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Business Structure Evaluation Process Updates

We're currently conducting an evaluation of Lee Health's business structure. Explore all available documents and dive deeper into the process by learning more here. 

Frequently Asked Questions

You asked. We answered. 

Keeping our community informed with accurate and up-to-date information is important to us. We’ve created this Frequently Asked Questions (FAQ) page to provide you with answers to the questions we’ve received from townhalls, in the community and through our Q&A email account. 

It is important to know that we are still too early in the evaluation process to answer questions about the exact benefits or limitations of conversion – we’ll know more once we receive the Evaluation Findings report sometime in February of 2024. 

Check back often as we will add questions and answers as we additional information. If you have questions or require further information, email us at [email protected], or simply click the link below to send us an email today.


EMAIL US YOUR QUESTIONS TODAY! 

Our History & Mission

In 2016, aligning with the 100th anniversary of the first hospital, Lee Memorial Health System began operating as Lee Health, celebrating our transformation from one hospital into a vibrant, full-service health system and our elevated focus on improving the health of our community. We made this change using a common legal provision called a “DBA,” which means “Doing Business As.” By taking this path, we were able to update our brand while leaving the legal structure of Lee Memorial Health System unchanged – saving time and resources.

A community-focused nonprofit means that Lee Health will continue to put the needs of our community first. Our mission of providing care to the residents of Lee County, regardless of their ability to pay, remains paramount for our health system. As a nonprofit, we would continue to reinvest any gains we make to improve the services and care for our patients and community.  

We would operate the same as most other nonprofit health systems you may be familiar with, such as Johns Hopkins, Mayo Clinic, Mount Sinai Medical Center in Miami and Tampa General Hospital. The principal difference would be that we would not be regulated by our state Enabling Act, which confines the definition of “community” to Lee County. 

No. One of the key reasons we are conducting this evaluation is to ensure we are well-positioned to continue fulfilling our community-centered safety-net mission of caring for Lee County residents regardless of their ability to pay, just as we always have.

At the Nov. 17, 2023 Board Meeting, the LHBOD took a unanimous vote affirming that our current Mission, Vision and Values would remain in place if conversion to a community-focused nonprofit structure is pursued and approved in the future.

Further, the Kaufman Hall report confirmed that “Regardless of whether a potential conversion is effectuated, the Lee Health Board and management maintain that the highest priority is protecting the system’s safety net mission” (p. 24).

Absolutely not. It is important to know that Lee Health and its leadership are not considering converting to a for-profit structure, and we have no interest in selling Lee Health to another company now or in the future. One of the primary goals of our structure evaluation is to determine if converting from a special district/government nonprofit structure to a community-focused nonprofit structure would strengthen Lee Health’s ability to remain nonprofit and independent for decades to come.  

Unlike nonprofit healthcare providers that operate for the sole purpose of caring for the communities in which they are located, for-profit healthcare providers generally exist to generate profits for their owners or shareholders, most of whom live in other places. Instead of reinvesting excess revenue back into improving care for the community, for-profit healthcare providers often take precious healthcare resources out of the communities they serve. Here are some other differences between nonprofit and for-profit healthcare providers:

Business Structure Nonprofit Health Systems
(Special District/Government & Community-Focused– Two Structures Under Evaluation)
For-Profit Health Systems & Healthcare Companies
(Competitors’ Structure – NOT Under Evaluation)
Ownership & Governance Owned by a governmental entity or community and governed by a board of directors who are responsible for fulfilling its nonprofit mission. Nonprofit systems are not owned by shareholders or private individuals. Owned by private owners/investors or shareholders. The governance structure is designed to make decisions that benefit the shareholders, with a focus on profitability.
Financial Objectives Primary goal is to provide healthcare services to the community, focusing on public service. Any excess revenue is reinvested into the health system to improve care for the community. Aim to generate profit for owners/shareholders. Profits can be distributed as dividends to shareholders and/or reinvested in the business for growth and operational efficiency
Tax Exempt
Status
Generally, exempt from federal and state income taxes, property taxes, and sales taxes due to their charitable mission. Commercial entities, subject to standard corporate taxes.
Community Benefit & Mission Often have a strong commitment to community health and may provide more in the way of charity care, community health programs, and other services that benefit public health. While they may also provide community benefits, their services and investments, by nature, are more likely to be driven by market demands and the potential for profitability.
Pricing & Services Offer services based on community needs, which can include less profitable services that are important for patient care and public health. More likely to prioritize more profitable services, which may influence the types of services they offer and their pricing strategies.

