COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC HEARING AND PUBLIC MEETING BEFORE COUNCIL COMMITTEE ON RULES - - - Room 400, City Hall Philadelphia, Pennsylvania Tuesday, February 23, 1999 2:20 p.m. - - - BILL 970744 - Adding a new Chapter 9-2100 to The Philadelphia Code entitled "Registration of Apparel Manufacturers and Contractors". . . Bill 990059 - Declaring it is desirable for the health, safety, and welfare of the people in the area served by Jefferson Health System, Inc. ("The System"), Frankford Health Care System,, Inc. ("FHCS"), the Frankford Hospital of Philadelphia ("Frankford Hospital") and the Delaware Valley Medical Center ("DVMC") for the Hospitals and Higher Education Facilities Authority of Philadelphia to participate. . . (Full text of both ordinances contained within body of transcript.) PRESENT: COUNCILWOMAN ANNA C. VERNA, Chair COUNCILMAN DAVID COHEN COUNCILMAN JAMES F. KENNEY COUNCILMAN MICHAEL A. NUTTER COUNCILMAN BRIAN J. O'NEILL COUNCILMAN W. THACHER LONGSTRETH - - - VINCENT VARALLO ASSOCIATES, INC. Registered Professional Reporters Eleven Penn Center, Suite 600 Philadelphia, PA 19103 (215) 561-2220 2 2/23/99 COMMITTEE ON RULES I N D E X Bill 990059 Donald Cramp, Chief Executive Officer . . . . 5 Hospitals and Higher Education Facilities Authority of Philadelphia Michael Curran, Chief Financial Officer . . . 7 Jefferson Health System. Austin McGreal, Esquire, General Counsel. . . 20 Hospitals and Higher Education Facilities Authority of Philadelphia 3 2/23/99 COMMITTEE ON RULES - 970744 P R O C E E D I N G S
Good afternoon. This is a public hearing of the Rules Committee. I would ask Mr. DeMarco to please read the title of Ordinance No. 970744.
Bill No. 970744, an ordinance adding a new Chapter 9-2100 to The Philadelphia Code entitled "Registration of Apparel Manufacturers and Contractors," providing for the registration and licensing of apparel manufacturers and contractors, imposing duties upon the Department of Licenses and Inspections for the inspection of apparel industry records and premises, requiring the posting of performance bonds by such manufacturers and contractors, and providing penalties for noncompliance; all under certain terms and conditions.
It is my understanding that we do not have witnesses to testify on this bill. Consequently, it will be held until the call of the Chair. Mr. DeMarco will please read the title of Ordinance No. 990059.
An ordinance declaring 4 2/23/99 COMMITTEE ON RULES - 990059 that it is desirable for the health, safety, and welfare of the people in the area served by Jefferson Health System, Inc. ("The System"), Frankford Health Care System,, Inc. ("FHCS"), the Frankford Hospital of Philadelphia ("Frankford Hospital") and the Delaware Valley Medical Center ("DVMC") for the Hospitals and Higher Education Facilities Authority of Philadelphia to participate with the System, FHCS, Frankford Hospital, and DVMC in a financing to provide for the acquisition by the System of the sole corporate membership interest in FHCS, for the acquisition by Frankford Hospital or its assignee of substantially all the assets of DVMC, and for constructing and equipping improvements to the facilities of DVMC. (Donald Cramp, Michael Curran, Austin McGreal come forward.)
Good afternoon. Please identify yourself for the record and proceed with your testimony.
Thank you, Madam Chairperson. May I take the privilege of a prestatement before my prepared statement? 5 2/23/99 COMMITTEE ON RULES - 990059
Thank you. It's certainly unrehearsed and it's coming from the heart rather than from the page. It seems particularly fitting, Madam Chairperson, that today marks our 25th year. It's almost to the day in 1974 and I believe in this very room that the Authority was constituted. And it's $4 billion later, nothing in tax monies, and a great deal of improvement, I believe in jobs created in Philadelphia that the wisdom of that decision back in 1974. And it's really testimony today that we're here with our friends from one of the premiere medical centers in the United States to show the service of the Authority and the City of Philadelphia raising these kinds of funds to help -- without tax revenues. And it is just a pleasure to be here with the Jefferson Medical Center, as a demonstration on the very day 22 years later. 23 And thank you. 24
I will say 25 happy anniversary to the Authority. And we 6 2/23/99 COMMITTEE ON RULES - 990059 certainly want to thank you for all the work that you've done.
