVERNMENTAL C OUNTING nanciul Accounting Stundurds Board and the American Institute of Certified Public Accountants, The National Council on Governmental Acrnuntin g The NCGA consists of 21 members which include (NCGA) develops, promulgates and interprets princi• dltors stale. aunmanagers eruct governmental accountants. au. pies of accounting, financial reporting and related fi, tl 1• certified public nanclal management activities for governments In the agement educators andnmemabe suatilarge ~Within the United States and Canada. While accounting and re• appropriate membership classifications. Council mem• porting for governmental Operations that are similar to bers are elected by vote of the Council to serve fouf- business enterprises closely parallel commercial year terms. The Council and Its Executive Committee accounting and reporting, there are environmental are assisted by the NCGA Committee of Advisors. considerations which may require modification of com• comprised of representatives of accounting, public in• mercial accounting practices and professional pro. terest, and governmental organizations. The work of nouncements as they apply to proprietary funds of Soy the Council is facilitated by project area Task Forces ernments' NCGA's responsibilities are directed to state (which include Council members. Advisors, and others and pro-4riciol governments and to all classes and units who possess an ex ertlse or view h of local governments and uusi• overnmental units. p point rrecom to the The genesis of the National Council on Governmen• eons for Council cornsidera on and draft ecommenda• tal Accounting dates to the 1934 formation of the Na. The NCGA Rules of Procedure pro%ide for several t tional Committee on Municipal Accounting, which types of Council Issuances: began the work of formalizing accounting, auditing. 1. Statements reflect the conclusion of at least a and financial reporting standards for governmental units under the sponsorshipp of the Municipal Finance majority plus one of the Council a to governing Officers Association (WA), The name thane in principles and explain and illustrate their re s c such 1949 to the National Committee on Governmental lion, including alternative applications where such Accounting emphasized that the authoritative pro. alternatives are deemed appropriate, nouncements app1) to states and all types of local ov 2. Interpretations the Council are issued by a majority plus one ernments The National Council Is the successor to the of the Council to clarify, elaborate upon, or ea. Naiionu! Committee. plain a Council Statement, a principle or illustr The NCGA was established in 1974 through the tion, 3Exposure reined matters, , Expos drafts. proposed Statements, back. sponsorship of the MFOA as a continuing body. o as. sure that principles and procedures for government are ground papers, working drabs and discussion in conformityy' with generally accepted accounting prin. es memoranda may be Issued b the as sary to sot cit comments and assist incresnln ng ciples. the NCOA maintains close liaison with the Ft• issues. NCGA STATIMINr 3 PA01 7 I NCGA Members Governmental Accounting/Financial Management Educators State Finance Officers Leon E. Hoy, distinguished professor of accounting. College of Business Administration, University of 'Frank L. Greathouse, chairman, director of State Arkansas, Fayetteville, Arkansas Audit, State of Tennessee, Nashville, Tennessee Carl G, Orne, professor of accounting. School of Man, John F. Rogan, state finance director, State of Wiscon• agement, University of Alaska, Fairbanks, Alaska sin, Madison. Wisconsin Edgar A. Vaughn Jr„ state auditor, State of South Canadian Finance Officer Carolina, Columbia, South Carolina J. E. Mulloy, acting general manager, Management Studies Systems and Budget, Edmonton, Alberta Local Government Finance Officers U.S, Federal Financial Executives 'Joel M, Schianger, vice-chairman, director of finance, City of Roanoke, Virginia Gerald Murphy, deputy fiscal assistant secretary of the Roy V. Anderson, assistant director/controller, Illinois treasury, U.S. Department of the Treasury, Municipal Retirement Fund, Chicago, Illinois Washington, D.C. Marie D. Farrel6Donaldson, auditor general, City of 'Ronald J, Points, associate director, U.S. General Ac. Detroit, Michigan counting Office, Washington. D.C, 'W. Gary Harmer, administrator/educational re. Cliy Chief Executive sources and clerk treasurer, Salt Lake City School District, Salt Lake City, Utah Orville W. Powell, city manager Gainesville, Florida Marlin H. Ives, first deputy comptroller, City of New York, New York At-Large Beverley R. Schirman, accounting manager, City of Everett, Washington 'Hyman C. Grossman, vice •presideni/municipal' rat. Practicing Certified Public Accountants ings. Municipal Bond Department, Standard Poor's Corporation, New York, New York 'Donald H. Cormie, partner, Alexander Grant & Frieda K Walllson, partner, Rogers and Wells. Attor• Company, San Antonio, Texas nays, Washington, D.C. William J. Raftery, partner, Main Hurdman & Crans• 'Executive Committee member. tours, New York, New York James L, Williams, partner, Deloitte Haskins & Sells. Donald W. Beatty, executive secretary Houston, Texas James S. Remis, director PAO$1 NCOA STATEMENT 3 . i First Texas Medical, Inc. February 24, 1983 To., The Honorable Mayor & Members of the Denton City Council, the Honorable Judge & Members of the County Commissioner's court, county of Denton Ladies & Gentlemen: Thank you for the opportunity to submit an executive summary of First Texas Medical Inc.'s proposal to lease and operate Flow Memorial Hospital, We look forward to the opportunity of submitting our full proposal and die- cussing this matter with you in the meeting scheduled for the evening of March L, 1983 at 7:00 p.m. At that time, we will be pleased to explain all details of the offering, and look forward to answering any questions you may have. Sincerely, Darrell Lummua, President I 660 W. Main • Suite 201 • Lewisville, Texas 76067 • (214) 221-2322 EXECUTIVE SUMMARY SITUATION ANALYSIS Flow Memorial Hospital has served the City and County of Denton well for nearly 35 years, Under the prudent management of successvie City Councils and County Commissioner's Courts, the hospital has grown to become the major medical center in the area respected for the quality of care provided by its staff, In the immediate future Flow Memorial inuat be substantially strengthened if it is to continue providing quality service to the community. Facilities and equipment must be modernized to keep pace with advancing medical technology, Improvements must be made to bring the facility into compliance with Life Safety and Hospital Licensure codes, Specialists in the design of health care facilities estimate that expenditures of approximately $50100,000 must be made just to bring the hospital into code compliance, This sum fails to account for the additional cost of lost revenue the hospital will sustain while services and departments are closed for renovation, At the same time, those responsible for Flow Memorial Hospital must question whether it is even prudent to invest that much money in the existing facility, Though appearing attractive, the hospital plant, developed over the years through additions and a variety of changes, is actually inefficient for the delivery of quality patient care. Likewise, its location is inconvenient to the maximum number of Denton County residents and the admittedly attractive site itself poses problems for older patients and visitors because of its hilly terrain, We have concluded that a very substantial infusion of capital will be required in the near future to maintain the services the community has come to expect, in fact, the potential of Flow Memorial Hospital will simply never be realized in the existing facility, PROPOSAL First Texas Medical, Inc, therefore proposes to lease and operate Flow Memorial Hospital and to spend approximately $30 million over the next five (5) years in creating a batter, stronger community medical center. These funds will be invested in the local community and its governments through the lease/purchase payments to the hospital, capital expenditures for new equipment at the existing facility, construction of a new $21 million hospital complex and'taxes paid into the treasuries of the city and county governments, More specifically; 1) First Texas Medical, Inc, proposes to lease and operate the existing Flow Memorial Hospital site and plant for 5 years and to construct a replacement facility to be operational by 1988. For this privilege, the company will pay the city and county $2,900,818 udon completion of the agreement, which amount is anticipated to create an indigent care trust. The revenues of the fund } will relieve local governments of financial responsibility for such care, } 2) In each subsequent year of the lease agreement, Firat Texas Medical, Inc, will also pay city and county $725,000 in annual lease payments and an additional $343,835 over the total lease period for retirement of bonds issued by the city and the county for prior capital expenses of the hospital, PAGF, TWO 3) At the conclusion of the five year leave period, the city and county will retain rights to the existing Flow Memorial Hospital and site and they may either retain the property for other uses, dispose of it by sale, or sell the property to First Texas Medical, Inc, who will agree to purchase the existing facility and site for an amount of not less than $1,500,000 (See attachment I - Outline of Lease/Purchase Proposal). 