No. Although direct support from tax payors is common for public special district/government health systems like Lee Health, Lee Health does not receive direct tax support to fund its day-to-day operations. 

The Kaufman Hall assessment confirmed that Lee Health is “the only hospital district in Florida that does not financially burden its community” (p. 10).

Yes. After receiving the Kaufmann Hall Evaluation Findings report, which recommends proceeding with conversion evaluation, and weighing the pros and cons of such, Lee Health’s senior leadership team supports the conversion of the health system to a community-based structure. Leadership has concluded it is the right step to preserve our financial sustainability, independence and community-led structure long term, while ensuring our ability to be a trusted partner, empowering healthier lives through care and compassion.

The Process We Are Following

In 2023, the Florida Legislature made changes to the Lee Memorial Health System Enabling Act outlining the process that our Board of Directors must follow to evaluate Lee Health’s structure and determine if reverting back to a community-focused nonprofit structure would provide greater benefits to Lee County residents and our organization.

A lot has changed in how healthcare is delivered and paid for since Lee Health became a special district/government entity in 1968. With dramatic change sweeping across the healthcare landscape, Lee Health has a responsibility to explore opportunities and paths that will ensure we can continue meeting the growing needs of our community, including evaluating our current structure to determine if it is still the best option for Lee Health and our community.

  • Increased Competition and Constraints on Growth: In 2019, Florida repealed significant portions of its long-standing Certificate of Need (CON) program. The repeal made it easier for most health systems to expand their services. Subsequently, 65 new hospitals were announced to be built in Florida between 2020 and 2022. However, Lee Health has been excluded from this expansion because there are limitations to what geographic region we can operate in (Lee County and as defined in the Enabling Act).
  • Growing Financial and Operational Pressures: Health systems across the country are facing historic financial challenges. As expenses grow faster than revenue, many health systems are operating at a loss. While Lee Health has managed a gain from operations most years and has reinvested those funds back into services for our community, we are not immune to the rising costs and declining reimbursement. Lee Health must evaluate the best way to remain financially strong.

The evaluation we are conducting will allow us to determine whether returning to a community-focused nonprofit structure from our current special district/government structure would result in greater benefits for the residents of Lee County. Recent changes to Lee Health’s Enabling Act outline a process for Lee Health’s Board of Directors to engage an independent firm to conduct such an assessment.

Additionally, the Kaufman Hall report notes that “The increased pressure from the political landscape is diminishing certain benefits of operating as a governmental entity

  • Congress continues to propose changes or reductions to supplemental payment programs that allow safety net providers additional funding to serve those most in need.
  • Both the Florida House and Senate…advanced similar bills focused on increasing the liability limits for governmental agencies with sovereign immunity” (p.13).

Why Engage a Third-Party:The Enabling Legislation requires that we hire an independent firm following the Aug. 31 vote by Lee Health’s Board of Directors to evaluate the potential benefits to Lee County residents of a return to a community-focused nonprofit health system structure.

What’s Being Considered: The independent firm we’ve engaged, Kaufman Hall, is collecting relevant information to assess how transitioning to a community-focused nonprofit structure would impact community members, patients and employees, including but not limited to:

  • The viability of the safety-net system, continuance of safety-net services and any impacts on indigent care
  • Long-term economic outlook
  • Potential impact on medical provider recruitment
  • Bonding capability
  • Sovereign immunity
  • Student loan forgiveness for employees
  • Many others

The evaluation process also includes, analyzing the effect of such a decision and considering all implications to determine whether a change would benefit Lee County residents.

