COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC MEETING BEFORE THE COMMITTEE ON RULES - - - Room 400, City Hall Philadelphia, Pennsylvania Wednesday, October 15, 1997 9:45 a.m. - - - BILL 970607 - An Ordinance declaring it is desirable for the health, safety and welfare of the people in the area served by Jefferson Health System and its member hospitals for The Hospitals and Higher Education Facilities Authority of Philadelphia to participate in financing capital projects. - - - PRESENT: JOHN F. STREET, Chair JAMES F. KENNEY, Vice-Chair COUNCILMAN BRIAN J. O'NEILL COUNCILWOMAN ANNA C. VERNA COUNCILMAN MICHAEL A. NUTTER COUNCILMAN FRANK DiCICCO - - - VINCENT VARALLO ASSOCIATES, INC. Registered Professional Reporters Eleven Penn Center Plaza, Suite 600 Philadelphia, PA 19103 (215) 561-2220 2 I N D E X BILL 970607 Donald A. Cramp, President, The Hospitals and Higher Education Facilities Authority of Philadelphia-------------------------------- 4 Michael J. Curran, Chief Financial Officer and Treasurer, Jefferson Health System---------- 6 Austin J. McGreal, Esq., General Counsel, The Hospitals and Higher Education Facilities Authority of Philadelphia------------------- 13 - - - Public Meeting--------------------------------- 15 - - - 3 BILL 970607 P R O C E E D I N G S
The Committee on Rules will now come to order to hear testimony on Bill No. 970607, which is an Ordinance declaring it is desirable for the health, safety, and welfare of the people in the area served by Jefferson Health System, and its member hospitals, for The Hospitals and Higher Education Facilities Authority of Philadelphia to participate with the System and the Hospitals on financing capital projects, consisting generally of the purchase of real estate comprising the Thomas Jefferson University Hospital and related facilities, the refinancing or restructuring of certain outstanding indebtedness of the Hospitals and the acquisition and construction of capital improvements to the facilities of the Hospitals. Will the members of the Hospital Authority please come forward. The record should indicate that the Rules Committee does have a quorum. And we would appreciate you identifying yourself for the record and proceeding. Good morning.
Thank you. 4 BILL 970607 Mr. Chairman and Committee members, my name is Donald Cramp. I serve as the Chief Executive Officer of the Philadelphia Hospitals and Higher Education Authority. I wish to make a brief introductory statement in support of the bill this morning before you. The Jefferson Health System is important to Philadelphia.
Surely. The Jefferson Health System is important to Philadelphia. Philadelphia is important to this growing and distinguished system. We especially appreciate your prompt scheduling of this hearing. We welcome the System back to Philadelphia. And the Hospital Authority warmly endorses this event. And we thank the Committee very much for the prompt scheduling.
A public hearing on behalf of Jefferson Health Systems is scheduled for 5 BILL 970607 Friday, October 24, 1997, at the Authority, in accordance with proper public notification in the media. As is customary, may I assure you that no financial or legal exposure will flow to the Hospitals Authority or to the City of Philadelphia for this financing. As you will note from the materials, we are co-venturing, as we have in the past with other authorities -- and in this case the Chester County Authority -- where several of the System's hospitals are owned. We have with us today in the audience a panel of experts to answer any questions you might have. Before turning the testimony over to Mr. Michael Curran, to my left, the most able Chief Financial Officer and Treasurer of the Jefferson Health System, may I close as I began, with my sincere appreciation on behalf of the Authority for your assistance to make this financing possible. Thank you.
Thank you for your testimony. 6 BILL 970607 Good morning, sir. Please identify yourself for the record and proceed.
My name is Mike Curran. I am Chief Financial Officer and Treasurer of the Jefferson Health System. And, again, I would like to also thank you very much for having us here today. It is an honor. I would also like to thank the Mayor's Office and the Mayor for addressing the issue of time, the President of City Council, City Council, the Rules Committee, and also the Treasurer's Office. We did have a very tight time frame to get this transaction done, and it has been a real privilege to work with people from the City to ensure that that occurs. We are very excited about our bond deal. It allows us to continue to serve the communities of Philadelphia and the surrounding areas. I want to stress our commitment to Philadelphia. We have been here for a long time. We expect to be here for a much longer period of 7 BILL 970607 time. And the proceeds from this bond deal will allow us to strengthen our position not only in Philadelphia, but also in its surrounding suburbs. In your package that you have received, I think there is a brief description of the transaction. We are looking for a bond deal not to exceed $350 million. Approximately 130 million of the dollars of that is anticipated being handled by the Authority from Philadelphia. Again, we have had many meetings with the Authority, a lengthy one yesterday, that went very well. And we do anticipate a successful completion of the bond deal by the end of this month. I would be happy to answer any questions anyone may have.
Could you give some testimony relative to the capital projects that are intended as a result of...
The capital projects, the largest piece of the bond deal, will be used for the actual acquisition of the physical properties 8 BILL 970607 that make up Thomas Jefferson University Hospital. The business moved over as a part of the Health System last March. We currently lease those facilities from Thomas Jefferson University. And, as a part of that lease, we have an option to buy those facilities. We would like to exercise that option to buy those facilities. And that's roughly a $130 million piece of the bond deal. We also have $50 million of debt that is currently on the books of TJUH, Thomas Jefferson University Hospital. We would like to refund that money, as well. Principally, that money comes from Methodist Hospital, and our merger of Methodist Hospital into TJUH. We would also like to borrow approximately $80 million for the Main Line Health Facilities, an additional $60 million for facilities at Thomas Jefferson University Hospital. That includes Methodist Hospital, as well.
