- November 20, 2024
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During a 12-minute interview, Lee Health CEO Dr. Lawrence Antonucci uses the word "compete" or iterations of the word 11 times. He is speaking about why the organization he oversees has decided to become a private nonprofit.
“The rationale is to give us more flexibility to be able to compete effectively and to maintain local control and to be able to fund our safety net mission,” Antonucci says.
Lee Health is converting to a private nonprofit from what has been its operating structure since 1968: an independent special public hospital district district created by the Florida legislature. Lee County commissioners authorized its transformation during an Oct. 28 meeting. The shift follows years of discussions between state legislators and the health system, according to Antonucci.
The shift will have little noticeable impact on the nearly $3 billion organization's patients or 16,000 employees, officials say. But it will have a big impact, Antonucci says, on how Lee Health grows long-term, potentially even adding $1 billion in revenue over the next decade.
“We began working with the legislature over the past five years to try to work out a way that we could become more of a regional presence,” Antonucci says.
One of the driving forces was a change in the law. In 2019, Florida removed what is known as the “Certificate of Need,” meaning state approval was no longer required for competitors to establish hospitals in the Sunshine State. More than a dozen other states had also lifted the restriction to increase competition and patient choice.
At that point, Antonucci says, Lee Health began looking at ways it could restructure.
“We recognized that there would be competitive forces coming to this region, and we wanted to make sure that we would remain community-focused and not become part of a bigger national for-profit chain, for instance," he says.
Being a private nonprofit will offer "more flexibility and allow us to compete effectively with competitors who will be coming to this community, who will have a regional presence," says Antonucci, who expects the change to take effect Nov. 1.
Among the drawbacks of being a special health care district was that Lee Health was restricted to having its facilities only in Lee County.
“One of the things we discovered is that 20% of our patients are coming to us from outside of Lee County,” Antonucci says. Lee Health operates four acute-care hospitals, two specialty hospitals and dozens of clinics within the county’s borders.
Shifting to a private nonprofit structure will enable Lee Health to offer services beyond Lee County lines, because it will no longer have to operate within the confines of a government-outlined district.
“This will allow us to improve access to those patients and put offices and satellites in our region,” Antonucci says in an Oct. 23 interview.
“Patients [will] be able to get care without having to travel as much," he adds. "It will also give us the flexibility to work with physicians to improve access by doing partnerships and joint ventures.”
As examples, Antonucci says, partnerships and joint ventures could include surgery centers or rehabilitation facilities. These partnerships would have the potential to bolster revenue for the organization, according to an independent analysis conducted by consulting firm Kaufman, Hall & Associates as part of the conversion process.
Lee Health — which had $2.89 billion in revenue in 2023 — may see a slight decrease in operating income during the first year of transitioning to a private nonprofit, the analysis shows. It could lose $59 to $107 million in operating revenue in year one, due to loss of some supplemental funding associated with being a special district, according to the analysis.
However, leadership has already done some legwork on the financial front.
“We've been able to mitigate those potential losses. Some of those losses [are] related to the supplemental governmental programs for the Medicaid program,” says Antonucci. “We've been able to work with the state to be able to mitigate those losses for the first year, and then after the second or third year, we believe that our opportunity to grow and to expand services will offset any potential losses.”
In fact, the health system’s projections show that operating as a private nonprofit will enable Lee Health to generate even more revenue, according to Antonucci.
“The financial analysis that we did actually shows that over a 10-year period of time, our revenue will be about $1 billion higher in this structure than it would have been in the governmental structure,” Antonucci says.
One of Lee Health’s goals is to continue to act as a "safety-net" provider for the region, caring for patients regardless of their ability to pay. Becoming a private nonprofit will help fulfill the mission, according to Antonucci.
"The challenge we have faced as a public entity...is that we don't have taxing authority," Antonucci says, noting other health districts, such as Sarasota Memorial, do receive tax dollars to fund their safety nets. "We've only been able to rely on on patient revenue and a small amount of philanthropy."
About 70% of Lee Health's business is Medicare and Medicaid patients, he says.
"That revenue doesn't cover the cost of care, so it's completely borne by the private insurers," Antonucci says. "If we were to be in a position where the amount of commercial business we have is is lost to competitors...it would be very hard for us to maintain our safety-net mission. We're not afraid to compete. We just want to be able to compete without our hands tied behind our backs."
When Lee Health transitions to a private nonprofit on Nov. 1, Antonucci says the change will not be noticeable to the many people in and around the facilities. That goes for the patients and the more than 16,000 employees who work for Lee Health — the largest employer in Lee County.
“The day-to-day operations aren't really going to change,” Antonucci says. “So from the patient's perspective, from the staff's perspective, they're really not going to see any difference in how they do their work."
The board of directors that was publicly elected will continue to serve through the transition and eventually be repopulated, most likely by a governance committee that will look for talent in the community and invite people to be on the board, Antonucci says, like many other nonprofit organizations.
"From a leadership and governance perspective, what will change is our ability to be more flexible," Antonucci says, "and to do things that we couldn't do before due to the restrictions placed on us as a governmental entity.”