Yes. The Board of County Commissioners is under no obligation to negotiate or agree to proposed contractual terms required for Lee Health to convert from its current special district/government structure to a community-focused nonprofit structure.

In the same way that Lee Health’s Board of Directors is conducting an evaluation to determine whether a conversion is in the best interest of Lee County residents, the Board of County Commissioners will also be looking to determine what, if any, benefits conversion would offer to Lee County residents. The BOCC is responsible for ensuring that Lee County’s resources are put to their highest and best use and are used for the benefit of community residents.

At the Aug. 31 Board Meeting, the Board voted to begin an evaluation to determine the potential benefits to the residents of Lee County of converting Lee Health to a community-focused nonprofit health system. The evaluation process will be conducted by an independent evaluation firm, as required by the Enabling Legislation, and could take up to 180 days.

Significant work must be done to gather and analyze the data and other information that will help us determine the optimal structure for Lee Health. We must conduct appropriate due diligence and follow the process set forth by the Florida legislature.

While the decision to convert will not be voted on by Lee County residents, conversion would require formal votes by two publicly elected bodies, including Lee Health’s Board of Directors and the Lee County Board of County Commissioners (LBOCC). The Florida Legislature authorized Lee Health’s publicly elected Board of Directors to decide whether it is in the best interest of Lee County residents to transition Lee Health from a special district/government health system to a community-focused nonprofit entity, and the terms of a deal must be approved by LBOCC before conversion could occur.

To view a detailed timeline of our evaluation process, please click here.

About the Process: The independent evaluation is only the first step of a process that would require public meetings, two more votes by the Board of Directors and one vote by the Lee County Board of County Commissioners. Each step of the process presents an opportunity for the Board to reassess the pros and cons of converting back to a community-focused nonprofit health system and whether to proceed forward or stop the process.

As of Feb. 15, 2024, we have entered the Discernment & Decisions Phase where the Lee Health Board of Directors has until June 20, 2024, to thoroughly review the evaluation data, findings and community feedback in order to discern which structure is in the best interest of Lee County residents.

A majority of the LHBOD must vote to move forward with conversion before any negotiations can begin. As stated in the Kaufman Hall report, “If approved, within 120 days of the Board approval vote, Lee Health must negotiate and gain approval from the Lee County Board of County Commissioners to move forward with the conversion. Following and subject to the negotiation period, the conversion may occur” (p. 3).

We have established a single point of truth (SPOT) on our public website, www.LeeHealth.org/LookingAhead, to house all the latest conversion evaluation process updates and resources we have available. We’ve also included a detailed timeline and an evolving and growing list of answers to frequently asked questions (FAQ). Please check back regularly as new updates and FAQ are added often.

The Potential Impact of Conversion on Key Issues

Because both structures are nonprofit, by nature they are very similar. Both special district/government entities and community-focused nonprofit entities reinvest excess revenue from operations back into the services provided to the community.

  • Board Leadership: A Board of Directors would still govern Lee Health if it transitioned to a community-focused nonprofit health system, but the members would no longer be publicly elected.
  • Governance: Lee Health’s business practices are governed by the Enabling Legislation and Florida law applicable to public entities. The business practices of community-focused nonprofit entities are governed by Florida law applicable to not-for-profit corporations.

No. Patients will continue to receive the best care possible, and the day-to-day experience will not change. As we do today, Lee Health will continue to focus on continuous improvement – never ending its efforts to improve quality, safety and the experience we provide to patients.

The Kaufman Hall report further states that “With no geographic limitation, Lee Health may pursue additional strategic opportunities to support its existing patient base and further enhance its safety net mission” (p. 16).

