The Lower Florida Keys Hospital District

State Governing Entity over District Hospitals

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                Website:        http://www.lfkhdb.com/general-information

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Special Districts are governed generally pursuant to Chapter 189, Florida Statutes.

 

Public Purpose:  The Board of the District is authorized to establish, construct, lease, operate and maintain a hospital or hospital, medical facilities, and other health care related facilities and services as in its opinion shall be necessary for the use of the people of the District. The hospital, or hospitals, medical facilities, and other health care related facilities and services shall be established, constructed, leased, operated and maintained by the Board for the preservation of the public health, for the public good, and for the use of the public of the District, and maintenance of such hospital or hospitals, medical facilities, or other health care related facilities or services within the District is found and declared to be a public purpose and necessary for the preservation of the public health and welfare of the District and inhabitants thereof.

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STATUS: The Board of Commissioners have been responsive to OHkw's requests for information. OHkw appreciates their efforts. 

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"The District" has authority over our Public Hospital, Lower Keys Medical Center (the Stock Island Hospital). However, the District partnered with Kennedy Drive Investors, Ltd, the operator of de Poo Hospital, in May 1990, and created the Lower Florida Keys Health System, because the then Board of Commissioners believed that the Lower Florida Keys community could not support two (2) competing hospitals, which conclusion was previously voiced and memorialized by two (2) separate empaneled Grand Juries.  At that time, although by far the smaller hospital in bed size, de Poo Hospital was proprietary, had no obligation to treat indigent residents of the District, and had a much newer facility.  The District Hospital, conversely, was obligated to provide care to all residents of the District regardless of ability to pay; had an old physical plant that was in need of restoration; and was attempting to compete with the proprietary hospital by virtue of technology acquisitions, capital improvements, expanding services and the like.  Although District revenues were greater, and its charges were higher than that of de Poo Hospital, due to its indigent care obligation and old physical plant, the District did not show a positive bottom line, and found itself borrowing funds utilizing tax anticipation notes, despite the fact that it was taxing the residents of the District the maximum 2 mils allowed by its Enabling Legislation.  Further, the establishment of the one (1) hospital system allowed for the determination of sole community provider status, enabling a higher reimbursement rate for Medicare patients.

 

As a result of that transaction, the District enjoyed approximately six (6) profitable years, wherein the District did not have the need to assess taxes against the residents of the District, and was able to meet its indigent care obligation through its contractual purchase of health care services from Health System, paying for same based upon the “profits” generated from Health System.

 

Over the last three (3) years of the operation of Health System, however, due to a variety of circumstances, including but not limited to the proliferation of managed care arrangements resulting in arbitrarily reduced payments regardless of charges; increased competition from proprietary enterprises that siphoned off the paying outpatient from Health System; the increasing number of residents living within the District without the ability to pay for requisite health care; and the increased capital needs for physical plant and equipment, all contributed to a decline in Health System revenues, thereby resulting in the District’s necessity of re-imposing taxes upon the residents in order to generate sufficient revenues to meet its indigent care obligations.

 

Based upon all of the foregoing, and with the willingness of Kennedy Drive, the District undertook a process to ascertain the level of interest of potential lessees/operators of its facilities, to better afford the District the ability to provide its health care obligations to the residents of the District without the need to impose annual ad valorem taxation. 

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Since Health System, to become a singular, sole provider hospital, had to unite, each of the District and Kennedy Drive ceded to Health System their respective AHCA license, and the CON that awarded it beds.  Each of Kennedy Drive and the District entered into mirror image leases with Key West HMA, but for the financial terms. 

 

At the time of the negotiations, the District and Kennedy Drive were unable to configure, upon either the early termination or natural expiration of their respective simultaneous lease with Key West HMA, how to unwind the AHCA license and respective equipment, as it was known that services were to be consolidated in the different buildings (such as mental health all being moved to de Poo).  As a result, it was determined that the corporate entity known as Health System would continue to exist, legally albeit inoperatively, and that upon any cessation of the leases with Key West HMA, Health System would be reinstated unless and until either a new lease was entered into with a hospital operator or the District and Kennedy Drive reached an accord between themselves." - Lew Fishman, Attorney for the Lower Florida Keys Hospital District.