4) In addition to these direct payments, First Texas Medical, Inc, will invest approximately $2L,000,000 in the community through the construction of a new hospital complex to be completed by 1988. The hospital will be awned and operated by First Texas Medical, Inc, The company will invest an estimated $500,000 annually in additional and replacement equipment during the lease period so Flow Memorial Hospital can continue providing quality hospital services to its residents, 5) First Texas Medical, Inc. will pay real property and personal property taxes to the city and county and other appropriate taxing authorities during the lease period, as if it owned the hospital site and improvements, and it will pay appropriate taxes on the new hospital complex, whose valuation it adds to local tax ro11s (See attachment 11 - Analysis of Economic impact to City and County). . MANAGEMENT OF THE EXISTING FACILITY As lessor and operator of Flow Memorial, First Texas Medical proposes to; 1) Perform sufficient maintenance and renovation to maintain the quality of care at the existing facility for 5 years, 2) Operate the facility efficiently, maintaining fees and charges which are competitive with, or lower than, other hospitals in the general service area, Fees and charges will be increased approximately 92 in 1983 including reimbursement by Medicare, Medicaid, Blue Cross, commercial insurance providers and self-pay patients. 3) Provide for hospital care of indigent residents of Denton County (See attachment III - Fund Balance and Indigent Care Projections). 4) Supply sufficient funds and necessary equipment purchases estimated at $500,000 per year. 5) Establish a citizen's advisory board to the hospital. 6) Guarantee employment and benefits for current employees. A) Continue employee pension plan and health insurance plans. B) Maintain vacation, sick leave and other employee benefits. C) Provide for retention of senority of current employees, 7) Maintain an open medical staff policy, DEVELOPMENT OF A NEW FACILITY First Texas Medical, Inc, will construct a replacement medical center located near the intersection of 1-35 and Scripture including development of it medical office complex adjacent to the new hospital, The total project will cost an estimated $21 million, i { PAGE THREE In developing a new hospital, First Texas Medical will; 1) Utilize a citizens' advisory committee for community input and direction. 2) Maintain all existing hospital memorials. 3) Concentrate on further development of existing medical delivery strength of Flow Memorial Hospital into regional capabilities; *Obstetrical *Neonatal *Psychiatric *Surgical *Emergency 4) Maintain a schedule of fees and charges competitive with hospitals in the service area. LONG TERM PLAN FOR INDIGENT CARE First Texas Medical recommends that the city and county use the proceeds of the lease/purchase funds of Flow Memorial to establish a permanent trust fund to provide for hospital care of Denton County indigents, This money can be invested, using only the earnings on capital, to pay for indigent care. This method of providing for indigents has been, successfully implemented in other communities, Projections indicate the level of indigent care provided by Flow Memorial during the 5 year lease period will exceed revenues from the indigent care fund, First Texas Medical will absorb these additional costs (Refer to Attachment III), ABOUT FIRST TEXAS MEDICAL, INC, First Texas Medical, Inc, is already actively involved in the delivery of medical care in Denton County, The company owns and operates numerous outpatient facilities, as well as Lewisville Memorial Hpapital, These operations currently employ 803 individuals, including 56 physicians in Denton County with an annual payroll of $12,580,000 (Refer to Attachments IV and V), In all of its facilities, First Texas Medical has the objective of providing quality care at the lowest cost to the patient. This is accomplished through aggressive outpatient treatment (to avoid expensive hospital stays) whenever possible, All First Texas Medical facilities are locally owned and revenues are reinvested in Denton County. FIRST TEXAS MEDICAL, INCORPORATED OUTLINE OF LEASE/PURCHASE PROPOSAL FLOW MEMORIAL HOSPITAL ATTACIVIENT I First Texas Medical feels that after discussions with its own legal counsel, and the city and county officials that a purchase of the operational assets of the hospital and a lease of the equipment and real estate for a period of five (5) years, is the alternative which can be dealt with in the most expedient manner. Operational assets are defined as the assets less liabilities on Flow Memorial Hospital Balance Sheet. As of September 30, 19830 this was: Current Assets $30534,782.00 Bond Designated Assets 330,942.00 Minus: Current Liabilities 12529,280.00 Long Term Debt: 1975 Series Bond 270,000.00 1975 A Series Bond 160,000.00 Computer Lease 81,699.00 Equipment Note 5509927.00 $1,210,8LA.QO . As additional consideration prepaid Lease ($10,000 per 169 Licensed Beds) 1,690,000.00 At Closing $21900,818.00 $725,000 per year for five (5) years 216250000.00 Reimbursement for Ca,snty Hospital Bond Retirement by year over the Remaining four (4) years 348,834.00 Option to purchase real estate at end of the lease 1,500,000.00 i $80374,652.00 s k 9,I L'11..' y V' FIRST TEXAS Mrl 'AL, INCORPORATED ANALYSIS OF ECONOMIC IMPACT to COUNTY AND CITY A7TPACJDtrNT It Method of f --1983 J 1984 1985 1986 1987 f Total A~roach I Projected (Projected Projected Projected I Projected iVor_5+Yra 1) Continue on Current Course of Action EXPENDITURES A. Indigent Care 330,000 363,000 3990100 439,230 489,153 21014,683 B. Mond Retirement 90,331 87,431 84,531 86,541 0 348,834 C, Construction costs 0 0 0 20,0000000 0 20,000,000 INCOME A. Proceeds from Lease 0 0 0 0 0 0 B. Increased Tax Revenue 0 0 0 0 0 0 NET IMPACT 420-331 450,431 M-483,831 20,525,771 -483,153 -22,363,517 2) Lease Facility EXPENDITURES A. Indigent Care 0 0 0 0 0 0 B. Bond Retirement 900331 87,431 84,531 86,541 0 348,834 C. Construction Costs 0 0 0 0 0 0 INCOME A. Proceeds Len,re/Purch 3,716,149 812,431 809,531 8110541 2,2251000 8,347,652 B. Increased Tax Revenue 25,670 32,700 39,735 46,765 53,800 198,670 » NET IMPACT 31651,488 --757700 »77176 -»--Y---- 5 -»-_»---5 -2-278--00 8,224-4-8 Annual Heonomic Difference 400710819 11208,131 1,247,566 21,2971536 23761,953 30,5881005 - » ------------------------....-----_-------------_-_-------_-_--_----_---I----------_------ Cumulative Economic Difference 41071,819 53279,950 6,528,516 27,8261052 30,588,005 "w FIRST TKKAS mrmCAL, INCORPORATED FUND IIALANCE AND INDIGENT CARIB PROJECTIONS ATTACIimn-N'C III YEAR 1 YEAR 2 YEAR AR 3 YEAR 4_ YEAR 5 1) Cumulative Proceeds from Lease Purchnno Proposal $30625,818 4,350,818 5,015,818 5,8000818 81025,818 2) 10% Annual Return an InVegtmenta 362,582 435,082 507,582 580,082 802,582 3) Projected Indigent Care Require- ments for Denton County 493,224 542,546 596,801 656,481 722,125 ASSUMPTIONS: 1) Per the proposal, 811 proceeds are invested in an interest bearing foundation. 2) A conservative annual rate of return of LO% on the cumulative proceeds is calculated as the yearly reimbursement for Indigent Care. 3) Projected indigent Care is based on n 10% annual tncrenge using historical data from Flow Memorial hospital, 4) First Texas Medical, Inc, will absorb the indigent Care expense in excess of the return on investment from the fund. s• r FIRST TEXAS ,MEDICAL, INCORPORATED OWNERSHIP AND DIRECTORS ATTACHMENT IV OWNERSHIP A total of 9291611 shares of common st Medical -Surgical are issued and Outstanding, The -Surgical Clinic Asaocation of Denton owns 377,223 shares or 41 percent; individual physicians employed by the Association own 4350637 shares or 47 percent; physicians not related to ,Medical-Surgical Clinical Association own 780237 or 8 percent; and oxecutive of the Company own 38,714 shares or 4 percent, a MANAGEMENT Directors and Executive Officers, The list below seta forth certain information with respect to the directors and executive officers of the Company, including their principal occupationa and beneficial ownership, Each officer and director has held the position table below with the Company since the Company's inception. listed in Name, Principal Occupation and Affiliation; Thomas Blucker M, D,, Director of the Com an physic an n Denton County since 1971, p y' He has been a tic eased Harr M, Bur esya MM D, Vice Chairman of the Board of Directors of the Company. Dr, urgers has been a licensed physician in Denton county since 1951, Conrad M. Garcia, HOD., Director of the Company. Dr, Garcia has been a licensed phye c an n Donton County since July 1978, Prior to 1978, he received medical training. David 0, Johnson M.D., Director the Company, Dr. Johnson has been a licensed Phys c an n Denton County since 1978, Prior to 1978, he received medical training, James Hollis -Jones M Director, Chairman of the Board and Chief Executive O car of the Company, Dr, Jones ties been a licensed physician in Denton County since 1951, James R. JoneaL M,D., Director of the Company. Dr, Jones has been a licensed Phys c an n Denton County since 1973, Darrell E. Lummus, Director, President and Chief operating officer of the Company, Mr, Lummus has served as the president of First Texas Medical, Inc,, since its inception and, prior to that, served as Medical Surgical Clinic Association Business Manager for more than five years, Harvard L. Mc Bra er M.D., Director of the Company, Dr, Mc Brayer has been a lce`nsed phye !an in entOn County since 1969. k li I• N Page 2, Attachment IV Alley n Pierce Director, Senior Vice President and Treasurer of the Company linic Mr, Pierce has served as Director of the Special projects for Medical-Surgical t ti PresidentsandaSenior1LoanAOfficer9of,First Texas Savings andeLoans AsSenir sociation for more than five years, e David G, Pu~rifoy, Director and Senior Vice President of the Company, Mir, -of y has served as Administrator for Lewisville Memorial Hospital since 1976, Arvin D. Short, M.D., Director of the Company, or. Short has been a licensed PhM=an in nton County since 1974. Dale G. Swanholmy M,D „ Director of the Company, Dr, Swanholm has been a 1 cenpys c an n Denton County since 1975, Eugene M, Taylor, M D , Director of the Company, Dr, Taylor has been