It is important to know that Lee Health is strongly committed and will continue to be strongly committed to fulfilling our safety-net mission. In fact, one of the reasons we are evaluating structures is to ensure we can continue to fulfill our safety-net mission by caring for Lee County’s most vulnerable residents for generations to come.

As stated in the Kaufman Hall assessment, “The Lee Health Board and management intend to continue and enhance the safety net mission of the organization; the Enabling Act requires that any agreement entered into by the Lee Health Board and Lee County Board of County Commissioners include an enforceable commitment to continue programs and services in perpetuity” (14).

Given that both structures we are evaluating are nonprofit, there are many similarities. As a community-focused nonprofit entity, Lee Health and its assets would be:

  • ‘Owned’ by the local community, just as we are today.
  • Dedicated to the sole purpose of caring for our community, just as we are today.
  • Stewarded by a board of directors who are members of the community and who are responsible for overseeing the organization's operations and ensuring that Lee Health adheres to its nonprofit mission and goals, just as they are today.

Yes. Lee Health would have the option to locate healthcare services in communities beyond Lee County. Like any business, removing Lee Health’s current growth constraints would allow us to positively impact the health of more people in the region, many of whom have to travel long distances to access our services today.

While Lee Health is already an economic engine in Lee County and the region, additional regional growth opportunities could also open the door to even more economies of scale, new jobs and additional investment right here in Lee County.

The Kaufman Hall report confirms that “Removal of geographic restrictions allows Lee Health to expand services to surrounding counties, increase access to a broader population base, expand the service offering in Lee County, and meet patients and employees where they require care” (p. 15).

No. Lee Health would continue to be led/controlled locally, with its leadership and operations based in Lee County.

As stated in the Kaufman Hall report, “The existing board would likely serve as the initial board of the community-focused nonprofit corporation, ensuring Lee Health remains a locally governed organization” (p. 18).

No. Unlike many other special district/government health systems, we do not have taxing authority today and have never depended on local tax support to cover the cost of day-to-day operations. This would not change if Lee Health converts to a community-focused nonprofit structure.

Lee Health is currently a nonprofit health system and, if Lee Health converts, it will continue to be a nonprofit health system (meaning we will continue to reinvest any excess revenue back into improving care for our community) and therefore exempt from paying certain taxes, including sales tax on the goods we purchase, [most] property taxes and corporate income tax.

The assessment completed by Kaufman Hall contains a diligence review of Lee Health’s finances, including, but not limited to what impact conversion would have on supplemental payment programs, the FQHC model, sovereign immunity and any existing bonds or other debt. All potential financial implications and opportunities are being examined now by the Lee Health Board of Directors and Lee Health management as part of the Discernment and Decisions Phase.

With regard to existing bonds or any other debt attributed to Lee Health, it has been determined that there would essentially be no impact, as they can all be transferred to the new entity that would be established if conversion occurs.

The Kaufman Hall report states that “Lee Health assessed several options related to the outstanding debt, ultimately deciding the preferred option to largely preserve the existing debt structure by amending the obligated group and transferring the debt liability to a successor entity” (p. 57).

Absolutely not. There are no offers or overtures to buy Lee Health and our leadership is not considering a sale. While it is still too early to know for sure, we believe conversion would actually strengthen our ability to remain independent in the future.

No. While the conversion process requires the dissolution of our current special district/government entity (Lee Memorial Health System) and the creation of a new community-focused nonprofit entity, we will continue to be a locally guided and led health system just as we are today. Furthermore, there have been no offers or overtures from any outside companies or other health systems to acquire or operate Lee Health, and Lee Health has no interest in outsourcing management or selling Lee Health.

Team Member-Related Questions

Based on what we know today, we have no reason to believe that conversion would change the day-to-day experience of employees at Lee Health or anyone’s current role.

Furthermore, the report along with Lee Health management finds that “The employment status and benefit programs for Lee Health employees would be substantially similar to the existing programs today” (p. 17).