Thank you. Thank you very much, Madam Chair. My name is Donald Cramp. I serve as the Chief Executive Officer of the Hospitals and Higher Education Facilities Authority of Philadelphia. I wish to make a brief introductory statement in support of the proposed bill before you this afternoon. On October 13, 1998, representatives from Jefferson Health System/Frankford Health Care System attended the Hospitals and Higher Education Facilities Authority of Philadelphia at our Board of Directors meeting seeking the Authority's assistance in this financing. The Jefferson Health System/Frankford Health Care System application was accepted and approved by the Authority Board. A Tax Equity and Fiscal Responsibility hearing on behalf of Jefferson Health System and Frankford Health Care System, Inc. Will be held in our board room in accordance with a published newspaper advertisement. 7 2/23/99 COMMITTEE ON RULES - 990059 Today we have the privilege together of assisting Jefferson Health System/Frankford Health Care System and the many people associated with these outstanding organizations. To close, may I, as always, express my appreciation to each member of the Rules Committee and Council on behalf of the Authority for scheduling this meeting and forwarding this financing. Thank you very much.
You're welcome. Good afternoon. Good afternoon. Please identify yourself for the record.
Good afternoon. I'm Mike Curran, Chief Financial Officer of the Jefferson Health System. And, Don, I'm glad to be a part of history today. I didn't quite realize when we were coming that it was going to be such a momentous occasion. But it is very nice to be back in front of City Council. This is my third visit here in about 18 months. The good news is, they were all 8 2/23/99 COMMITTEE ON RULES - 990059 scheduled visits in the sense when we met with you the first time, we told you a story about the Jefferson Health System and the fact that it was coming together with the Mainline Health System, and that as a part of that, we wanted to stay committed to the City; and, therefore, we brought you the TJUH refinancing. Subsequent to that, we came in about eight months ago, I guess, with the Einstein piece and looked for a refunding on the Einstein piece of our debt. This is the third scheduled meeting, I guess, where we're in to talk about the Frankford refinancing. And the majority of the 240 million that we're talking about today actually relates to refunding the existing debt that comes with Frankford Hospital. There is a piece of the transaction, roughly $40 million, that does relate to the Delaware Valley piece that was mentioned in the ordinance. It is, again, our privilege to be here. We have found working with the Authority over the last couple of years to be a very satisfactory relationship in the sense that these 9 2/23/99 COMMITTEE ON RULES - 990059 are difficult transactions to go through, and Don and his staff have just done a fantastic job for us. And again, it is a real honor to be here with him on his 25th anniversary. As I mentioned, it's a $140 million transaction. There is significant savings that will go to Frankford Hospital because of this refinancing. Right now, depending on current market conditions, that could be as much as $2.5 million in savings relating to the re-funding. These initiatives, these re-fundings that are made available through this Authority really makes it easier for us to perform our health care mission mechanism in light of the very difficult reimbursement mechanisms that are out there today. So, again, the $2.5 million savings goes a long way for us to accomplish the things that we feel are so mission-critical to our communities. We are a system that is indeed committed to our communities. The movement up into Bucks County is a complete reaction to some of the people who are now living in Bucks County 10 2/23/99 COMMITTEE ON RULES - 990059 who have a strong desire to be a part of the Frankford Health Care System, and that is the explanation for our movement up into Delaware Valley and why that is included with Frankford in this offering. I'll be happy to answer any questions relating to the transaction.
Mr. Curran, could you explain what the relationship is now between Frankford and Jefferson? Is it wholly-owned, are they merged in but are retaining their identity? I know there's different ways you can affiliate and there's all kinds of levels of joinder that goes on up to pure merging. How would you describe this one?
Well, there's always a tough questions when there's so many lawyers in the room, but let me try to give you the layperson's explanation. Frankford joined basically with TJUH Mainline Health and --
Thomas Jefferson University Hospital, I apologize. It was Frankford, Thomas Jefferson University Hospital, Einstein, and Mainline Health and now Magee that all came together in essence.