a licensed phyexc an n Denton County since 1969. , u FIRST TEXAS MEDICAL, INCORPORATED OWNED, MANAGED 03 AFFILIATED ORGANIZATIONS ATTACHMENT V DENTON: I. First Texas Medical Center, Denton (formerly Medical-Surgical Clinic Association), This physician multiapecialfacility serves as the medical office building for a 23 ty practice of medicine, 2. North Texas Diagnostic Radiology Center provides outpatient diagnostic radiology services, 3, Denton Ambulatory Surgery Center provides outpatient surgery services for patients not requiring overnight care, 4. North Texas Medcare, Inc, is a state certified health maintenance organization, 5, Bryan Oaks is a 106 bed intermediate care facility providing services to the severe and profound mentally retarded, 6. North Texan Radiation Therapy Center is nn outpatient cancer treatment center. The certificate of need has been granted and ground breaking is anticipated within 60 days, LEWISVILLE: 1, First Texas Medical Center, Lewisville (formerly Doctors Clinic), This facility serves as the medical office building for a 26 physician multisper,ialty practice of medicine and is located contiguous to Lewisville Memorial Hospital, 2. First Texas Medical, Inc, corporate office is located in the North Texas Medical Center Professional Building, 3. First Texas Medical Center Computer Center has the most modern computer technology and is located in Lakeland Plaza, 4. Lewisville Memorial Hospital a 110 bed general acute-care hospital, and is scheduled to braak ground on a $7 million dollar, 42 bed expansion and I renovation project in the late summer of 1983. 5. Edmond Oaks is a 116 bed intermediate care facility providing services to the moderately mentally retarded, 6. Adult Day Care Center provides supervised care during the day for disabled individuals who can still return to their homes at night, can provide care for up to 100 individuals, 7. Medcare Home Services provides care to meet the needs of ill homebound individuala on a short term basis, 8. Oak Grove Work Activity Center is a sheltered workshop for 235 handicapped individuals, j}} E~ 1 Page 2, Attachment V CARROLLTONt 1, First Texas Medical Center, Carrollton will serve as the medical office building for a 7 physician multispecialty practice of medicine and is scheduled to open February 28, 1983. i FLOW MEMORIAL HOSPITAL ANALYSIS OF FINANCIAL DATA 1982 AUOITED & 1983 UNAUDITED i In review of Flow's financial statements and other available data, the following information was extracted: r 1) There was a decrease in census in 1982 from 1981 by 2,4%, however, there was an increase in total revenue of 20.8%. 2) Patient Receivables grew by $8259878 in 1982. The total Patient A/R of approximately $3,000,000 is estimated to be 81 days A/R with Medicare, and about 95 without. Through December, the A/R have risen about another 6 days. 3) About 50% of Flow's aged receivables are made up of self pay patients, 38%, Patient Balance 12%, The Business Office Manager for LMH visited Flow's Fiscal Department. 4) A/P increased by 60% in 1982 and the total of $1,113,000 balance was estimated to be about 90 days expense in A/P. 5) Debt requirements consist mainly of W,C. loans. Flow has relied on contributions from the county. 6) Bad Provision has been running near 9% of Total Patient Revenue. It is not clear on their write-off policies, but recoveries from Bad Debt are low, 7) Hours per patient day fluctuate, which probably means their FTE's are basically fixed, flow has had 417 FTE's over the last three months, 8) Bad Debt Expense has more than doubled in two years: 1979 Provision $545,903 1980 Provision $567,018 1981 Provision $752,027 1982 Provision $1,189,547 9) Indigent care write-offs historically have been erratic. The amount of indigent care in 1981 was less than in 1979 or 1980. 1979 Charity Service $382,058 1980 Charity Service $370,288 1981 Charity Service $358,843 1982 Charity Service $449,251 I FLOW MEMORIAL HOSPITAL ANALYSIS OF FINANCIAL DATA 1982 AUDITED & 1983 UNAUDITED In review of Flow's financial statements and other available data, the following infoz,mation was extracted; 1) There was a decrease in census in 1982 from 1981 by 2.4%, however, there was an increase in total revenue of 20M. 2) Patient Receivables grew by $825,878 in 1982, The total Patient AIR of approximately $3,000,000 is estimated to be 81 days A/R with Medicare, and about 95 without. Through December, the A/R have risen about another 6 days, 3) About 60% of Flow's aged receivables are made up of self pay patients, 38%, Patient Balance 12%. The Business Office Manager for LMH visited Flow's Fiscal Department. 4) A/P increasi:9 by 60% in 1982 and the total of $1,113,000 balance was estimated to be about 90 days expense in A/P. 5) Debt requirements consist mainly of W.C. loans. Flow has relied on contributions from the county. 6) Bad Provision has been running near 9% of Total Patient Revenue. It is not clear on their write-off policies, but recoveries from Bad Debt are low. 7) Hours per patient day fluctuate, which probably means their FTE's are basically fixed. Flow has had 417 FTE's over the last three months. 8) Bad Debt Expense has more than doubled in two years; 1979 Provision $545,903 1980 Provision $567,018 1981 Provision $752,027 1982 Provision $11189,547 9) Indigent care write-offs historically have been erratic. The amount of indigent care in 1981 was less than in 1979 or 1980. 1979 Charity Service $382,058 1980 Charity Service $3709288 1981 Charity Service $358,543 1982 Charity Service $449,251 E; s i a. /I CITY OF DENTON, TEXAS OFFICE OF THE CITY ATTORNEY C.d, Taytor, Jr., city Attorney UZ31ORANDUU Jot D, blorria, A&7tstont City Attorney Robert B, Humor, Aasiatont City Attorney DATEi July 23, 1984 TO, G. Chris Hartung, City Manager FROM; Joe D, Morris, Acting City Attorney SUBJECTt City/County Health Agreement between City of Austin and Travis County Paul Isham, City Attorney, City of Austin, has provided us with a copy of the City/County Health Agreement between the City of Austin and Travis County which provides for the payment by Travis County to the City of Austin for the treatment of indigents at lreckenridge Hospital. I thought this agreement may be of interest to you as an example of how the payment of medical bills of indigent patients are provided for under circumstances similar to the situation we have at Flow Memorial Hospital. JO DRY JDM:js 1 71M STATE OF TMAS X CCAMI Y OF TRAVIS KNOW ALL MEN BY T1 ESE PRESCMS ; ;s E~1LX CITY-COLUN HEAM AGREREN7 ~0 -C'~. This contract and agreement, made and entered into on this the ka day of a., L, 19 , by and between the City of Austin, a home rule municipal corporation of Travis County, Texas, by and through its duly authorized officials, hereinafter referred to as "City," and the County of Travis, by and through its duly authorized officials here- inafter referred to as "County," is hereby agreed to as follows; I, The City agrees to furnish quality hospitalization, hospital services, and physician services to all indigent persons who are residents of Travis County, Texas, outside of the officially designated city limits of Austin, It is widerstood and agreed that such services shall be provided at Brackenridge Hospital and that the County Commissioners shall be consulted by the City in advance and in writing prior to changing the location of i where such services are to be provided but that the decision as to any change in location shall be made solely by the City, II, The County agrees to reimburse to the City those billable charges incurred for furnishing hospitalization, hospital services and physician services for those indigent persons who are residents of Travis County and who reside outside of the officially designated city limits of Austin, III, It is understood and agreed by both parties that each will use the same standard of indigency and residency. For purposes of this agreement, a :E t person is eligible for indigent care if his or her financial situation falls within the 1973 Office of Economic Opportunity (OEO) Poverty Guidelines, The i standard for indigency may be changed at any time by the mutual agreement of the City and County as evidenced by a written addendum attached hereto, For purposes of this agreement, a person is deemed to be a resident of the required locale if he or she lives in the locale with no intention of presently moving out of the locale. A person shall not be considered to have gained a residence in any place to which he or she has come for temporary purposes only, without the intention of making such place his or her home. Al. The County will provide the personnel and materials necessary to implement a procedure for the evaluation and subsequent admission of indigent patients who reside in Travis County but beyond the corporate limits of the City of Austin. The Cite will provide space at Brackenridge Hospital, or such other building which may be used in the future for indigent care, for County personnel to perform their evaluation task. Before any person can be classi- fied as an indigent hereunder, he or she shall sign and swear to an affidavit to the effect that he or she meets the criteria of being indigent as described to them by admission personnel and that he or she is a resident of the County of Travis, residing outside the corporate limits of the City of Austin. County personnel must certify that a person living outside the officially designated city limits of Austin does meet the indigent status, and City agrees to withhold hospitalization, hospital services, and physician services on an indigent basis for which the County would be responsible until such person has been certified by County personnel, No person, however, will be denied emergency care by the hospital for the reason that his or her financial status cannot be readily determined, ii V. The City will submit its request for reimbursement to the County i monthly, along with a report to the County Auditor