Billing taxpayers to prop up a bad deal

The ongoing project to turn Lakewood’s publicly owned hospital into a private health center has a big price tag. Selling people a deal they don’t want is expensive: consultants, advertising, direct mail, etc. Add fees on top of more fees, and the asset write-downs of a no-bid deal.

Then quietly charge it all to taxpayers.

This has been the consistent story behind closing Lakewood Hospital, so far. It’s also the simplest, bottom-line argument for voting against the deal in November and introducing some fiscal discipline to a pricey boondoggle. The direct costs, alone, already run into the hundreds of millions.

For a real sense of the scale of this deal’s expense, it may help to start small and work up from there.

$300: the approximate hourly rate paid by Lakewood to Thompson Hine beginning in April 2015, “in connection with negotiations with the Cleveland Clinic Foundation and Lakewood Hospital Association, Inc., relating to Lakewood Hospital.” Between then and the negotiated deal announced six months later, a three-digit total of billable hours seems plausible, at least.

$50,000: paid by Lakewood Hospital Association—which officially existed to run a public hospital on our behalf—to a political group that opposed public input on the hospital’s future.

$75,000: the minimum which Lakewood paid to Huron Consulting, for a conclusion-averse study, whose authors apparently provided freelance political campaign work on the public tab, too.

$500,000: paid by Lakewood Hospital Association to Subsidium, for a study so inadequate that city council commissioned the Huron study to review it.

$78,000,000: anticipated costs of “winding down” operations of Lakewood Hospital. These costs are poorly explained at present—but according to Mayor Mike Summers, the Cleveland Clinic may pay only a small portion of them.

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10 Things About Lakewood Hospital

The following review of Lakewood Hospital facts is also available as a PDF you can download and print out.

1) Lakewood Hospital is Owned by the Citizens Of Lakewood. The land and buildings, every MRI, ultrasound, operating table, every piece of lab equipment—right down to each light bulb—are all owned by Lakewood residents.

2) The Clinic Leases the Hospital. There are 10 more years left on the lease.

3) A $400 Million Lawsuit Has Unearthed Secret Documents and testimonies revealing that the Clinic planned and implemented the destruction of Lakewood Hospital with empty promises to make the hospital sustainable for years to come. Dennis Kucinich explains in this video.

4) The Hospital Was Profitable until this year, even after the Clinic removed nearly two dozen services and departments beginning in 2007, culminating this past January with the closing of the cardiac catheterization lab. The Clinic said the state health department made them close this most profitable unit, which was not true. The City’s three representatives on the Lakewood Hospital Association (LHA) board did nothing. City Council stood by tacitly as the hospital was steadily emptied of valuable resources.

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Administrative costs rise nearly 900% in 12 years?

Beginning in 2001, financial statements for Lakewood Hospital Association introduced a line for “Administrative services” costs. Starting at $2.4 million in 2001, these costs balloon to more than twenty-four million dollars in 2013. Save Lakewood Hospital has questioned high fees paid by LHA to the Cleveland Clinic for operating Lakewood Hospital, before, but the exact progression of this line item through 14 years should be sobering reading for everyone interested in Lakewood’s future:

2001: $2,479,000
2002: $2,970,000
2003: $3,459,000
2004: $5,925,000
2005: $6,093,000
2006: $7,349,000
2007: $10,887,000
2008: $14,864,000
2009: $15,083,000
2010: $20,727,000
2011: $23,810,000
2012: $23,043,000
2013: $24,438,000
2014: $24,305,000

Curiously, the bill for these Administrative services has ballooned fastest through those years which, the LHA and City of Lakewood have complained, Lakewood Hospital has been losing money owing to declining activity. It’s also worth noting that between 2008 and 2014, alone, the LHA paid $146 million for Administrative services—more than the entire predicted cost of building Cleveland Clinic’s new Avon hospital from the ground up.

Yet the nature of these expenses remains unexplained and unquestioned by the same LHA trustees and city administrators consistently asserting that Lakewood Hospital is financially unviable.

Lakewood Hospital and Lakewood deserve better stewardship than this.

Note: audited financial statements for 2009, 2010, 2011, 2012, 2013 and 2014 are available from the City of Lakewood’s web site. Earlier statements have been released, by city Law Director Kevin Butler, in connection with a taxpayers’ lawsuit; please see this PDF with 2001 and 2002 Administrative services costs as comparison.