Mainline Health is Lankenau, Bryn Mawr, Paoli and Bryn Mawr Rehab. Mainline Health was a health-care system that was formed approximately years ago, and it got 13 together with Thomas Jefferson University Hospital 14 to form the Jefferson Health System two and a half 15 years ago. Since then, we've added three more founding members. Einstein came in as a founding member, Frankford came in as founding member, and Magee came in as a founding member. Three of the four parties come in as equals. Each brings seven members to the Board. Magee, because of its size, brought two members to the Board. They share in the ownership, if you can use the word "ownership," but in the governance and in the control over the Jefferson Health System. 12 2/23/99 COMMITTEE ON RULES - 990059 We are a system that is very member-driven; we're there for our members. There's no big corporate staff. I'm probably one of probably people, max, that are actually 6 system people, and the members basically govern 7 the direction of the system. 8
So the people that 9 were running Frankford prior to this are still 10 running Frankford on a day-to-day basis. 11
And the things 14 they do with the community are still controlled 15 out of that. 16
Yes, that is correct. We 17 basically look at the system level to do strategic 18 planning, to do things like group debt where 19 there's economies to be made; group purchasing, 20 where, again, our size can give us economies; 21 budget planning; business planning. The actual 22 day-to-day operations still stay with our member hospitals. The system does not run day-to-day operations with the hospitals.
But there's an 13 2/23/99 COMMITTEE ON RULES - 990059 easier relationship, say, in Frankford being a community hospital and you being a teaching hospital. And if I've got something fairly serious wrong with me and I get into Frankford, it's a lot easier for them to connect with Jefferson or one of the others hospitals within the system than if they were just out there by themselves.
That's how it's supposed to work. We're supposed to put the best clinical people together from both the academic world and the community world to make sure that the appropriate level of care is available to everybody within our communities. And those dialogs exist between all members of the medical community to make sure that it exists. And we've had many good examples of that happening. We've also taken some programs that may have been considered classic academic programs 14 2/23/99 COMMITTEE ON RULES - 990059 and, because of this relationship, been able to move that out further into the communities, whether it's some of the advancements in heart programs at Einstein or if we're talking about neurosciences being performed at Frankford. So there's been a lot of positives that have already come out of the creation of the Health System.
And do the individual hospitals or systems retain their own boards of directors?
Yes. The member boards still stay intact. There are reserve powers that exist at the system level to make sure that indeed we function as a system. But the local boards do maintain, again, the day-to-day control over their facility and all the community relationships.
The nuns established that system where -- they take control ultimately. Thank you.
Mr. Curran, is there any reason why you did not mention 15 2/23/99 COMMITTEE ON RULES - 990059 Methodist Hospital?
No. Methodist Hospital is now considered a part of the Thomas Jefferson University Hospital System. They are actually a division very similar to that Mainline has Paoli, Lankenau and Bryn Mawr. As you know, Methodist is a very, very important part of our health system. It our South Philadelphia connection, and we've been proud of many of the things we've been able to do with Methodist over the time they've associated with TJUH and the Jefferson Health System.
Thank you. The Chair recognizes Councilman Cohen.
I understand the health systems with respect to, say, group purchasing; I'm not sure I understand it with respect to group liability. What is the liability, say, on this bond issue? Who's liable? Is Einstein, which is a part of the Health System, liable? How does that work, you know with all of the different groups?
The liability with the 16 2/23/99 COMMITTEE ON RULES - 990059 debt that we're talking about is a Jefferson Health System debt. Now, behind that debt is a debt allocation agreement that exists that basically takes, in this case, the 140 million and makes that a primary obligation of Frankford. However, all of the members are ultimately responsible for that piece of debt. So it is a pure system debt that is backed up by documents that exist between the system and its members, that they will take care of their own debt and, if necessary, take care of the debt of their fellow members.
