What Somervell County Hospital District (Glen Rose Medical Center) is doing with I-35 Capital Physician*s Group Looks Illegal as Hell Somervell County Salon-Glen Rose, Rainbow, Nemo, Glass....Texas

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More than 7 For Profit Clinics Operating Outside Somervell County Hospital District

What Somervell County Hospital District (Glen Rose Medical Center) is doing with I-35 Capital Physician*s Group Looks Illegal as Hell

16 May 2019 at 2:56:00 PM

Here is the question I'm bringing up. Should a taxing hospital district operate or have management companies do so as a pass through for-profit clinics that are not for a public purpose within a different hospital district's territory or within another county without a change to the hospital district definition and permission from the county with whom they want to operate a clinic?A hospital district has discrete boundaries and two hospital districts cannot do business within the same territory. Glen Rose Medical Center is a PUBLIC hospital, does not pay any taxes, and is not-for profit.  If the reason a hospital decides to become a hospital district is to serve its own citizens, including the needy, is it legal to operate clinics outside district boundaries for the benefit of (usually) well to do patients and spending district residents money as a for-profit to do so? If there is even a chance this is illegal, why does the Somervell County Hospital District not immediately ask for an Texas Attorney General opinion or are the board members wanting free reign to spend money as they please? Or maybe they're all waiting for a lawsuit. 

Apparently Somervell County Hospital District has at least 7 clinics, in some sort of management and leasing arrangement with I-35 Capital.

Now let's look at the list of ancilliary clinics that Somervell County is operating under a management agreement with I-35 Capital (List of ancillary clinics -from the March 27 2019 meeting (board packet) 

Really????  Frisco, McKinney, Plano, Denton, etc. Not only are ALL of these outside Somervell County Hospital District boundaries, but a number of them are actually in other county's hospital districts (Tarrant County and Dallas County have their own hospital districts)  Here is what Texas Health and Safety code says about that

Sec. 286.029. OVERLAPPING DISTRICTS. (a) If the territory in one or more districts overlaps, the commissioners court of the county in which the most recently created district is located by order shall exclude the overlapping territory from that district.