providing an itemized card number of the patient served, the nature resume of the name and clinic of the care provided, and the individual charges covered in each bill. The county will remit payment to Hospital within thirty (30) days of receiving billings from Hospital. The City will provide separate bills for its hospital i services and the physician services provided by the emergency physician group and the Central Texas Medical Foundation Physician Services Program, The hospital and the two physician groups involved will submit charges to Medicare,' Medicaid, and other third party payers before bi),ing the County. The Corrcnissioners Court of Travis County and the County Auditor must approve the form of the biking procedure and monthly report and the sufficiency of the information therein. if County gives notice to City that such monthly reports lack sufficient information, City shall provide such other information in its possession concerning indigent services and charges for those indigent persons within Travis County. The City agrees that the rates charged for indigents residing outside the officially designated city limits of Austin will not be higher than those charged for persons residing within the above described city limits for the same services. The County shall be responsible only for those charges for emergency physician services, under contract with the City, house staff coverage, and hospital services which are reasonably required and necessary for the health care of the indigent patient. V1, This agreement shall taks effect as of January 1, 1973, and shall continue thereafter unless terminated by either party as provided herein; provided, however, that continuation of this agreement beyond the first year is contingent upon the funds being available for each of any of the budgetary t years covered by this agreement. County reserves the right to amend its procedure for the evaluation and subsequent admission of indigent patients ? within ninety (90) days from the date of the signing of this agreement. i This agreement shall be continued yearly thereafter unless either party gives ninety (90) days' written notice of its desire not to renewthe agree- meet to the other party, VII. The City agrees to indemnify, save and hold harmless Travis from an), liabilitY> claims or damages as a result of the City's County s operation of its hospital in the treatment of indigent persons, to the limits allowed by law. VIII. The County shall have full access to all City records and reports with respect to the furnishing of hospitalization and hospital services to indigent persons. E%TEM INTO this the day of 19 7el. CI79' OF AUSTIN ity aver ATTEST; city C19 r Tom".... MhM Or- BY: ke enfr l County Jud e;' t. • it fa i FLOW HOSPITAL MEMORIAL FUND ADVISORY COMMITTEE Margaret Allen Mrs. J. E. Allen 382-6070 it 606 Northridge Denton TX 76201 ~--~4 Margie Appleton Mrs. Ray Appleton, Jr, 382-8330 H 813 Liveoak ' Denton TX 76201 Claralynn Barnes Mrs. J. Brandon Barnes 566-0034 H 2416 Royal Acres Denton TX 76201 lone Barton Mrs. J. Emory Barton 387-1156 ]1 (816 Sherman Drive) Post Office Box 178 Denton TX 76201 Velma Bass Mrs, R. W. Bass 382-6585 II 610 Austin Denton TX 76201 Wallace Batey Mr, Wallace Butey 1-365-2240 H Route 2, Box 525 Denton TX 76201 Catherine Bell Mrs. Harry Dean Bell 382-9360 H 612 Park Lane Denton TX 76205 Dixie Clardy Mrs, E. F. Clardy 382-5939 H 1019 Egan Denton TX 76201 Grady Collom Mr, Grady Collom 387-2352 it c/o First State Bank 382-5421 0 Post office Box 100 Denton TX 76202 Fred Connell Dr. L. F, Connell, Jr, 382-8897 it 924 Ridgecrest Denton TX 76201 Ken Cornell Mr. Ken Cornell 817-458-3358 H Route 1 Sanger TX 76266 Fran DuChemin Mrs, Roderic C. DuChemin 382-3412, It 2038 scripture Denton TX 76201 a x=r .w~ fp ,Flow Hospital Memorial Fund Advisory Committee page 2 of 3 Sid Graham Mrs. Fred 0, Graham 382-3325 11 1015 Hopkins Denton TX 76201 Brooks Holt Mr. Brooks Holt 387-6633 11 2411 Robin Circle Denton TX 76201 Elinor Hughes Mrs. Robert L. Hughes 387-2867 11 1821 Linden Denton TX 76201 Ann Kelsey Mrs. Richard Kelsey 382-9370 H 206 Ridgecrest Denton TX 76201 Ruby Kerner Mrs. Melvin Kerner 382-2385 11 1228 Tulane Denton TX 76201 Crillon Payne Mr. Crillon C. Payne 382-6417 11 1407 Linden Denton TX 76201 Raymond Pitts Mr, Raymond Pitts 382-6120 H 2528 Royal Lane Denton TX 76201 Tom Porter Mr, Tom W. Porter 817-686-2068 11 407 West Walcott Pilot Point TX 76258 Lovie Price Mrs. E. D. Price 387-3497 It 520 Chambers Denton TX 76205 Rosales Remley Mrs. William A. Remley 387-3304 11 2112 11ollyhill Drive Denton TX 76201 borwin & Patsy Mr. & Mrs. Dorw.in Sargent 1-A58-7384 H Sargent Route 2, Box 215 Lois Road West Sanger TX 76266 Jack Scott Col. Richard E. J. Scott 387-2831 it 507 Mimosa Denton 11'X 76201 Janie Shnnds Mrs. It. D. Shands 382-6454 11 1717 West Oak Denton TX 76201 Plow Hospital Memorial Fund Advisory Committee page 3 of 3 Kay skiles firs. Joe Skiles, sr. 1407 Ridgecrest 387'1026 Ft Denton TX 76201 Margaret Smith Mrs, Howard W. Smith, Jr. 2216 Archer Trail 382-3296 FF Denton TX 76201 Philip Walker Dr, Philip Walker Route 31 Box 134 1-497-2992 H Denton TX 76201 Clyde Wright Mr. Clyde W. Wright 2709 Nottingham 367-2264 H Denton TX 76201 Ex officio; Stanley & Louise Mr. & Mrs, Stanley Monroe 387-6625 Monroe 1822 ftorth Bell Denton TX 76201 Mary Williams Mrs. Mary Henderson Williams 387-5497 2515 Jamestown Denton TX 76201 7/84 1,I Ij f~. P S. `~VV I I J r ii ARTI-IuR ANDLRSBN & Co. SU1.1% e200 1201 11LM STHFHT `r' DALLAS, THXAS 7$870 ~(e14) 741.2e(51 July 9, 1984 Mr. Chris Hartung City Manager City of Denton 215 East McKinney Denton, Texas 76201 Dear Mr. Hartungo We are pleased to present this proposal to conduct a market survey for Flow Memorial Hospital. As you requested, our proposal is brief. Additional information can be provided upon request. Our Understanding of Survey Objectives You desire to obtain an unbiased survey of physicians within the local community for the hospital. Some of the specific questions to be answered by the survey area ° What are the general strengths and weaknesses of Flow Memorial Hospital as perceived by the physicians in the community? ° Specifically, how is the hospital viewed in terms ofl - Facilities? - Personnel? - Medical Staff? ° To what extent does the community understand the scope of services provided by the Hospital? Approach to the Survey The specific approach to the market survey would be tailored to insure it met your objectives. Generally speaking, the major work tasks are as Eollowai F 't; r H .i M1 ~e ARTHUR Axr)rRSEN & Co. Mr. Chris Hartung -2_ July 9, 1984 ° DeeltIn the Survey Instrument - We will discuss the specific topics and information to be gained by the questionnaire with Hospital administration and will draft a proposed questionnaire. It will then be discussed with the Hospital Board and the City Council, if you so desire, for their approval. ° gelac, t the heTarbot Group - We will identify all physicians practicing within the City of Denton as the target group as you instructed. ° Distribute and Receive the Surve Instrument - The questionnaire will then be mailed to recipients. Responses will be controlled until analysis begins. ° Pro pare Customized _Microcomputer Software and Tabulate Ree onses - To assist in the tabulation of the results of the survey, we will develop programs and utilize a microcomputer. This will be useful in sorting and summarizing responses to facilitate your review and analysis. Interpretations i of data will be limited to conclusions that can be clearly drawn from survey results. ° Present Findings - Once survey results are collected and tabulated, they will be presented to Hospital administration, the Hospital Board, the City Council or any other group you doom appropriate. Products of the Su_ rvev Wewill prepare a final report that summarizes the survey findings and presents them in an easy to understand format. We will pictorially present as much information as possible and will not prepare lengthy narrative date. Staffing, Fees and Related Scooe Considerations We will utilize personnel from the healthcare consulting group in our Dallas/Fort Worth office, We have assumed that you could provide one staffperson to assist with distribution and collection of questiot_nairec. t The scope of this project is dependent upon a number of factorsi ° The number of questionnaires sent and completed, ° The specific information you desire the survey to provide, !a I ARTHUR ANDERSEN 8c Co. Fir. Chris Hartung -3- July 9, 1984 ° Questionnaire length, ° The number of presentations of survey results, The extent of these factors cannot be completely understood until the project is begun. However, we estimate that our professional fees would be between $5,000 - $7,000. Although difficult to determine at this point, we would plan to complete the survey in approximately 4 - 6 weeks. Healthcare Consulting You asked us to respond to you regarding consulting services we could perform for you on an as requested basis. We perform a wide variety of business consulting services to our healthcare clients including strategic business planning, financial projections, rate surveys, productivity studies) and cash management studios. Regarding the new Medicare Prospective Payment System, healthcare consultants in our Dallas/Fort Worth office have made over 30 presentations explaining its impact and management strategies to deal with it. Attached to this letter is a list of references which you may wish to contact regarding our healthcare consulting services. E Fees for these services would be based on our regular per diem rates. We would arrange these services with you as requested and provide you with an estimate of our fees before the work is performed. 