Projections indicate that The Memorial Hospital could generate up to $300,000 a year by investing in office space, X-ray equipment and a Magnetic Resonance Imaging machine, officials say, which justifies the expense of the investment.
But that doesn't justify the manner in which the decision was made, Craig neurologist Pam Kinder said.
"This was done blatantly behind closed doors, which makes me furious; it smacks of small town politics," she said. "(The hospital board) completely circumvented the established way that we do any equipment lease or purchase."
Kinder said established procedures call for a step-by-step process for making large purchases, which starts with identifying the need, budgeting the purchase and then researching the best equipment and values.
"As long as I've been here, and that's been nine years, any acquisition of equipment has always gone through the budget process," she said. "I'm shocked beyond belief. We need to put an immediate stop to this, and I want (board members) each to start explaining."
Hospital officials confirmed Wednesday, after an accidental leak of the information, that they were negotiating a 20-year lease-to-own agreement for the Northwest Health Specialists building and its equipment.
TMH Board of Trustees President Sue Lyster denied the deal was made in secret, saying a confidentiality agreement prevented a public announcement, but that the final decision would have been made in a public meeting.
Public Relations Director Pam Thompson said the revenue expected from operating the clinic not only would pay the annual lease payment, it also would enhance the hospital's ability to construct a new facility.
At one point, TMH offered an annual lease payment of $426,900 for five years and $103,836 a year for the remaining 15 years.
"The lease payments are based on the fair market value of the assets prorated over the life of the lease," Thompson said.
Randy Phelps, TMH administrator, said the hospital's revenue projections are based on actual numbers -- not estimated numbers.
He said hospital staff took the number of MRI studies performed through the hospital's weekly mobile service plus those performed annually at Northwest Health Specialists.
"It's based on the numbers we have in hand that have been validated," he said.
Kinder disagrees that operating an MRI machine would generate revenue for the hospital.
"Can the community of Craig, Colorado, afford an MRI machine? No," she said. "I'd love to have an MRI at my disposal 24 hours a day -- I'm a neurosurgeon -- but we can't afford it, and the mobile unit looks great."
The hospital contracts for the use of a mobile MRI machine. Each time that contract comes up for renewal, Kinder said, a team evaluates the feasibility of purchasing an MRI and always decides the answer is "no."
Thompson said the hospital officials are looked into putting an MRI machine into a new hospital, but that the construction would add another $150,000 to the total cost, not to mention the estimated $1.5 million price of a new machine.
"There is only one entity in the community that can operate a profitable 'fixed site' MRI and that is The Memorial Hospital," she wrote in a statement released Thursday. "The hospital can only be profitable with a fixed site unit in the absence of local competition."
Using its Critical Access status, the hospital is reimbursed for the actual costs it incurs in providing a service to a Medicare patient. A business would be reimbursed at a rate set by Medicare, which is what would make the investment profitable for the hospital as opposed to a private business, Phelps said.
He also said one of the hospital's primary reasons for considering a deal was to ensure that a private business did not purchase the building and equipment and compete with the hospital.
"Part of the consideration of this opportunity was more of a consideration of what would happen if we didn't take the opportunity," Phelps said. "It would essentially put us out of the MRI market."
Kinder also is concerned that the hospital will be supporting physicians that directly compete with established Craig physicians.
Several Steamboat Springs-based specialists rent space in the Northwest Health Specialists clinic and the continued provision of that office space is part of the agreement the hospital is considering.
"The clinic is already in competition with a majority of the doctors here," Kinder said. "A majority of the doctors who use that clinic take the majority of their business back to Steamboat Springs."
Thompson said that by operating that clinic, area physicians may make more use of the clinic and its equipment than they currently do.
Christina M. Currie can be reached at 824-7031, Ext. 210 or by e-mail at email@example.com.