According to discussions at the Somervell County Hospital District, there's a significant amount of money going out to fund these clinics. That is TAXPAYER MONEY. What are the numbers? First, there are 2 different types of clinics they want to have open. 
Rough Transcript: 
Reynolds: Let's talk a llittle about radiology and then we'll talk about therapy. The radiology agreement would be for us to operate a hospital based radiology department in Cleburne.I-35 would be responsible for the oversight of the non radiology piece of that. Would be branded with our name on it. Would have our name, employees would have our badges on, have our sign there. The technical employees would be our employees, employed by us, subject to the same rules and from our perspective would report to Lea. We would offer CT, BP, ultrasound, dexa and radiology. From a financial perspective the way the radiology would work is  there would be a monthly management fee of $10,840 and that would be paid to I-35 and that would be for their oversight of the facility, the marketing. A little bit of an aside, the (thims?) would be read by a group, not the group thats' reading for us, not same one we're using right now, so that'd have to be conditional on our staff. There's also a fee for us of lease for the facility and a lease of the equipment and that's $19, 850 a month. There's two separate agreements, the management agreement which is $10,840 and the lease of the facility and equipment. There's also a collection fee for coding and following up on the account. They would be coded by their coding group, come to us and we would submit 'em to insurance through our system, payment would come into our system. We would put that into an account, just like we do with the lab outsourcing agreement and do reconciliation of that on a monthly basis but if there's any followup they did after insurance submitted, the followup would be by I-35 and that would be the 8 percent of collections. ... There's really two risks going into this, or maybe one. The upfront cost to us is that we would pay the facility lease.. the facility lease amount would be due the first day of business, whatever the contract .. we would pay that. The monthly management fee would be due by the 5th after the reconciliation at the end of the month, so would the 8 percent billing fee after the reconciliation of the collections. There then is a management bonus which is determined by fair market value, you're making money and you're generating certain levels, there is a bonus fee that's paid to the management company and that's. Starts out at 25 percent and it gets higher as the collections grow, I believe up to about 50 percent. ... When you're at that level, that means we're billing and collecting enough that is generating a surplus that we then share. The physicians practice is already there and is in place and has been in place for a number of years. .. Cleburne Family Medicine and we would have a radiology department inside that facility. They'd just come in and reregister for Glen Rose Medical Center... They have another location in Joshua. I would expect all the radiology to be done. .. The length is initially a one year management agreement with a 30 day no fault out and also on the facilities. Also a provision that if a change in regulation to medicare/medicade, we do see medicare/medicaid patients there, opportunity to renegotiate the contract. 
The second is therapy type clinics. 
Rough Transcript
Reynolds: Therapy Leases, There are two separate management leases. There's a management agreement for 3 locations . One of them is in Plano, one in Fort Worth and one in north Plano. That is a separate management agreement, there's a management fee associated with that and then there are 3 separate leases for the 3 separate locations. This one, monthly management fee is  $35,254. There is a therapy services agreement for therapy, the therapists are employed by I-35 and leased back to us. There is a fee associated with that, unlike radiology where the people are on our payroll; these people would not be on our payroll but they would be leased, credentialed through us, from a patient's perspective would be our employees. From a contracting standpoint, they're their employees and we lease them back. There is another agreement, this is with another management service for another group of practices and these are in Frisco, Allen, and McKinney. It's the same type of arrangment, it is a little bit different . It has a monthly management fee of $69,552 as opposed to 35,264 but as I told you there's a management bonus as the revenue increases, and it's about a wash at about $900,000 revenue. One with the lower monthly fee is more attractive to us, has to do with the volume of patients currently being seen and what we're calling the edge agreement.  ... A little bit of a concern, therapy services agreements higher  $159,390, these are businesses that are currently in place, currently seeing patients on a day to day basis, and as of the date of the agreements would change from a positions building perspective from  physicians based to hospital based, billed through us. The reason for the difference is, we've done some fair market value tests on this and this group of 3 is a much larger practice already up and running. 
? (I-35?): How fair market value is calculated. They look at the last 12 months and on the (RDU?) bonus that's just a bigger number 
Bruce: What is their volume right now? 
?(I-35?) Approximately 3000 patients a month -for all three
Bruce What about the (unintelligible) number?
I-35? 1.2 million dollars a month
Reynolds: With Fort Worth calling Source One, lower monthly fee but bonus provision is higher on the top side. Same amount of management fee paid to both,
I-35? Out of that fee is how they pay their employees
Reynolds: Their therapy fee is about twice as much as one source. The management agreement for therarpy is initial period of 2 years with automatic renewal 2 years unless 90 days notice. Also a 30 day no -cost out.. makes the contracts 30 day contracts. One of the requirements (joe Nelson, Kevin) or suggestions that a 5 year contract doesn't have that provision. ....Those are the deals.. management fees, services fee cost of technical employees, facility lease fee. Total lease expense is  $93,599 , upfront cost from day one. The therapy service fee is $240,203 a month for both,  $104,816 management fee . Risk to us is that we're required on day one to pay the lease cost, about $110,000. Starting on the 2nd month where we have all 3 fees, (end of month) our total cost is 469,000 month, fairly significant number. Risk is with the payors. There's no indication that we won't be paid for therapy and radiation, since we're on the radar with our allowed out source. We've had a conference call with Blue Cross, told, Carr about it, told her about  where radiology, within 35 mile range, not required for therapy, told her where the approx location of hte facilities would be and her only remark was not in Houston. Still a concern with what's going on with Blue Cross is what we'll get some pushback from them. Blue Cross only one not paying us right now, completely independent of the lab. We do have a savings account, $3 mil in it right  now, funding it monthly. On the therapy we routinely bill every Thursday, will bill every 15 days, expecting to be paid by the end of the month. 
Bruce: Where does hte cash go
Reynolds Into our account, and we manage it and like we do with lab outsourcing, go back to calculate 
Will we have employees other than therapists? 
Reynolds: not that we're paying for. 

Here's the problem and I'm going to spell it out.

The Somervell County Hospital District has some specific territorial requirements according to the law. 

