St. Luke’s Health System will transfer ownership of its hospitals in McCall and Mountain Home back to their taxing districts, to settle claims from the Idaho Attorney General’s office that it was unconstitutional for St. Luke’s to collect tax revenues from those districts.
The Statesman in January 2015 reported that St. Luke’s had acquired hospitals in 2010 and 2013 from special taxing districts in McCall and Elmore County, under agreements that the districts would give St. Luke’s their tax revenues to help fund hospital operations. The Boise-based health system was then poised to take over a third hospital from a taxing district, in Weiser.
The combined revenue of those taxing districts was more than $3 million a year.
In all three cases, taxpayers had owned the hospitals and hired St. Luke’s to manage them for years. But when St. Luke’s bought the hospitals, they no longer were owned by taxpayers. Under the purchase agreements, districts retained some oversight as well as the ability to buy back the hospitals, and St. Luke’s agreed to maintain and improve the hospitals.
Idaho Attorney General Lawrence Wasden’s office notified St. Luke’s in January 2015 that it believed the agreements were “unlawful and unconstitutional.” The office investigated the transactions, then announced Tuesday it had ended its investigation.
St. Luke’s has agreed to instead lease the hospitals and pay operating costs. The taxing districts can use their tax dollars to “fulfill funding requests” from St. Luke’s, but the districts will own the property. The districts also will control services offered at, and changes made to, the hospitals. St. Luke’s will have the option to buy the hospitals in the future.
St. Luke’s chief attorney Christine Neuhoff said the new agreements went into effect in the past week.
“Patients shouldn’t see a change ... in terms of the health care they receive,” Neuhoff said in an interview Tuesday.
The initial lease is for 25 years, then St. Luke’s and the districts will have the option for 10-year renewals, she said.
“The Idaho Constitution prohibits a government entity like a hospital district from donating assets or transmitting tax revenues to help support the operations of a private entity,” said Idaho Attorney General Lawrence Wasden in a news release announcing the settlement. “That’s exactly what St. Luke’s agreements with these hospital districts did.”
Under the deals, the districts would have lost their rights to repurchase the hospitals back from St. Luke’s if they declined to transfer their tax dollars to the health system, Wasden said.
The settlement applies only to McCall Memorial Hospital and Elmore Medical Center in Mountain Home. However, it is the same business structure that St. Luke’s will use if or when it closes on the Weiser hospital acquisition, Neuhoff said.
Wasden said the agreements raised several questions under Idaho law:
▪ The legality of giving public assets to private entities.
▪ Tax revenues benefiting private entities.
▪ Whether the districts were incurring financial liabilities that exceeded their annual revenues.
▪ Whether the districts were acting within and pursuant to their grants of authority.