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County Board hears Fremont Health partnership proposal

July 5, 2018

The Dodge County Board of Supervisors heard a proposal by representatives of Fremont Health regarding a strategic partnership with Nebraska Methodist Health Systems (NMHS) at its meeting on Tuesday.

After hearing a lengthy presentation regarding the details of the proposed strategic partnership, the County Board took no immediate action on the proposal, instead voting to continue the matter until its regularly scheduled meeting on July 18 to allow time to study requisite legal documents and to allow time for public comment.

On Monday, the Fremont Health Board of Trustees unanimously voted to approve the partnership proposal which, if passed by the County Board, would create a new organization known as Methodist Fremont Health that would be a subsidiary of NMHS.

“After careful evaluation of potential partners NMHS was selected as our preferred partner in February of this year,” Fremont Health Board Member Dr. Tom Waring told the County Board on Tuesday. “We did that because the Methodist proposal was so closely aligned with all of our key objectives including continuing the mission of improving community health, retaining significant local control in governance of the hospital and preserving jobs in Fremont.”

As part of the proposal, NMHS agreed to name the new organization Methodist Fremont Health for the foreseeable future and that organization would operate the Fremont Health Medical Center, Fremont Health Clinic, and Fremont Health Partners.

Fremont Health would be renamed as Fremont Community Health Resources and would remain in existence to manage net proceeds, manage the current pension plan and ensure that agreements with Methodist Fremont Health and NMHS are fulfilled.

At the County Board meeting on Tuesday, Supervisor James Vaughan asked the team from Fremont Health about why the proposal included an agreement that Fremont Health would lease land, buildings, etc. to the new subsidiary of NMHS – Methodist Fremont Health – for a 50-year lease term. As opposed to simply selling the land, buildings, etc.

The lease would include yearly rent of $3.3 million a year for 20 years, totaling $67 million.

“We actually considered a sale, because that is really what this is, and that is what Methodist wanted,” said Fremont Health attorney Bob Cohen of Kutak Rock, LLP. “Fremont Health has a pension plan, which none of the suitors wanted to take the liability for, so we needed a way to preserve the plan for the beneficiaries of that plan. Obviously that is a long term obligation and it won’t be satisfied for 20 plus years.”

Fremont Health President Pat Booth said, the current Fremont Health pension plan has obligations of approximately $75 million dollars with $65 million currently in investment accounts funding the plan.

“The funds that are in the pension plan and the lease payments coming in over the twenty years will be sufficient under adverse conditions in the stock market over time to fund that plan,” Cohen added.

Along with allowing Fremont Health to keep control of the pension plan, the partnership proposal also provides continued local control over the management of the hospital and other medical services.

“I think you can tell your patrons that what the county gets out of this is ongoing good healthcare for the citizens here in Dodge County,” said Dodge County Board attorney Mark Christensen of Cline Williams Wright Johnson & Oldfather, LLP. “They (NMHS) didn’t want the pension plan, so (Fremont Health) is going to lease instead of sell, but what you also get out of that is this ongoing relationship with a large element of local control.”

Some aspects of continued local control over the new proposed Methodist Fremont Health organization would include:

- Seven Fremont-area residents would sit on the Methodist Fremont Health board consisting of 9-12 members, and two of those seven members would have seats on the NMHS board.

- Fremont Community Health Resources would be governed by a three-member board that would be appointed by the Dodge County Board of Supervisors.

- Key services would continue to be provided for at least 10 years, with changes after that time needing local board approval.

- Fremont Health Foundation would remain in place, with all current gift agreements being honored including naming recognition.

Other key aspects of the proposed partnership include:

- Fremont Health will lease land, buildings, etc. to the new subsidiary of NMHS – Methodist Fremont Health – for a 50-year lease term. The lease will include yearly rent of $3.3 million a year for 20 years, totaling $67 million. Methodist Fremont Health would then have the option to purchase the land and buildings after 20 years of rent payments for $1 subject to the pension plan obligations having been satisfied prior to exercise of the purchase option.

- Methodist Fremont Health would also purchase substantially all of the assets of Fremont Health and assume all of the liabilities of Fremont Health other than its pension plan assets and liability. Fremont Health would retain $5 million in cash, working capital in excess of $13.5 million and cash and assets limited as to use in excess of $16 million. Methodist Fremont Health would assume all liabilities of Fremont Health including bank debt except for the pension plan liability.

- All employees in good standing would be offered employment at comparable wages and benefits, and medical staff privileges would be preserved.

- Methodist Fremont Health would invest at least $30 million in capital over the next ten years, with charity care guidelines remaining similar to the current Fremont Health guidelines.

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