9ummar We are eager to provide services to you. We believe you should select Arthur Andersen & Co, because we can meet your needs. ° You will receive services from professional personnel who are experienced in all phases of strategic Planning, of which this market survey is a part. ° You will receive services from the largest healthcare audit and consulting firm in the region, Our healthcare consultants have a comprehensive and current understanding of the healthcare environment. a ° You will benefit from our understanding of the government and related operations of the City of Denton and Denton County, as the auditors for both organizations. r i ~4 4 11 n.'t A AnTHun AwbER5EN & CO- Mr. Chris Hartung -4- July 9, 1984 We look forward to working with you in conducting this important survey. If you have questions or would like to discuss any aspect of this proposal, please call Mark Bronson or Tim Weis at (214) 741-8300, Very truly yours, i t i j s i i s i j i ~ i j , i 1 +1 I I ,F ♦Y ARTHUR ANDERSEN Rc CO. EXHIBIT I FLOW MEMORIAL HOSPITAL HEALTHCARE REFERENCES The following are several references of clients in the healthcare industry with whom we have consulted in various areas. We encourage you to contact each and ask them why they have retained us as their consultants. We will be pleased to furnish additional references upon your request, ° Baylor Health Care System Boone Powell, Jr., President (214) 820-2731 Jack Hesa, Vice President of Finance ° Irving Community Hospital Morris Parrish, Administrator ` (214) 579-8101 Richard Lorance, Assistant Administrator - Finance ° Midland County Hospital District Ray Branson, President 0 (915) 685.1533 Ron Peterson, Vice President of Finance r ° Scott & White Memorial Hospital Joe Dickson, Administrator (817) 774-2546 William gntzminger, Assistant Administrator - Fiscal Services ° St, John's Hospital (915) 655-3181 rlel Camp, Administrator Richard Boyd, Assistant Administrator - Business Services i I a i: t' THE PACE CROUP .KJr 51984 1'P r~ ~Olyf ~rf j-rjj 4 14841 Colt Aoatl, Suite 300 t ANNAGNIS OiFIC Dallas, Texas 75248 RAY H. PACE President (214) 991.1410 July 3, 1984 Mr. G. Chris Hartung a r City Manager City Of Denton Municipal Building Denton, Texas 76201 Derr Mr. Hartungr It was a chance meetin with issuesofacing the Cit , had we discussed, this letter will indicate an Interest oI'm n thead art i Aace Group in working with the City, outline our understanding of The the appropriate timeframepa dcfeAs,address the issues and discuss the YSSUESt The City of Denton is facin a Flow Memorial Hospital is partly owned b y potential dilemma in that is experiencing unanticipated deficits, the C e and the for the most These deficits haveobeenai being shiftedptotthe bor cityy the County in the past but are now Other issues facing the city and the hospital include (.1) low occupancy at the hospital, (2) an increasing indigent care base, (3) competition from other private institut patient and (4) a significant dependency on one ional affiliated with competing hospitals group Of Physiciansiwhosare , ApPROACHs Based on the historical relationships between the City, County and hospital, its the problems that exist, not likely that there is a "quick fix's to thedprobl Constant pressure from third Medicaid and health insurers) is impacting therhospital's revenue. Labor costs and facility maintenance are affecting the hospital's expenses, Reimbursement for Indigent Care is while the amount of care is increasing, decreasing The Pace Group is interested in workin staff to address the above issues, g with the City Council and our Senior Consultants be made avai.lableotodworkowiithdtheRCityotof (1) initially idantify Specific issues and both Thor, term and long term, an the City, quantify the impact, recommendations for the Council's considetion as)torpotential solutions. Mr. G. Chris Hartung July 3, 1984 Page 2. TIMEFRAME AND F'EESt It is estimated that the initial assessment discussed above could be made over a four week period (depending on the availability of persons to be interviewed and necesary data being available) with a final report being furnished within two weeks of completing the assessment. The Pact. Group fee would be based on $900 per day per consultant, plus associated expenses. It is estimated that the total expense to the City will not exceed $39,400 for both professional fees and expenses. In the event the assessment can be completed in less time, our fee will be reduced accordingly. During my visit with you yesterday, I left with you information concerning our firm. If additional information or references is needed, please let me know, We look forward to working with you, your staff and the Council. Sincerely, fq /V • (4o-e r,V Ray H. Pace RHPtss i THE PACE GROUP THE PACE GROUP The Pace Group has as its principal objective the goal of affording management, financial, marketing, and other consulting services to the providers and purchasers of health care. The Pace Group has princi- pally been involved in the HMO industry since 1978. Since its incep- tion, The Pace Group has provided services to over 50 formative and operational HMOs organized as group, staff, or individual practice associations. / SERVICES OF THE FIRM The list of services provided by The Pace Group over the past few years is rather lengthy, A general description of those services follows3 MANAGEMENT - on 16 different occasions, The',Pace Group has been engage to provide management services to both group/staff and IPA HMOs. These engagements were either on an interim basis while permanent management and new funding sources were identified, or on a long-term management relationship. The Pace Group currently manages one HMO under a long term arrangement, ADMINISTRATI N CLAIMS - The Pace Group staff has been very suc- ce at implementation of administrative and claims handling ( 1 systems for client organizations. Currently, our Coordination of Benefits program is enhancing avoidance and recovery procedures for six HMOs nationally, FINANCIAL - Financial modeling and forecasting, which recognizes all variable and fixed features of a specific marketplace, are specialta.es of The Pace Group. Our financial planning systems have been of significant value in returning troubled HMOs from the brink of bankruptcy on eight different occasions. MARKETING - Successful long and short range marketing planning and g rEeglzing are synonymous with The Pace Group, Development of low option plans, enrollment strategies which maximize results, evaluation and implementation of advertising campaigns are but a few of the current activities provided by The Pace Group personnel, APPLXCABILITY All management and information programs introduced by The Pace Group are tailored to meet the specific needs of an HMO and these systems will recognize the differences not only in the type of HMO with whom we are working, but also the differences in the various contract arrangements between the HMO and providers, benefit structures, ragu- latory authority, specific competition, and other factors unique to the client's marketplace, i THE PACE GROUP CONSULTING TEAM APPROACH Any time The Pace Group initiates an engagement with a client, whether it be a specific project or a general management contract, the consul. tants of The Pace Group are always free to call upon the services of other consultants within the firm who impact complementary areas, Therefore, a client who contracts for marketing services, for instance, will also have the strength of The Pace Group's financial, administra- tive, and management consultants to support marketing program develop- ment, "A$IBILITY STUDIES is In the last twelve months, The Pace Group has been engaged to complete feasibility studies on seven different occasions, These studies were undertaken in the following areast Akron, Ohio Columbus, Ohio Dayton, Ohio Little Rook, Arkansas Richmond, Virginia Rochester, New York Central Texas Clients for these projects included physician maor national hospital corporation, a regional hospital consortiums anjindependent and Blue (exceptrthosepstill inlprogress) were completeddonltime a dlwithinethe established budget. the D8MOPM8NT/PRE-OPERATIONAL ACTIVITIES The Pace Group is currently engaged by three clients in the develop- ment of prepaid plans, one group practice and two individual practice association type HMOs, Customarily, a team of The Pace Group is assigned to each development project. The team includes onesindi- vidual for each of•the key areas to be addressed during the preopera- tional periods Management/Administrationo A Project Director controls all phases of development and is accountable to the client and to the Presi- dent of The Pace Group, Marketing Our consultant is responsible for developing marketing plans/strategies and assisting in recruitment and development of personnel, ' Finances The Pace Group support personnel develop financial pro- forma to anticipate early and subsequent revenue/expense activitiea,, Legalt Our consultants prepare the necessary legal analysis/ documents to become a licensed HMO within state and/or federal statute requirem&nts. THE PACE GROUP THE PACE GROUP The Pace Group has as its principal objective the goal of affording management, financial, marketing, and other consulting services to the providers and purchasers of health care. The Pace Group has princi- pally been involved in the HMO industry since 1978. Since its incep- tion, The Pace Group has provided services to over SO formative and operational HMOs organized as group, staff, or individual practice associations, SERVICES OF THE FIRM The list of services provided by The Pace Group over the past few years is rather lengthy, A general description of those services followai MANAGEMENT - On 16 different occasions, The Pace Group has been engage to provide management cervices to both group/staff and IPA HMOs. These engagements were either on an interim basis while permanent management and new funding sources were identified, or on a long-term management relationship, The Pace Group currently manages one HMO under a long term arrangement, ADMINISTi_ATION/CLAIMS - The Pace Group