By Paul Leighton
The ongoing negotiations about the future of Northeast Health System, including its Addison Gilbert and Beverly hospitals, could have a lucrative side effect for the communities where it does business.
But Gloucester Mayor Carolyn Kirk and leaders in Beverly and Danvers say that's not at the top of their priority list when it comes to their concerns for the hospitals' futures.
An acquisition by one of the two for-profit companies bidding to buy Northeast Health would put the organization's vast property holdings on the tax rolls for the first time and result in hundreds of thousands of dollars in revenue for Gloucester, as well as for Beverly and Danvers.
In Gloucester, where Northeast operates Addison-Gilbert Hospital, the city could reap about $225,000 per year in taxes on the company's property, assessed at $18.2 million.
Yet Kirk said over the weekend she's neither expecting that, nor looking to it in terms of endorsing any such sale.
"I believe I speak for many in saying the order of priorities for the city in the outcome of NHS' merger or acquisition discussions is, first, the continuation of hospital and ER services, job retention, and then taxes," Kirk said.
The future of Addison Gilbert amid Northeast's partnering talks with four other health care companies has drawn special attention in Gloucester and Rockport.
The Gloucester City Council has gone on record backing a call to retain the state-mandated core services at Addison Gilbert that are required to provide emergency care; similarly, Rockport voters approved a similar resolution at Saturday's Rockport Annual Town Meeting.
For Northeast's property in Beverly, which is assessed at $42 million and where it operates Beverly Hospital, that city could reap about $800,000 per year in taxes under a sale to a for-profit firm, while Danvers would receive more than $530,000 per year for Beverly Hospital at Danvers.
Yet, Beverly Mayor Bill Scanlon and Danvers Town Manager Wayne Marquis, while saying they would welcome new tax revenue, also stopped short of endorsing the prospect of a for-profit company taking over Northeast Health.
Scanlon said he is concerned that hospital costs would rise under a for-profit owner.
"The reason not-for-profits are not-for-profits is to hold costs down," Scanlon said. "Would I like to have another 800,000 bucks? You don't need to ask. But in a way I don't, because it would raise costs, and already health-care costs are too high."
Scanlon said the $800,000 in annual potential property taxes that would be paid by a for-profit Beverly Hospital is an estimation. The hospital has not challenged its $42 million assessment because it does not pay property taxes now; that figure could be lowered if a new owner sought an abatement.
But any taxes paid by the hospital would provide a significant boost for the city, which, like Gloucester and most communities, is struggling to deal with rising employee health care and pension costs. At $800,000, Beverly Hospital would become the city's fourth-largest taxpayer behind the Cummings Center, Massachusetts Electric and Axcelis Technology.
Marquis said Danvers has benefited from the sale of the former Hunt Hospital to a for-profit company, which pays the town more than $100,000 per year in property taxes. But he also said Beverly Hospital's nonprofit status has been an "important factor" in its ability to contribute in the community.
"I don't have a strong bias one way or the other," Marquis said.
Northeast Health System CEO Kenneth Hanover said the organization received proposals two weeks ago from Steward Health Care System and Vanguard Health Systems, both for-profit companies, as well as from non-profits Lahey Clinic and Beth Israel Deaconess.
An advisory committee will meet in mid-April to evaluate the proposals and make a recommendation to the board of directors. Hanover said a final decision could come by the end of June.
Steward Health Care System is the company formed last year to run six Caritas Christi hospitals in Massachusetts. Vanguard Health Systems is a Nashville-based company that owns 26 hospitals in five states, including two in Massachusetts — MetroWest Medical Center in Framingham and St. Vincent Hospital in Worcester.
Hanover said the biggest difference between for-profit and not-for-profit hospital organizations is how they use their net operating income.
Not-for-profits reinvest all of their net operating income back into the hospital in the form of new facilities, technology, programs and services, he said. For-profits reinvest in their hospitals, too, but they must also generate a profit for their shareholders.
"For-profit hospital organizations are primarily responsible to their shareholder/owners, and their decision-making process is primarily oriented to the interests of their shareholders," Hanover said. "Not-for-profit hospitals base their decisions solely on their community-wide interests."
When it comes to patient care and service, Hanover said research suggests there is little difference between for-profit and not-for-profit hospitals.
"They operate in a safe and dependable manner," he said.
The for-profit vs. not-for-profit issue is an important consideration for Northeast Health officials in determining which organization to choose, Hanover said, but it's not the most important factor.
"If it was, then we wouldn't be considering for-profit options," he said.
Staff writer Paul Leighton can be reached at 978-338-2675 or by e-mail at email@example.com.