Texas Health and Safety Code 
Sec. 286.022 
Contents of Petition
(a)The petition prescribed by Section 286.021 must show:

(1)that the district is to be created and is to operate under Article IX, Section 9, of the Texas Constitution;

(2)the name of the proposed district;

(3)the districts boundaries as designated by metes and bounds or other sufficient legal description;

(4)that none of the territory in the district is included in another hospital district;

What did the petition to create the Somervell County Hospital District say? 

And finally what does the Texas Constitution say?

Art 9 - Sec 9

Article 9 - COUNTIES


The Legislature may by general or special law provide for the creation, establishment, maintenance and operation of hospital districts composed of one or more counties or all or any part of one or more counties with power to issue bonds for the purchase, construction, acquisition, repair or renovation of buildings and improvements and equipping same, for hospital purposes; providing for the transfer to the hospital district of the title to any land, buildings, improvements and equipment located wholly within the district which may be jointly or separately owned by any city, town or county, providing that any district so created shall assume full responsibility for providing medical and hospital care for its needy inhabitants and assume the outstanding indebtedness incurred by cities, towns and counties for hospital purposes prior to the creation of the district, if same are located wholly within its boundaries, and a pro rata portion of such indebtedness based upon the then last approved tax assessment rolls of the included cities, towns and counties if less than all the territory thereof is included within the district boundaries; providing that after its creation no other municipality or political subdivision shall have the power to levy taxes or issue bonds or other obligations for hospital purposes or for providing medical care within the boundaries of the district; providing for the levy of annual taxes at a rate not to exceed seventy-five cents ($ .75) on the One Hundred Dollar valuation of all taxable property within such district for the purpose of meeting the requirements of the district's bonds, the indebtedness assumed by it and its maintenance and operating expenses, providing that such district shall not be created or such tax authorized unless approved by a majority of the qualified voters thereof voting at an election called for the purpose; and providing further that the support and maintenance of the district's hospital system shall never become a charge against or obligation of the State of Texas nor shall any direct appropriation be made by the Legislature for the construction, maintenance or improvement of any of the facilities of such district. Provided, however, that no district shall be created by special law except after thirty (30) days' public notice to the district affected, and in no event may the Legislature provide for a district to be created without the affirmative vote of a majority of the qualified voters in the district concerned. The Legislature may also provide for the dissolution of hospital districts provided that a process is afforded by statute for: 
(1) determining the desire of a majority of the qualified voters within the district to dissolve it; 
(2) disposing of or transferring the assets, if any, of the district; and 
(3) satisfying the debts and bond obligations, if any, of the district, in such manner as to protect the interests of the citizens within the district, including their collective property rights in the assets and property of the district, provided, however, that any grant from federal funds, however dispensed, shall be considered an obligation to be repaid in satisfaction and provided that no election to dissolve shall be held more often than once each year. In such connection, the statute shall provide against disposal or transfer of the assets of the district except for due compensation unless such assets are transferred to another governmental agency, such as a county, embracing such district and using such transferred assets in such a way as to benefit citizens formerly within the district. (Added Nov. 6, 1962; amended Nov. 8, 1966, and Nov. 7, 1989.)

You see it? A hospital district is created within its territorial boundaries and THIS hospital district boundary is conterminous with Somervell County, ie, THE BOUNDARIES OF THE COUNTY. and NONE OF THE TERRITORY IN THE DISTRICT IN THE DISTRICT IS INCLUDED IN ANOTHER HOSPITAL DISTRICT. This also includes operating ANYTHING outside the district,in areas without their own hospital district. (And, it seems to me that for a hospital district to operate outside its boundaries at all, for any reason, there would have to be some sort of intergovernmental county agreement) 

This means that the district CANNOT OPERATE anywhere outside its boundaries and definitely not in another hospital district's territory.  (That includes Pecan Plantation in Hood County which has its own hospital district for which residents pay ZERO taxes while Somervell County residents pay our taxes to remodel, lease and otherwise support the well to do who live in a gated community) 