staff has been very suc- oesa u at mp ementation of administrative and claims handling systems for client organizations, Currently, our Coordination of Benefits program is enhancing avoidance and recovery procedures for six HMOs nationally, FINANCIAL - Financial modeling and forecasting, which recognizes a.11 variable and fixed features of a specific marketplace, are specialties of The Pace Group. Our financial planning systems have been of significant value in returning troubled HMOs from the brink of bankruptcy on eight different occasions, MARKETING - Successful long and short rango marketing planning and s ra eg zing are synonymous with The Pace Group, Development of low option plane, enrollment strategies which maximize results, evaluation and implementation of advertising campaigns are but a few of the current activities provided by The Pace Group personnel, APPLICABILITY All management and information programs introduced by The Pace Group are tailored to meet the specific needs of an HMO and these systems will recognize the differences not only in the type of HMO with whom we are Working, but also the differences in the various contract arrangements between the HMO and providers, benefit structures, regu- latory authority, specific competition, and other factors unique to the olient's marketplace, THE PACE GROUP CONSULTING TEAM APPROACH Any time The Pace Group initiates an engagement with a client, whether it be a specific project or a general management contract, the consul- tants of The Pace Group are always free to call upon the services of other consultants within the firm who impact complementary areas, Therefore, a client who contracts for marketing services, for instance, will also have the strength of The Pace Groupla financial, administra- tive, and management consultants to support marketing program develop- ment, FEASIBILITY STUD:[ES In the last twelve months, The Pace Groin has been engaged to complete feasibility studies on seven different occasions. These studies were undertaken in the following areas: Akron, Ohio Columbus, Ohio Dayton, Ohio Little Rock, Arkansas Richmond, Virginia Rochester, New York Central Texas h Clients for these projects included physician groups, a major national hospital corporations a regional hospital consortium, an independent investor group, and Blue Cross and Blue Shield plans, All projects (except those still in progress) were completed on time and within the established budget, DEVELOPMENT/PRE-OPERATIONAL ACTIVITIES The Pace Group is currently engaged by three clients in the develop- ment of prepaid plans, one group practice and two individual practice association type HMOs, Customarily, a team of The Pace Group personnel is assigned to each development project. The team includes one indi- vidual for each of 'the key areas to be addressed during the preopera- tional periods Management/Administrationo A Project Director controls all phases of development and is accountable to the client and to the Presi- dent of The Pace Group, consultant Is assisting einorecruitmentdandlodevelopment iof personnel. formacto antTheicPace Geary andpsort ubsequent re enue/expensenaceivities, Legal$ Our consultants prepare the necessary legal analysis/ documents to become a licensed HMO within state and/or federal statute requirements. THE PACE GROUP PERSONNEL SUMMARY This listing of The Pace Group personnel is supplemented by contracts with legal firms well known for their involvement in the HMO industry, and actuarial firms known for their dependable development of pricing formulae. RAY H. PACE, President of The Pace Group. Mr. Pace founded The Pace Group in following 14 years with Blue Cross and Blue Shield of Texas. Mr. Pace developed and served as President of an IPA/HMO in San Antonio, Texas, as well as managing group and staff model HMOs, Mr. Pace serves as advisor to several health care institutions which are searching for alternative ways to better provide health care to their clients. W. BRENT CASEY, Vice President of The Pace Group. Formerly Senior rector o e third largest Medicare Intermediary and Carrier in the nation. He has served on national Medicare systems planning and tech- nical advisory groups. Mr. Casey has served as Chief Executive officer in multiple staff, group, and IPA model HMOs, as well as completing several HMO mergers and acquisitions. Fie has worked with numerous state and federal regulatory agencies in the successful reconstruction of troubled HMOs. JAMES C. BAUM A_Q_PTEN, Senior Consultant for The Pace Group, Mr, Baum- garten Teas s'e-rve-etas the Chief Executive officer for both IPA and group model HMOs. He was formerly Vice President of Administration and Claims Processing for Blue Cros^i and Blue Shield of Texas. Mr, Baumgarten currently provides oversight on the COB program for The Pace Group as well as serving as Project Manager for a developing HMO. JAMES P FORREST, Senior Consultant for The Pace Group. Mr. Forrest gai serve as Pan Manager in three IPA/HMOs which have gone through financial rehabilitation, Mr. Forrest was formerly Business Manager for Baylor Medical Center Hospitals in Dallas, Texas, He is currently assisting a major mid-west municipality in development of self-admin- istered health benefits programs for its 40,004 employees. ROBERT J. BROWN, Consultant for The Pace Group, Mr. Brown has many years exper ence in the health care field having served as a planner and advisor to a variety of health related companies, He is currently serving as Project Director for a developing HMO for The Pace Group in the northeast. LARRY P, FRENCH, Consultant for The Pace Oroup. Mr, French has recent- ly ceve oopear and is currently monitoring market plan strategies for various IPA and group model HMOs nationwide, He is also providing marketing oonsultis.g services to the Qualification and Compliance Divisions of OHMO, Mr, French is a former Marketing Director of two successful HMOCI THE PACE GROUP PERSONNEL SUMMARY Page 2, SHARON GILLESPIE, Consultant for The Pace Group, Ms, Gillespie previ~- ' ous y w- e~~w h various governmental agencies and CIGNA Healthplan f in developmental activities. She is currently serving as Project Director for an HMO feasibility study being conducted by The Pace Group, BARRY J. GOLDBERG, Consultant for The Pace Group, Mr, Goldberg has many years exper ence in personnel and administrative management, Mr. Goldberg was formerly Administrator for the Franklin Medical Group, Philadelphia, PA, an affiliate of a major university/hospital. He currently serves as CEO of an IPA/HMO in New Jersey which is under a long-term, management contract with The Pace Group, JOHN L. HAGAN CPA, Consultant for The Pace Group, Mr. Hagan has eve ope nano a planning and forecasting processes for various HMOs which have come under supervision of The Pace Group. provided financial planning services to numerous commercial He has al tions outside the HMO industry, corpora KEI H A. STRA SN , Consultant for The Pace Group. Mr, many years pract cal experience in the prepaid health insStrassn has uranceefield since receiving his Masters in Public Health in 1969, and is an experienced CEO of a group model HMO in the midwest. He is currently serving as Project Director for a developing HMO for The Pace Group, as an DAN, WILKINS, Consultant for The Pace Group, Mr, Wilkins' experience rc u years as Corporate Planning Director for a major multi- line insuror, and Manager of Product Developmant and Planning for Texas Instruments, Inc, i THE PACE GROUP REFERENCES The following individuals can provide basio insight as to The pace Oroupis ability to provide services fndicatedt Robert M. Heyssel, M.D. President The Johns Hopkins Hospital 600 North Wolfe Street Baltimore, Maryland 21205 (301) 955-6552 Robert J, De Vita Executive Director IPA Apple Plan P. 0. Box 97 Memphis, Tennessee 38101 {901) 529-8400 Bernard F, Master, D,o. President Health Power, Inc, 1855 Fountain Square Court, 4108 Columbus, Ohio 43224 (614) 268-7973 Frank H, Seubold, Ph,D. Acting Associate Director of HMOs Department of Health and Human services Bureau of HMOs and Resource Development Parklawn Building 5600 Fishers Lane Rockville, Maryland 20857 (301) 443-4106 Mr, Thomas R, Riley President Blue Cross and Blue Shield of the Rochester Area 41 Chestnut Street Rochester, New York 14647 (716) 454-1700 d RESOURCE SHARING AFFILIATION AGREEMENT This Agreement is made and entored into this day of April, 1983, by and between Flow Memorial Hoapital, Denton, Texas, hereinafter referred to as °FMH", and Baylor Health Care System, Dallas, Texas, hereinafter referred to as 'BHCS". W 1 T N E S S E T Hs WHEREAS, FMH is a general acute care hospital located in Denton, Texas, being jointly owned by Denton County and the City of Denton and WHEREAS, BRCS is a nonprofit multihospital system headquartered in Dallas, Texas, and WHEREAS, BHCS offers affiliations to nonprofit hospitals whereby BHCS resources are made available to selected nonprofit hospitalai and WHEREAS, FMH desires to have BHCS resources available to it and BHOS desires to make such resources available to FMH through this Resource Sharing Affiliationj NOW, THEREFORE, for the mutual covenants and consideration sat forth herein, the sufficiency of which the parties acknowledge, FMH and BHCS agree as followai 1. Resource Sharing Affiliation, FMH and BHCS hereby enter into a Resource Sharing Affiliation whereby BHCS will make available to FMH such of its resources that BHCS makes available to other nonprofit hospitals as part of the Resource Sharing Affiliation. FAJH, in its sole discretion, will decide which BRCS Vesources it will purchase and the pricing of such resources will be set before the resource is purchased by FMH. FMH will make available to BHCS data necessary for BRCS to identify resources that may be attractive to FMH and to facilitate implementation of resources I selected by FMH, 2. Executive Search Service. The first resource to be purchased by FMH from BRCS under the Resource Sharing Affiliation is an executive search project whereby BHCS will make a search for, and screen applicants for, the position of administrator of FAill. A description of the , work to be performed and compensation therefor is set forth in Attaohment At attached to this Agreement and made a part hereof for all purposes, 91 Voluntary Hospitals of America. BHCS and FMH anticipate that their affiliation relationship will grow as FMH chooses to acquire additional resources from BHCS. As the affiliation grows and at a point in time determined by BHC89 BHCS will extend to FMH the opportunity to participate in the various programs of the Voluntary Hospitals of America. 