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HUNTSVILLE — Behind-the-scenes negotiations between Scott County and Mercy Health Partners, Inc., over a proposed long-term lease of the local hospital has been ongoing in advance of tonight’s (Thursday’s) meeting of the commission’s Hospital Committee, the Independent Herald has learned.

Acting on behalf of the Hospital Committee, Mayor Keeton has submitted a list of 15 clarification statements, to which Mercy Health has responded, in what has all the appearances of a make-or-break showdown between the two parties.

A three-page summary, under the heading of “Mercy Health Partners Response to Scott County’s Lease Discussion Points,” dated March 26, 2009, was made available to the Independent Herald on the following day (Monday).

The point-counterpoint document is three pages in length, and although most are agreed upon, a few could lead to an abrupt end of the negotiations between the two parties.

The proposed 15-year, no-payment lease and this latest document are expected to be the chief topics of discussion as the Hospital Committee meets at 5:15 p.m. this evening (Thursday) at the Scott County Office Building in Huntsville.

Just before our deadline on Tuesday, Mayor Keeton announced that a Special Called Meeting of the full Commission would be held at 6 p.m. on Monday, April 6, to act on the hospital lease and other matters. The meeting will be held in the Conference Room of the Scott County Office Building in Huntsville.

Here is the text of the negotiation points with the county’s statements numbered, and Mercy Health’s response signified by the letter “A” and the response italicized:

Thank you for providing the additional clarification on the discussion points relative to the referenced lease agreement above. While we are receptive to negotiating the language on many of your points, some items are non-negotiable. The following responses will identify and clarify our position regarding each of these items.

1. Scott County would enter into a 15-year lease for the operation of the Scott County Hospital, effective the first day of the month following County Commission approval.

A. We are in agreement and will anticipate this happening by May 1, 2009.

2. Scott County would consider including in the lease additional 5-year extensions after the initial 15-year lease term. Certain items to be negotiated prior to extension.

A. We would consider these provisions.

3. To help Scott County reach anticipated revenues in the current and next budget cycle, Mercy Health Partners would pay Scott County the remaining current lease payments until January 31, 2010 after which no lease payments will be made for the remainder of the 15-year lease.

A. We would make lease payments through May 31, 2009 at which time lease payments would cease for the balance of the 15 year lease period.

4. Mercy Health Partners would agree not to terminate the lease for a period of 10 years, after which a 2 year notice is required.

A. We would agree to a 2 year, at any time, notification provision in the agreement.

5. Mercy and its parent would execute the lease agreement.

A. Mercy Health Partners, Inc. and St. Mary’s Medical Center of Scott County, Inc. are the appropriate corporate entities to execute the lease agreement.

6. A provision should be considered in the lease which will grant Mercy the right to assign the lease with County approval after some period of time — suggest either five or seven years.

A. We would retain current language in the agreement relative to assignment of the lease.

7. Mercy Health Partners would commit to investing $5 million for capital improvements during the first five years of the lease and $1,000,000 each year thereafter. Capital improvements for the first five years should average $1 million dollars per year to the hospital building, professional building, and campus. Improvements for the purpose of this lease shall not include other properties in Scott County leased or owned by Mercy. (However, Mercy may be given credit for any funds committed toward improvements or replacement of the Scott County Ambulance Service Building.)

During the first five years, should capital investment exceed the required amount, Mercy will receive credit of the overage for subsequent years only through year 5. If in year 6-15 if Mercy does not meet the required annual investment (noted above), then the County would receive from Mercy the difference in the amount actually invested and the required annual investment.

A. We have agreed that we will make appropriate capital improvements during the lease term and we will submit a plan of capital improvements for the first 5 years of the lease.

8. Please submit a draft of the anticipated “Capital Improvements Plan” to the hospital — improvement and cost — anticipated for the first five years.

A. See response to #7.

9. If purchased, non-building capital improvements pertaining to “large-scale equipment” shall become fixtures of the building and as such remain with the building should future sale and/or change in operators be contemplated. Leased or rented equipment should not be counted as capital improvements.

A. Capital improvements that would be considered fixtures of the building would remain with the facility if at any time in the future Mercy Health Partners ceases to be the Hospital Operator. Leased or rented equipment is considered to be operating rent if the agreement is 3 years or less.

10. Mercy shall relieve the county of any obligation to make on-going repairs to any of the buildings associated with the Hospital campus.

A. Mercy will assume all responsibility for the repairs and maintenance of all properties leased from the county and utilized by Mercy.

11. Mercy would increase the prisoner care commitment to $125,000 annually (based on a total of approximately 130 prisoners). A credit toward this amount can be achieved if Mercy would be willing to provide a part-time nurse (RN or LPN) to the Scott County Jail.

A. We would propose that the prisoner care commitment continue to be up to $75,000 for County residents housed at the Justice Center.

12. Mercy would continue their on-going financial support of the following programs:

a. $2,000 a month to fund the Senior Citizens
b. Sponsor of the Relay for Life
c. Commit to $1,000 scholarships for the two local high schools.

A. We would continue this community support at a minimum.

13. Mercy would provide the County with an annual audited financial report (using generally accepted accounting practices) reflecting profits or losses — pertaining only to the operation of the Hospital and not include other business entities that Mercy shall operate in Scott County. Also, Mercy will provide the County a report of capital expenditures at the end of each year as noted in #7 above.

A. Mercy Health Partners does not undergo an independent audit solely on the Mercy Health Partners facilities; however, we would be willing to provide an unaudited financial statement and a report of capital investments on an annual basis for the Scott County Hospital.

14. If at any time Mercy’s annual report shows profits above $200,000.00, the County reserves the right to ask Mercy Health to help financially with the County’s Ambulance Service in the form of a new ambulance, equipment or building needs to improve the County’s Health Services. Other suggestions would include setting up a “PILOT” arrangement with a fixed amount of annual payment from Mercy to be used by the County for the operation of the SC Ambulance Service.

A. Mercy would be receptive to the County’s request once the losses sustained by Mercy at SMSC have been recouped and annual profits remain in excess of $200,000.

15. The County would endeavor to publicly promote and support Mercy and the Hospital to the citizens and medical community within Scott County.

A. This would be appreciated.