What is your institution's vision of the continuing existence and vitality of Methodist Hospital in South 9 BILL 970607 Philadelphia? And what is your corporation's commitment to that?
Very strong commitment to Methodist Hospital. Many of our recent physician acquisitions, prominent physician acquisitions, have been in the South Philadelphia area. We will continue to make more acquisitions of physicians in that area to strengthen both Methodist Hospital and its referrals to Thomas Jefferson University Hospital. We are, I think, a predominant player in South Philadelphia. We like that role, and we intend on keeping that role.
Is there any change in scope of services at Methodist that's being planned or anticipated as a result?
Okay. Thank you. Any questions from members of the Committee? The Chair recognizes Councilman DiCicco. 10 BILL 970607 COUNCILMAN DiCICCO: Good morning. I apologize for getting here a little bit late. Concerning Methodist Hospital, do you foresee any reduction in the work force there?
Work force reductions are difficult across the entire system. We do not have any plans for any work force reduction at any of our facilities currently. We feel we are well positioned in the marketplace. I couldn't guarantee there would be no 12 work reductions, but there are none on the table as of now. COUNCILMAN DiCICCO: Have there been reductions at the Jefferson University Hospital?
Yes. We had reductions at Jefferson, I think it was, two years ago, two and a half years ago. It was a fairly significant reduction. We tried to take care of the majority of those reductions via attrition, or an early retirement program, or an early quit program. And we are dedicated to trying to place as many individuals as we can. Interestingly, currently we are in a 11 BILL 970607 growth stage at TJUH downtown. We are actually bringing some of those people back into our facilities. Again, with our ability to acquire some significant physician groups, we have strengthened the revenue flow into Thomas Jefferson University Hospital. COUNCILMAN DiCICCO: Is that as a result of some of the downsizing at the other institutions and your beginning to absorb some of those?
It is a difficult market out there. I think everybody is aware of that. We try to stress our commitment to the communities, whether that's at TJUH, whether it is at Methodist, whether it is at Ford Road campus, or any of the Main Line facilities. We feel that allows us to keep some physicians' groups that are equally committed to that community. And recently we have had some great successes in keeping top physicians in our organization; therefore, the revenue streams flow with those physicians and we're able to remain 12 BILL 970607 strong. We look for a very good year this year. Our budgets are strong, and we will do our best to keep committed to that. COUNCILMAN DiCICCO: Do you foresee any changes in the policy regarding community involvement, notably, one, the Mummer's Parade, and things of that nature? I mean, Methodist has really been a very crucial part of the community in many ways, in addition to providing health services. They have also been very active in the neighboring community. And Mummery is dear to my heart, but that's not the purpose for my asking. I just want to make sure that there is still going to be some sort of neighborhood connection there.
Absolutely. With all of our facilities, it was key for us, for instance, to keep the Methodist name on our facilities. We don't go around, you know, changing everybody's name of their hospitals once they are a part of the system.
Like some others in this area. Again, it is part of our commitment. We personally enjoy the Mummers. And we were somewhat hurt the time that it went down Market Street, rather than Broad. So I will put in a vote for keeping it on Broad.
We don't want to get into that. You don't know the hurt.
So, again, all of us like the Mummers Parade going by Methodist. And we make a big event, as you know, of it each year.
Thank you. Any other questions for Mr. Curran? Thank you very much for your testimony. Is there anyone else to testify here today on behalf of this bill? Mr. McGreal. MR. AUSTIN J. McGREAL: Austin McGreal, Counsel to the Authority. Just in the event that your Committee sees fit to recommend this, we would appreciate a suspension of the Rules.
Thank you very 14 BILL 970607 much. Anyone else in the room to testify on this bill? Seeing none, we will end our Public Hearing and convene a Public Meeting. (Public Hearing concluded.) - - - 15 COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC MEETING of the COMMITTEE ON RULES - - - Wednesday, October 15, 1997 - - - Public Meeting conducted by the Committee on Rules, held in Room 400, City Hall, Philadelphia, Pennsylvania, on the above date, to consider action on the following: BILL 970607 - - - PRESENT: COUNCILMAN JAMES F. KENNEY, Vice-Chair COUNCILMAN BRIAN J. O'NEILL COUNCILWOMAN ANNA C. VERNA COUNCILMAN MICHAEL A. NUTTER COUNCILMAN FRANK DiCICCO - - - 16 PUBLIC MEETING
The Chair recognizes Councilwoman Verna for a motion on Bill 4 No. 970607.
Thank you, Mr. Chairman. I move that Bill No. 970607 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. (Duly seconded.)
Move and seconded. All in favor say aye. There are none opposed. Bill No. 970607 will be reported out of this Committee with a favorable recommendation. In addition, a request will be made for Rules suspension to allow for first reading at our next Council session. Thank you very much for your attendance, and thank you very much for coming in this morning. 17 PUBLIC MEETING (Public Meeting adjourned at 10:00 a.m.) - - - 18 C E R T I F I C A T I O N I HEREBY CERTIFY that the foregoing proceedings of the Council of the City of Philadelphia of Wednesday, October 15, 1997, were reported fully and accurately by me, and that this is a correct transcript of same. RE: COMMITTEE ON RULES _____________________________________ DEBRA A. WHITEHEAD, RPR