Based on what we know today, we have no reason to believe that a change in our structure would have any impact (positive or negative) on team member salaries or wages. We will continue to set salaries and wages just as we do now, which is based on the specialized skills necessary for each position and what is needed to be competitive in the marketplace.

As community-focused nonprofit health system, Lee Health would continue to operate a 403(b) plan, just as we do today.

The Kaufman Hall report confirms that “Employees would transition to a new employer entity, which will result in the transition of certain programs such as the health plan offering, 403(b) plan, and 457(b) plan. The transition of these plans would not significantly alter employee benefits” (p. 17).  

For those who participate in Lee Health’s 457(b) plan, the conversion would serve as a qualifying event to transition existing 457(b) plan funds to an alternative investment vehicle, of which there are many options available (e.g., 401k or IRA) that support similar objectives of tax-advantaged savings. No 457(b) plan funds will be at risk in the event of a conversion. Our goal would be to provide an alternative supplemental retirement benefit in place of the current 457(b) plan. As always, we would communicate any changes transparently and well in advance so plan participants can prepare accordingly.

As stated in the Kaufman Hall report, “The employment status and benefit programs for Lee Health employees would be substantially similar to the existing programs today. Employees would transition to a new employer entity, which will result in the transition of certain programs such as the health plan offering, 403(b) plan, and 457(b) plan. The transition of these plans would not significantly alter employee benefits” (p. 17). 

Because the Public Student Loan Forgiveness Program is offered to borrowers employed by nonprofit entities, Lee Health would remain a qualifying employer for this program and employees would remain eligible to participate in the programs that exist today.

Both special district/government nonprofit and community-focused nonprofit organizations may participate in the National Health Service Corps Loan Repayment Program. As a community-focused nonprofit, automatic eligibility to participate would end and Lee Health would be required to apply for approval to participate. There are a variety of ways an organization can be deemed eligible to become an NHSC-approved site. Our evaluation process will include a review of all the ways Lee Health could continue as an eligible NHSC-approved site.

Conversion is unlikely to impact the likelihood of unionization. This is because members of Lee Health’s leadership team understand the importance of listening to, valuing and being responsive to team member and clinician ideas, concerns or requests, as well as creating a safe and empowering environment. Lee Health has a long legacy of collaborative leadership, and this type of leadership is at the heart of our ExceptionalLee Promise, which is a promise that every member of our leadership team, team members and clinicians make to our patients, their families and each other.

No. Lee Health would continue to ensure the rights of its team members and clinicians are honored and protected, just as we do today.

Physician & Clinician-Related Questions

Recruitment for physicians is challenging throughout the industry. Lee Health’s recruitment efforts must remain strong whether Lee Health is a special district/government health system or community-focused nonprofit health system. Regardless of our structure, Lee Health must continue to offer compelling reasons people should join our team, including a caring and supportive culture and competitive compensation.

Additionally, the Kaufman Hall assessment finds that “A private nonprofit corporation structure may enhance Lee Health’s ability to recruit physicians due to increasing patient volumes from the removal of geographic restrictions and increased access to shared savings and profit-sharing models”(p. 46).

No. The medical staff bylaws in effect at the time of a conversion will remain the same and, therefore, the amendment process is not impacted by a conversion. Nothing in the law allows for a unilateral change in bylaws triggered by a conversion to a community-focused nonprofit health system.

While it is too early in the evaluation process to know for sure, conversion would have no direct impact (positive or negative) on compensation as the Anti-Kickback Statute, Stark Law and Fair Market Value standards will still apply.

The Kaufman Hall report finds that conversion and the removal of geographic restrictions could increase “access to shared savings and profit-sharing models using non-PPPS and value-based arrangements” and provide an “opportunity to employ physicians in a separate group practice entity, allowing potential profit-sharing arrangements and moderating operational and regulatory risks” (p. 48).

Contracts would need to be reviewed on a case-by-case basis to determine assignability of the non-compete clauses.

Yes. Sovereign immunity would no longer apply to Lee Health or our employees.

