ECHD, Landgraf talk upcoming legislative year

The Ector County Hospital District board of directors had the opportunity to ask questions and air concerns with local representative this week.

Rep. Brooks Landgraf, R-Odessa, told the board the Texas Legislature will reconvene in January 2019 and when he heads back to the capital he wants to be prepared to represent interests their interests as a board and as a hospital district.

Several of the issues Landgraf and the board touched on included property tax reforms, Medicaid reimbursement rates, the 1115 Waiver, cost of prescription drugs, the opioid epidemic and trauma-related funding.

Landgraf said he plans to continue to push for support for a Medicaid block grant program and the renewal of the 1115 Waiver, as he knows Medical Center Health System makes good use of it and has had a lot of success with it. He also said Health and Human Services is taking a look at what other states are doing in terms of cutting costs for prescription medications, including purchasing the medicines from other countries.

As far as the opioid epidemic goes, Landgraf said there is a special committee assigned to address the issues as it reaches Texas and will present recommendations during the next session.

President and CEO of MCHS Rick Napper said trauma funding is under attack and with MCHS taking most of the trauma patients in the area, paired with being in a location where there’s a high level of trauma due to the industry in the area, the hospital could be looking at a potential $8.5 million hit with funding cuts.

“ … I think we could probably make a pretty good argument that Medical Center Health System would be disproportionally impacted more than any other hospital in the state, at least on a per capita basis, by those cuts,” Landgraf said, adding that the issue would be high up on his list.


With the estimated market rent expected to increase two to three percent, the ECHD board also took a look Tuesday at Fair Market Rent values on some of the properties they lease out.

“This is something we do periodically and it’s an assessment of the value of all of our lease properties, particularly properties that we lease to physicians,” Matt Collins, vice president of support services at Medical Center Health System, told the board Tuesday. “We do this in order to remain compliant with our rental values and also to keep things more equitable on the campus.”

Appraisals were done on 18 properties — 14 medical office buildings and four retail facilities — located in Odessa and owned by the district.

“The reason that it’s important is every renewal or new lease that the hospital district engages in with a physician, this will be the basis of the pricing of that lease,” Collins said.

Napper said the assessment is not something that has traditionally gone to the board to be approved and felt it was important for the entire board to know what the Fair Market Value was to help legitimize the pricing.

“So when you do the leases and rentals with the physicians, probably the most important thing for the board to be comfortable with is that there is a third party independent group that can say to you, as a board, what you are renting that property for is fair market,” Napper said.

The CEO also mentioned several years ago in the healthcare industry there were boards renting properties to physicians to attract them to work at their facility and the prices were way below Fair Market Value.

District 3 Board Member Richard Herrera said he’d seen similar information before and Board President Mary Thompson said they have talked about Fair Market Value in the past, but they’ve never done anything like what was presented Tuesday.

“You get it in each physician contract, you get some information on it, but not as a whole and that’s what I felt was important, that you see it as a whole because this will be what determines those rental lease values for the next three years,” Napper said.

The appraisal assessment, which was approved unanimously, was done by Advanced Valuation System. Collins said the company was selected based on price, their experience in West Texas and the quality of their proposal.


The board also approved an item that would allow them to pledge assets to replace a loan guarantee. MCHS Chief Financial Officer Robert Abernethy told the board Tuesday in 2010 the hospital district partnered with Midland Memorial Hospital and Hendrick Health System in Abilene to start Texas Healthcare Linen to provide linen services for all three hospitals. Being part of that, both Hendrick and ECHD put up a guarantee for the loan. Hendrick put up one-third and ECHD put up one-third, he said.

“I will tell you that laundry has done very well — expanded. We have a number of clients including now Covenant Hospital of Lubbock, Odessa Regional, a number of smaller hospitals in the area so we’re actually seeing return on investment with that,” Abernethy said.

Because of the success of the program, First Financial in Abilene came up with two options to move forward.

Abernethy said option one would be to basically lower the guarantee and then phase it out. Option two, which he recommended and the board unanimously approved, was for a total of $3 million cash or a liquid asset pledge ($2 million from Hendrick and $1 million from ECHD). The pledge of assets would expire Sept. 19, 2019, and there would be no more pledging or guarantee of the loan.

Texas Healthcare Linen would basically be a standalone facility and ECHD would be one-third owners along with Hendrick and Midland Memorial, Abernethy said.

District 4 Board Member David Dunn asked if Midland Memorial Hospital would be shelling any money out, but Abernethy said they determined they could legally not do that as a district. Abernethy said ECHD can because they created what is called West Texas Healthcare Services, which is a wholly-owned subsidiary of ECHD.


The board took the following action:

  • Unanimously approved three updated agreements for the Family Health Clinic in preparation for a site visit later this month.
  • Heard an 1115 Waiver report update.
  • Tabled a quarterly marketing report.
  • Rejected an interlocal agreement/request to sell property due to lack of information presented and approved a motion to discuss the item again during the next regular meeting.