4. Term and Termination, The initial term of this agreement will be for a period of three years commencing on the date first written above. The agreement will be automatically renewed from year to year thereafter unless terminated as herein provided, Either party may terminate this Agreement, without cause, at any time during the initial or renewal terms after giving the other party sixty days prior written notice of termination, i t r2r i I EXECUTED by the parties through their duly authorized offioer day and year first written above, s the FJ,OW MEMORIAL HOSPITAL 13AYLOR HEALTH CARE S4 $1'EM f Byr Sy A. E. Wyatt L. Gerald Chairman Senior Vice Bryant President -3- FLOW HOSPITAL FUNDING COUNTY/CITY TAXABLE VALUATION BAOI51 1906 LEVY H PITAL DISTRICT TAXPAYER INCREASED RATE TO OENEKATE REQUIRED LEVY LEVY-REQUIRED $2 t Q(10 100() NET TAXABLE _g. C,Y ~ VALUE E3111454) ADDITIONAL TAX PER :310.) VALUATION .tt ~Cr, r;r{rQ VALUE =1' 1 pr;r, pr7t:r * VALUE X24. 445 t:r9 DCNTON COUNTY TAXPAYER INCREASED RATE TO 05NCRATE REQUIRED LEVY LEVY-REWIRED NET TAXABLE VALUE `}•012r)5 ADDITIONAL TAX PER k'100 VALUATIONi t 500)(A:) VALUE $6.62 ' 1001 r:r00 VALUE k12, {rte, CITY OF DENTON TAXPAYER INCRFASF'b RATE TO GENERATE RE4?UIRED LEVY LEVYW RECiUI REb 4' 1 , r:rt:n r, t7C>t} m NET TAXABLE-VALUE •r1J49 1 192014631940 ADDITIONAL TAX PER *lr:O VAL.UATIONt 50900>fr VALUE 4:27.47 $ 1 t,i{r q t;rr:* VALUE tee. 93 OVERL.APrINB TAX DEE4T TO CITY OF DENTON TAXPAYER, IF THE CITY AND THE COUNTY BEPERATELY RAISE S,Ut>t;r,C>t7c:r THRU 'TAXES, t 5r:r, gt:r~r VALUE :t 33. 49 fi 10090011 VALUE , :fib6. 98 i I i NOW Haskins+Sells 1400 Lincoln Plaza LB #4 Dallas, Texas 75201.3320 (214) 9544500 Telex: 4995828 Mr, John F. McGrane April 13, 1987 Director of Finance City of Denton Municipal Building Denton, Texas 76201 Dear Mr. McGrans. In our letter of March 260 1987, we indicated that we would supply you with information which would respond to points 1, 3, 5c, 5e and 8 of Judge Burgesa' lr,tter dated March 13, and points 1, 4 and 5 of Moyor Stephens' letter dated March 18. The purpose of this letter is to provide information ppertaining to points 6 and 8 of the Judge's letter, and point 5 of the Mayor a letter. These points were not part of the proposed and approved scope of our work, and some data is sensitive. The other above-referenced points are addressed in our formal report under separate cover. Point 6 of the Judge's letter requested a comparison of hospital costs for a patient to stay at the AMI Denton Regional Medical Center, the Denton Community Hospital (FTM) and Flow Memorial Hospital. We would refer you to a re ort repared by the Medical Task Force Subcommittee of the Denton Economic Development Committee dated September 1986. Page 26 of the report presented herein as Appendix A, contains comparisons of charges for various hospital services at Denton, Dallas and Port Worth facilities, including the above-mentioned facilities, We have not audited or tested this data; however, the information pertaining to Flow k Memorial Hospital appears to be accurate. Point 8 of the Judge's letter requested a listing of annual contracts the Hospital has with pphysicians, and the amounts of each proposal. We have compilad a summary of the Hospital's contracts with physician in Appendix B, n~rai 0 aa'Y4\R~ N f, Point 5 of Mayor Stephens' letter requested information pertaining to outstanding leases. A listing of all capital leases, and equipment-related notes payable, appears in Appendix C. I hope this information is of help to the City and County management. Sincerely, Mark E. Delane Managing Director of Consulting Services 3 9I `i F. Y S!,C , ?ti 1 i 1 IIr I APPENDIX A COMPARISON OF HOSPITAL CHARGES 7N THE DENTON/DALLAS/FORT WORTH AREA Semi-Private Two-View Room Rate Cheat SED Facility Name Per Day X-Ray CHIC Rate Flow Memorial Hospital $185.00 $57.00 $26.50 $11.00 AMY Denton Regional l Medical Center 216,00 73,30 28.25 23.65 Lewisville Memorial 188,00 43.00 23.30 16.00 North Hills Medical Center 180.00 58.00 21.00 17.00 Harris Hospital HEB 203.00 53.25 31.25 12650 Harris Methodist 189.00 55.65 17.85 15.50 Harris Hospital EMASH 177,50 47,30 15.80 17,90 Trinity Medical Center 220.00 76.00 25.00 17,00 Irving Community Hospital 18540 45.74 16.00 16.50 St. Joseph Hospital 188,00 51,00 20.00 15,50 St, Paul Medical Center 215,00 53.50 21.00 17.00 Walla Regional Hospital 177.00 54.65 22,25 17.25 Cook/Ft, Worth Children's 200,00 55,00 20.00 17,50 John Peter Smith Hospital 172.00 36,50 18,00 10.50 Presbyterian Hospital 198,00 51000 16.25 10.25 Arlington Memorial Hospital 151,00 32,50 15.50 10000 Parkland Memorial Hospital 230,00 37,00 17,50 9.00 Methodist Medical Center 189,00 38,50 15.50 8,25 Med. Ctr. Dallas Hosp, 226,00 56,00 17,50 7.50 Doctor's Hospital 225.00 61.50 36,00 18,00 Garland Memorial Hospital 180,00 39,50 14,75 10,25 SOURCE: Medical Task Force Subcommittee Denton Economic Development Committee taptember, 1986 i, A-1 t'. APPENDIX B PHYSICIAN CONTRACTS According to Hospital records, the following physician contracts are currently in effect. The information provided is based upon our review of the contracts. For a more detailed understanding, the contracts should be reviewed in their entirety. rrr.rrrrrrrrrrr.rrrrrrr.rrrrrr.r.. PHYSICIAN: Daniel H. Bailey, M.D. PURPOSEi To maintain a program for providing prenatal, intranatalI and postpartum care to the patients at Flow Memorial Hospital by Certified Nurse-Midwives. COMPENSATION: $100,000.00 per year. TERM: Twelve months beginning September 1, 1986. The contract may be terminated by either party for cause proved to the satisfaction of a majority of a three member arbitration panel. The contract may be terminateventsixti time by either the Hospital or the Physician by g y days' written notice. NOTE: A term of the oontracc calla for Dr, Bailey to maintain policies of insurance accepptable to the Program, with minimum policy limi.t~a of five Tundred thousand ($500,000.00) per occur ice, insuring him against claims of medical malpractice, at to provide the Hospital with a Certificate of Insurance, satisfactory to the Hospitalt for Physician's General Liability, Malpractice, and Worker s Compensation Insurance. rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr..r PHYSICIAN: John Dulemba, M.D, PURPOSE: To assist the physician in establimhing his practice and to form a primary affiliation between 4,ie physician and the Hospital, COMPENSATION: The Hospital guarantees the physician a , minimum income of $78,000.00 in the first twelve months of the physician's medical practice. The Hospital will that teforeheexpensesexact ofe B-1 Y I $78,000.00 in the first twelve months of his practice. After the first year, fift ppercent (50%) of the physician's gross income in excess of10,000.00 in any given month will be , paid to the Hospital until the total subsidy is repaid. The physician may secure from the Hospital up to $20,000.00 towards expenses of establishing his office for medical practice. The physician shall repay any funds extended under this clause at the rate of fifty percent (50%) of the gross income in excess of $10,000.00 per month after the first r' year beginning with the month after which the gross incomo subsidy supplied by the Hospital has been repaid. TERM: The term of this agreement is for one year beginnings on the day the physician opened his office for the practice of medicine (a proximately August 1, 1986) and remains in force until a13 funds extended by tha Hospital have been repaid. There is no termination clause in the contract. NOTE: Through the first five months of fiscal year 1987, the Hospital has issued payments totalling $13,902 to Dr. Dulemba. rrrrrr.. r rrrrrrrrrrrr. rrr rrrrrwrrr 4 PHYSICIAN: 6ridger P. Little, M.D., P.A. PURPOSE; To provide physician emergency department staffing to the Hospital twenty-four (24) hours per day. COMPENSATION: $37,40 per physician hour. TERM: Two years beginning March 1, 1986, The contract may be terminated with cause by either party upon written notice given sixty days in advance, NOTE: Through the first five months of fiscal year 1987 the Hospital has issued payments totalling $136,485 under this contract, rrrrrrrrr..rrrr ON rrrrrrrrr rr rrrrrr. PHYSICIAN: Richard Frazier, M.D, PURPOSE: To servo as Codirector of the Anesthesia Department. t> g..2 t. ~i COMPENSATION: The physician has the right to bill patients and third party payors wherever applicable fur his professional fees, and the professional, fees of all Certified Registered Nurse Anesthetists (CRNAs) employed b the Hospital but under his supervision, The Hospital00guarantees that the hysician shall earn a total of $9,167. per month in fees ($110,000.00 per annum) for the first twelve months of the agreement. In each month beginning on the first day of the second month of the agreement and extending through the first day of the first month after the initial twelve months of the agreement, the Hospital shall pay to the physician an amount equal to the difference between his actual collection of fees in the preceding month and $9,167.00, if such pavmenta are requested by the physici.an or Codirector, The physician agrees to reimburse the Hospital for any monthly guarantee amounts paid to the