  • Current Special District/Government Structure: As a public health system, sovereign immunity provides Lee Health legal and financial protections for our organization and our employees. Sovereign immunity requires that any negligence lawsuits must be brought against Lee Health and not against any of its employees. For Lee Health, potential damages are limited to $200,000 per claim with an aggregate limit of $300,000.
  • If Lee Health Converts to a Community-focused Nonprofit Structure: Currently, Lee Health has a self-insured program combined with insurance protection for claims that exceed the sovereign immunity limits for covered losses (described above). If the Lee Health Board of Directors decides to pursue conversion to a community-focused nonprofit structure, we would modify and expand our insurance program to protect our organization and employees from personal financial liability in the same way they are protected today, without deduction or impact on employee compensation. We would also continue to provide tail coverage, just as we do today.
  • The Kaufman Hall report affirms that “Lee Health currently obtains insurance for added protection above sovereign immunity; Lee Health management anticipates increasing its current coverage to ensure employees and providers are protected similarly to the current status quo” (p. 50).

Board Leadership & Governance

Lee Health’s Board of Directors (LHBOD) is exploring the potential benefits of converting to a community-focused nonprofit structure and has engaged Kaufman Hall to develop an Evaluation Report with insight into the potential new structure, including future board governance.

To fully understand the implications of conversion, the LHBOD participated in workshops led by Holland & Knight, experts in health system governance and experience in structure conversions.

These workshops focused on three key decisions:

1. Lee Health’s current Mission, Vision and Values would remain the same for any potential successor nonprofit entity.  

2. The structure and initial membership of the potential future Board of Directors

3. The pay policy for members of the potential future Board of Directors. 

These issues were voted on in advance of the completion of the evaluation and well before any decisions could be made regarding conversion to help Kaufman Hall provide a clearer assessment – ensuring future decisions can be timely and well-informed. It is important to know that our Board of Directors has not decided to pursue conversion and is in no way endorsing or advocating for conversion at this time.

The following FAQs address these recent votes and how they might affect the future Board of Directors if conversion to a community-focused nonprofit structure is pursued and approved.

To be very clear, these votes are not an endorsement of conversion, as we currently lack the level of information needed to make such an important decision. Our in-depth structure evaluation is looking at every aspect of our organization, including board structure and compensation. The members of LHBOD are committed to transparency and ensuring the findings of the evaluation are as accurate and applicable as possible. With this in mind, they voted on a future board membership structure and compensation policy so that Kaufman Hall’s assessment could more closely reflect what would occur if conversion is pursued and approved in the future.

Our current Board of Directors voted to permit Directors serving at the time of the final vote on conversion to continue serving on the future Board of Directors should they so choose. This decision would ensure continuity and preserve institutional knowledge should the transition occur in the future. Although current Directors would be permitted to transition to the new board, they would be subject to term limits and no longer be publicly elected—ensuring there are new individuals added to the board over time versus an immediate and complete turnover.

The Kaufman Hall report notes this as well, “Initial Board composition: immediately post-conversion, the current Board will serve as the initial representation of the private nonprofit corporation, subject to later changes at the discretion of the Board” (p. 51).

Yes. Members of the inaugural Board of Directors of the nonprofit successor entity would be eligible to receive compensation in the same manner the LHBOD does today. Under Lee Health’s Enabling Act, which was approved by the Florida legislature in 1963, Directors receive an annual compensation of up to $10,000 for service, adjusted each year based on the Consumer Price Index. Currently, Directors are eligible to receive around $18,000 in annual compensation for their service. Members of the inaugural Board of Directors would have the option to refuse compensation if they so choose.

The Kaufman Hall report notes this as well, “Board compensation: the initial Board will be eligible to receive compensation in the same manner provided by the enabling act, subject to each Directors’ preference and later revisions” (p. 51).

Lee Health’s Board of Directors will continue to meet with experts to determine the best governance structure for a future Board of Directors should conversion to a community-focused nonprofit structure be pursued and approved.