Originally created 01/12/00

MCG Hospital affiliation OK'd

ATLANTA -- Medical College of Georgia Hospital and Clinics moved a giant step closer to independence Tuesday with approval of its affiliation agreement with the school and the University System of Georgia board of regents.

Months of negotiations produced a 61-page contract for transferring 3,500 workers and staff, equipment and debts to nearly independent MCG Health Inc. Supporters of spinning off the institution say it needs more flexibility to contract with nonfaculty doctors and outside hospitals to stop losing money.

"From where we started, there has been considerable give and take on both sides," said regent Tom Allgood of Augusta, chairman of both MCG health's board and the regents' Teaching Hospitals Committee.

In separate meetings, the hospital board and the committee approved the agreement without objection. But some major details remain to be worked out.

"I am still troubled by what effect, if any, the 10-year lease might have on our ability to do business," Mr. Allgood said.

The Georgia Attorney General's Office advised regents that leasing the hospital buildings to MCG Health for longer than 10 years could present legal problems and suggested including renewal options instead of a 99-year commitment. But Mr. Allgood worries that bankers and investors would hesitate to make large loans to the independent hospital for so short a period.

Existing bonds, issued by the state for past hospital expansions, also present questions. Bond attorneys hired by the state are investigating whether investors who hold those bonds will continue to avoid income tax on their interest after the transfer, and they are weighing how much of the debt MCG Health should absorb. Bonds issued by the state pay tax-exempt interest.

Another concern of Mr. Allgood's is the possible cost of acquiring private liability insurance, which is necessary because the state is withdrawing its protection as a condition of the hospital's independence. Three Augusta insurance agencies will prepare bids during the next 90 days.

Freedom from regents' personnel rules was one of the goals of giving the hospital independence. Although all of the hospital's employees will be transferred to MCG Health's payroll July 1, as many as 650 could lose their jobs soon afterward because of cost cutting.

But independence has complicated the matter of benefits because workers will no longer be University System employees. The status of retirement benefits has not been determined for workers who are fully entitled to draw from the Teachers Retirement System.

The agreement must be approved by the full board of regents at today's meeting. Part of the contract includes settling the remaining issues by April through five subagreements.

"It's like trying to separate Siamese twins," said Lindsay Desrochers, the university system's senior vice chancellor for capital resources.

Reach Walter Jones at (404) 589-8424.


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