It's like when an individual person goes to buy a car, and the seller of the cars check with the bank and they say, Well, the credit isn't good, get somebody else whose credit is better to co-sign. Like an hour I spent last night with a constituent who wanted to know, My son wants to buy a car but he needs a co-signer or he has to pay 20 percent more on the interest rate. And he tells me it doesn't mean anything; I just sign my name. And I had to explain, Well, it's just like you're buying the car to the father. You 17 2/23/99 COMMITTEE ON RULES - 990059 know, if the son doesn't pay, then the father pays. Is that what it is here? That if for any reason there's a failure to pay by the Health System, then each of the groups that make up the Health System would be individually liable? Have each of them passed on this or is that a general agreement so that they don't have to get involved each time in every bond issue?
Actually, we go back to each of our members each time there is a change to the bond documents to again reaffirm their commitment to again standing behind not only their own bonds but the bonds of their fellow members. And we have been through the Frankford piece of this with our members, and we're now going back with the Delaware Valley piece to again reaffirm the fact that they're committed to this. I had my TJUH, Thomas Jefferson University Hospital meeting on Monday. I will hit Einstein and Mainline Health on Thursday.
So does that mean the that the members of the Health System will not be making any individual applications for bond issues but that there will be bond issues on 18 2/23/99 COMMITTEE ON RULES - 990059 behalf of the Health System?
That is the case with those members. We have not brought Magee into the group debt. When Magee was becoming a part of the Health System, we actually did not have time to prepare all the necessary paperwork for them to come into group debt. Whether that happens at some later point in time has not yet been determined, but Magee could actually come in with a separate piece of debt.
This probably goes to Mr. Cramp: Are these bonds insured by one of the insurance companies or are they being issued on the credit of the members of the Health System?
The analogy you were making about a purchase of a car, first, if I may comment, with a system of the stature of Jefferson, with no reflection on Frankford as a free-standing, but I think, as you point out, it probably will be a little stronger protection by having something that is stronger than the 19 2/23/99 COMMITTEE ON RULES - 990059 present. I want to be careful not to reflect on Frankford, but you make a good point, that, obviously, this is a strengthened debt. Secondly, and there are professionals in the room that can make comment, more technical if you wish, but there will be a letter of credit protection on the initial offering of this debt, which is what we call "an enhancement." In other words, your protection for the bondholder, if the whole sequence of events ever took place -- and that is what Mr. Curran's already explained -- if that safety net did not take place, then we still have another safety net. And it affords the opportunity to make my usual statement that I do, Madam Chairperson, and that is that the documents also have provision that should anything go wrong, the liability does not flow up to the Authority and does not flow to the City. We have a China wall legally built in.
Thank you. Are there any other questions or comments from members of committee? 20 2/23/99 COMMITTEE ON RULES - 990059 The Chair recognizes Councilman O'Neill.
Mr. Cramp, did you request a rules suspension? I'm sorry, I thought you were all finished.
Mrs. Chairperson, my name's Austin McGreal, and I'm General Counsel to the Authority. And if your committee sees fit to approve this -- hopefully, they will -- I would request a suspension of the rules.
We will certainly consider that, Mr. McGreal. Thank you.
Thank you. I also want to say that when Mr. Cramp said it was years ago, I couldn't remember 17 that. 18 Thank you. 19
Do we have 20 anyone else to testify on this bill? 21
Thank you. 23 This will conclude the public hearing. 24 - - - 25 21 2/23/99 RULES COMMITTEE - Public Meeting
We will now go into our public meeting. The Chair recognizes Councilman Kenney.
Madam Chair, I move that Bill No. 990059 be reported out of this committee favorably and a request made for a rules suspension to allow for first reading at our next Council session. (Duly seconded.)
It has been moved and seconded that Bill No. 990059 be reported out of committee with a favorable recommendation; also a recommendation that the rules of Council be suspended so as to permit first reading at our next session of Council. All in favor will signify by saying aye. Those opposed? The ayes have it, the motion is carried. This concludes our public meeting. Thank you very much.
Thank you very much for 22 2/23/99 RULES COMMITTEE - Public Meeting your time.
Thank you. (Adjourned at 2:38 p.m.) - - - 23 C E R T I F I C A T E I HEREBY CERTIFY that the foregoing proceedings of the Council of the City of Philadelphia of Tuesday, February 23, 1999, were reported fully and accurately by me, and that this is a correct transcript of same. RE: COUNCIL COMMITTEE ON RULES BILL NO. 990059 __________________________________, JOSEPHINE CARDILLO, Registered Professional Reporter