physician under terms of the agreement ii the event the physician's total collection of fees relat,ad to services performed during the course of the agreement exceeds $110,000,00. TERM., Twelve months beginning July 140 1986, The contract may be terminated by either party, In the event that the party receiving notice of termination objects, both parties are entitled to pick one arbitrator and the two party arbitrators will select a third arbitrator. The decision of the pnnal shall be binding on both parties, R NOTE., Through the first five months of fiscal year 1987, the Hospital has not issued any payments under this contract, rrrrrrrrrrrrrrrr rrrrrrrrrrrrrrrrrr PHYSICIAN: A. Christian Green, M.D, NOTE., The contract between the Hospital and Dr. Green is the same as that of Dr, Frazier, Through the first five months of fiscal year 1987, the Hospital has not issued any payments under this contract. rrrrrrrrrrrrrrrrr rrrrrr r rrrrrrrrrr PHYSICIAN: Richard Frazier and A, Christian Green, M,D, PURPOSE: To assist, the physicians in establishing their, practice and to form a primary affiliation between the physicians and the Hospital. B-3 irr 1 '(s 1 ' COMPENSATION: The Hospital guarantees the physicians a minimum income of $220,000,00 in the first twelve months of their medical practice. After the first year, fift~~$$ percent in0a~n ofthe n monthcwillsbe gross paid i to the in Hospital until the total 0.00 any given is repaid, p The physicians may secure from the Hospital up to $40,000.00 towards expenses of establishing their office for medical practice. The physicians shall repay any funds extended under this clause at the rate of fifty percent (50%) of the gross income in excess of $20,000,00 per month after the First year, beginning with the month after which the gross ` income subsidy supplied by the Hospital has been repaid. TERM: The term of this agreement is for one year beginning on the day the physicians open their office for the practice of medicine and remains in force until all funds extended by the Hospitat have been repaid. There is no termination clause in this contract. , NOTE: Through the first five months of fiscal year 1987, the Hospital has not issued any payments under this contract. .err PHYSICIAN: Edward Ri.edweg, M.A. i KRPOSEs To assist the physician in establishing his practice and to form an exclusive affiliation between the physician and the Hospital. COMPENSATION% The Hospital guarantees the physician, through a loan arrangement, a minimum income of $72,000.00 in the first twelve months of the physician's medical practice. The Hospital will subsidize the pphysician the exact monetary sum tha the ph aician's income before expenses would fall short of 72,000 ,0 in the first twelve months of medical practice, TERMS The term of this agreement is for one year beginning on the day the physician first relocated his practice to the Hospital (approximately November 6, 1986), and remains in force until all funds extended by the Hospital have been repaid, There is no termination clause in the contract, n-4 ;I 1 i' NOTE: Through the first five months of fiscal year 1987, the Hospital has issued payments totalling $23,492 under this contract. .....................w..........w. PHYSICIAN: Edward Riedweg, M,D, PURPOSE: To secure the physician's services as Medical Director of the Hospital s Alcohol and Chemical Dependency Unit. COMPENSATION: $4,000,00 per month, TERM: The contract may be terminated with sixty days' advance notice, NOTE: Through the first five months of fiscal year 1987, the Hospital has issued payments totalling $16,000,00 under this contract, w VENDOR: Medical Laboratories, Inc, ' PURPOSE: To secure laboratory services for the Hospital. The vendor is to provide technical laboratory personnel, } supplies equipment maintenance, and other such services as are considered necessary for standard laboratory operation, COMPENSATION: The Hospital is to be billed on a cost basis for both in-house and reference chemistries, The Hospital will pay Medical Laboratories, Inc., the cost of performing the laboratory work requested. Costs are to be determined by standard cost accounting procedures as indicated. Cost for lab work performed in the Hospital will be made up of the following items: 1. Wages and benefits extended to employees for the services they perform within the Hospital laboratory, 2. Supplies utilized in the performance of service in the Hospital laboratory. b-5 I 3. Allocated costs: a, Medical Laboratories Inc,) Business Office expenses such as accounting, billing for laboratory work etc., but not to include billing for Affiliated Pathologists, P.A. business activities, b. Data processing fees. c. Expenses incurred in providing courier services, d. Maintenance expenses ana maintenance contract expenses on laboratory equipment. Costs for lab work performed in Medical Laboratories, Inc., reference laboratory will be made up of the following items: 1. Service will be reimbursed based upon the cost of operating the Medical Laboratories, Inc., reference laboratory. The Hospital would be charged based on the ratio of tests performed to the total reference laboratory volume per area of the reference laboratory etc. such as bacteriology, hematology, chemistry, 2. Medical Laboratories Inc,, cost accounting records are available to audit for Hospital financial agents. Any major item which will result in significant cost increase must be approved by pi Medical Laboratories, Inc., institutes the service. Failure to obtain approval is go for nonpayment of cost increase, Bills will be rendered monthly, On or before the 15th of each month, a bill will be service. rendered oprevious month's etlaboratory following let Payment is duo on or before the month, 3. Billing information, relative to laboratory work performed, provided to the Hospital by Medical Laboratories, Inc., shall be received by the Hospital within seventy-two hours from the time the work was ordered, Acaordinglq such information received by the Hospital after the above specified time period shall be billed to Medical Laboratories, Inc,, at the Hospital's normal charge rates, B-6 IYrrtris~ 41~ .N YiBY. TERM: This contract shall run for a period of one year, Renewal is automatic for one year terms in pperpetuity until termination is reached by written notice, re terminate the contract, written notice must be given and received ninety (90) days prior to the termination date of the contract. The contract currently in effect is dated October 19, 1978, NOTE., Through the first five months of fiscal Hospital has issued payments totallin year 1987 the contract, g $344,415 under this i ;i t a g-7 t! it e. t F The following contracts between physicians and the Hospital Hospiweretal recently al management lowed to expire, and were not renewed, by PHYSICIAN: Diresh Pandurang Kagal, N.D. PURPOSE: To secure the physician'n services as Medical Director of the Hospital's Department of Respiratory Therapy. COMPENSATION: $6,000,00 per year, TERM: One year beginning January 1986, ..........rr PHYSICIAN: Robert M. Lockwood, N.D. PURPOSE: To secure the physician's services as Medical Director of the Hospital, and Chairman for the Department of Radiology, The purpose of the Medical Director of the Hospital is to assist Hospital in its administrative function in relation to the practice of medicine and the Hospital's relationship with staff physicians, The purpose of the Chairman of the Department of Radiology is to administer for + the maintenance, operation, and use of the Department for diagnosis and treatment of illness. COMPENSATION: $90,000.00 per year, 'PERM: October 1, 1985 through SeptAmber 30, 1986, .rrr rr........ rr...r..r.r..... r... PHYSICIAN: Tanveer A, Qurechi, M.D., P.A. PURPOSE: To secure the physician's services as Medical Director of the Coronary Care Unit, Intensive Care Unit and Progressive Care Unit, i Br8 f~ COMPENSATION: $2,917.00 per month, TERM: October 1, 1985 through September 30, 1986, rrr.r..rrrrw.rrr.r..rrrr.rrr..r... Hospital management has informed us that these represent all existing contracts between physicians and the Hospital. During the course of our work, we discovered no other contracts. • g. 9 APPENDIX C CAPITAL LEASES AND NOTES PAYABLE Hospital management provided the following list of capital leases which were in effect at February 28, 1987, This information has not been audited by us. However, we did trace the information to the audited financial statements for the fiscal year ending September 30, 1986, Deacri tion Principal Monthly Pay-off $a---W-lance . Pint ~Dat9 \r Lanier Word Processors CT Scanner, (Old) $ 457 248,23 $ 334.67 8-01-87 Hospital beds and GTE 264,900,35 6,551.88 12-15-91 IBM System 38 242 064.96 30-91 Intermountain Software I 127,081.31 3,211,00 4-30-91 Intermountain Software II 1400880.02 3,211,00 11-01-91 Decision Data Equipment 133,012.81 20911,00 6-15-91 CT Scanner (New) 364_ ,841_' 8,639.70 12-15-90 Total $1,731,702,36 39- 3 25 In addition, at February 28, 1987) the Hospital held the following notes payable related to the acquisition of equipment; Description Principal Monthly Pay-off Balance Pa meat Date Gas Sterilizer $ 91041,21 Mammography Equipment 50633,31 $2,8413-09 2-03-8 50,60 4-01-87 phaco Emulsifier 8,539.35 20178,49 6-01-87 Ultrasound Equipment 2,677,03 478,19 8-1-87 Electrocardiograph 650373.46 11954,86 4-01-90 EEG Equipment 6,150.97 Anesthesia Machines 462,04 4-01-88 _ 25220 73 _ 1, 059.96 4-15-89 Total 11___.:.r 6,0 22 d36.U6 19,397.23 The Hospital is party to a non-capitalized lease with N.A.P. Commercial Electronics Corp, for communica ion and television equipment. The lease is in the amount of 89.33 per day. The Hospital has the option to exercise a buy-out based on the following schedule; January 1, 1988 - 105,633.00 January 1, 1989 - 79,974,00 January 1, 1990 - 53 815.00 January 1, 1991 - 28;156,00 January 1, 1991 - 7 0000.00 --rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr C-1