Let's just say for the sake of argument that for the clinics that would operate in a different county NOT IN THE TERRITORY OF SOMERVELL COUNTY HOSPITAL DISTRICT that the board got an intergovernmental agreemen to operate a clinic in a different county that didn't already have a hospital district. GRMC would STILL Have to have a public purpose and be not-for-profit AND they would have to go back and change the legal definition of the hospital district  But the board has said repeatedly that they are doing this "Outside the area", as Ray Reynolds said, to bring in revenue. These clinics are not for the benefit of the taxpaying citizens who live in Somervell County and do not have a public purpose.(As a related note, see the principles, although not the same state, in this Kansas Attorney General opinion

March 28 2019

Feb 28 2019 meeting

Rough transcript:

Reynolds: Just an aside, three or four weeks ago, Ron and I went with them and we toured some of their facilities. We went to Cleburne and looked at that and they're right, very very limited radiology service in that clinic right now. But then we also went to Arlington to one of their facilities where they have an MRI in there but it's interesting, you walk in to the one section of the building and it is Wise County hospital. There's a sign there where you register at Wise County Hospital ... It is our facility located in another market

I was also interested in this. I called up Wise County Hospital and spoke to a Paul there. Wise County is a hospital authority running under the City. WISE COUNTY DOES NOT HAVE A HOSPITAL DISTRICT. If they did, then they would NOT be able to run something outside their territory. This is a BAD EXAMPLE. 

Budget meeting  from August 2018. Dr Vasek talks during that August 30, 2018 with the need to find additional revenue streams and someone mentions I-35.

Rough Transcript:

Vasic: We look at the budget from year to year and it's pretty flat. And then we have to say, okay, growth opportunities, and what are those growth opportunities and where do we start investing capital to be able to get more revenue. 

(?) Don't forget we also have that I-35 project, we have budgeted for that

Except this is a public hospital. that runs within the definition of a hospital district territory where the hospital district CANNOT OPERATE OUTSIDE THE DISTRICT, which is the county border.  What is a public hospital? 

Big or small, public hospitals are not for profit

As further proof of GRMC going for what looks like a money-making for profit venture, Reynolds discussed hiring another person to go manage all the clinics !!!!! 

Rough transcript

Vasick: Those are big numbers for us and so, i"m comfortable with knowing that if things aren't going well, we can shake hands and say, okay, we gotta go. .. I think from our previous discussions ... seems that your track record is good .... 

Parsons: I'm glad we're going to have oversight. If we hang out shingle out.. 

Hankins: That was a question that came back from Kevin Reed's office, suggestion that as soon as practical to employ someone who knows how to do oversight and will circulate among the facilities. 

From June 2015 -Ray Reynolds was already planning to break the law and go outside the district to create clinics in Acton and Decordova, not for the purpose of serving Somervell taxpayers,but to grow the base. 

Rough Transcript

Reynolds: Which does lead us into more of a discussion about broadening our base and getting a larger base for our patients in. Pecan is an opportunity for us, that's an area which is a growing area, there's significant growth that's going on in Pecan. And we'll take Thursday night about an opportunity to lease an additional spaces out there and grow our spaces but if we're going to do that, we're going to have to have more providers at Pecan. ... Recruit another primary care physician (for Pecan)

As a side note, Ray has said before that Pecan Family Medical Center is for Pecan residents. (Video at this link)

As an example, JPS/Tarrant County which has its own hospital district has ALL of its clinic within the territorial boundaries.

Seems to me the problem is that Glen Rose Medical Center wants to act like a private hospital instead of a district paying no taxes and being funded by continually raising taxes on the residents. Were they private, they could open up clinics all over the world and it would be their own lookout AND WITH THEIR OWN MONEY. 

But, ya know, it seems to me Glen Rose Medical Center is breaking the law with this deal with I-35 Capital. Of course I-35 Capital Physicians Group wants to do this and they aren't realy concerned nor did they probably research the legal aspects of Texas hospital districts. But the board should. The board should immedately vote to seek an attorney general opinion based on the issues above, ie, 1. Territorial boundaries 2. Can't have hospital districts operatin in another district 3. Can't be for profit. 4. Must have a public purpose for clinics. The board continually has voted down getting an AG opinion and I question why, unless it's that they know it's illegal and they want to continue to break the law. 


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