Can the city sell hospital property?

Medical personnel at the Tallahassee Memorial have proposed a governance change that city staff say would reduce city oversight. TMH says it will either close the lease or not be acquired, and it will be attributed to growth and future partnerships with FSU.

City leaders explore the possibility of a sale of the Tallahassee Memorial Health Facility after hospital staff restructure their governance agreements in ways that city staff say will reduce monitoring of broader strategic decisions impacting the health system.

To position themselves for continuous growth and new partnerships, nonprofit community-based hospitals want to create a new health system committee that does not require members to request “city verification agencies” to oversee the broader TMH health system. According to the city agenda, existing committees will continue to manage the hospital's day-to-day operations.

The move touched on extraordinary staff reports on city-hospital relationships, potential acquisitions that could transform TMH in the future, and deep dive into ownership arrangements “so that urban interests are preserved.”

“In light of TMH's proposal, staff will assess whether continuing city ownership remains in the city's long-term profits, according to a report on the committee's agenda materials for next week's meeting.” “As part of this analysis, staff will also investigate the feasibility and potential benefits of the real estate sales potential, taking into account all available options and approaches.”

While many were surprised to see issues with the agenda, Mayor Reese Gord said that many people have added information items for reviews of the city's commissioner as they are unaware that the city owns land, buildings, equipment and all assets related to TMH.

The city's largest healthcare provider began as a city-run hospital in the 1940s and moved to an independent, non-profit healthcare system under a long-term lease agreement with the city.

“I think it's healthy for us all to understand history and current status,” God told Tallahassee Democrats. “This will allow the city committee to assess the changing situation on the board and, in fact, the evolution of healthcare in our area.”

The city's agenda items nurtured the potential for hospital acquisition by for-profit or nonprofit organizations in line with industry trends, but TMH officials said there are “no current plans to move to different ownership or operational models.”

TMH Vice President and Chief Communications Officer Stephanie Delzipolsky said the request for a change in governance was partially affected by the hospital's partnership with FSU Health, but was primarily based on significant growth over the years, including a new healthcare campus formed in Panama City.

“In fact, one goal of our relationship with FSU is to maintain our independence and avoid acquisitions by a large-scale for-profit hospital system,” Derzypolski said in an email.

According to agenda documents, the hospital serves 21 counties in North Florida and Georgia. Since the city chose a nonprofit organization to manage the hospital's operations in 1979, it has been signing long-term lease agreements with the city. Goad said the rent has been set at $1 a year since the two parties entered into leases.

“This structure allows the city to maintain ownership and oversight while enabling TMH to expand its health services and partnerships,” the agenda source said.

Derzypolski has made it clear that the hospital is not planning to end its lease with the city or ask the city to consider selling it.

“TMH's request to the city was to confirm changes to the governing documents in accordance with the lease provisions,” she said.

If governance is updated, this will not change “the city's ownership or TMH's responsibility for the operation of the hospital and its associated facilities,” Derzypolski said.

Goad said the city must fully see the impact and conduct a legal analysis before a decision is made, but he said he does not think TMH is trying to separate it from its ownership: “I don't think it will happen.”

However, the city's agenda item points to a steady decline in independent, nonprofit hospitals due to financial pressure, forcing many to “integrate with a larger health system, including university-affiliated hospitals, larger nonprofits and for-profit organizations.”

It also highlights its expansion through UF Health Shands and “strategic acquisition and development.” But Goad said the comparison between the Gainesville-based hospital system and the TMH-FSU Health Partnership is justified, saying it might be “premature.”

According to agenda documents, the city “retains ownership of the land, buildings, equipment and other related assets in TMH.” Goad has made it clear that the assets include everything except the vehicle, but the city has no financial obligation if something needs to be repaired or replaced. This means it will not affect the city's budget.

Everything is fully paid by TMH, he said.

When the two parties created a long-term lease agreement in 1979, everything on the property was leased to TMH. However, despite everything being city property, the city cannot take items from hospitals.

“We can't intervene in their manipulation,” God said.

City managers look forward to a robust discussion that will be held at City Hall on Wednesday, March 26th at 3pm for the City Commission.

“It could be a meaningful milestone in Tallahassee's healthcare,” he said.

Local government watchdog reporter Elena Barrera can be contacted at ebarrera@tallahassee.com. X: Follow her at @Elenabarreraaa.