An Incomplete Deal for Westmoreland Manor

Too often the intricacies of a complicated transaction fail to be reported by the media. Such is the case with the recent decision to award a management contract for Westmoreland Manor. I was forced to vote against the contract because it was incomplete, limited our ability to negotiate management incentives and left money on the table.

Westmoreland Manor is an award-winning, nationally-recognized public geriatric hospital that is home to more than 400 residents, employs more than 500 workers and costs more than $44 million annually to operate. Its mission is critical to the well-being of our seniors and the quality of life in the county. It has served generations of county residents and their loved ones. For all those reasons, the hasty decision to award a management contract without including all the details was the wrong way to go.

The county has not put a dollar of local property taxes into the Manor for more than a generation. We have been able to run it using insurance reimbursements and other outside sources. This is the good news. The bad news is that the Manor has been running an operating deficit. And while we have been able to offset that deficit using Manor financial reserves, there is no disputing that we cannot do this long-term without eventually hitting county dollars. We need to find ways to close that gap and get Westmoreland Manor closer to break-even. It’s never been my intent to profit from the facility (it is a non-profit after all) and certainly not to sell it; only to keep it self-sufficient to protect county taxpayers.

The major reason that the Manor is running a deficit is the collection of unpaid debts by residents and their families. Primarily this is due to qualifying residents for Medical Assistance in a timely way, or by accessing the assets of a family or an estate once those residents’ bills begin compiling and for whatever reason that person has been denied Medical Assistance. As a public nursing home it is the mission of the Manor to be the last line for seniors needing skilled nursing care. It is not, however, a means for families or the estates of residents to avoid their financial obligations.

And therein is the crux of my objections to the new management contract.

An important part of our request for proposals was the concept of an incentive fee arrangement for the collection of these unpaid debts. This arrangement would lower the annual management fee the county would pay upfront, but would allow for an additional amount to be paid to the management firm based on pre-set targets of the bad debt the firm collected. They would get paid an agreed upon percentage of that additional revenue. In other words, no new revenue, no more money for the management firm.

This type of arrangement would have not only saved the county nearly $50,000 immediately, it would have given the management firm an incentive to increase revenue, thereby lowering the Manor’s deficit. All of the finalist firms submitted such an arrangement. Some firms offered some rather concrete ideas. So why award the contract without including it? My fellow commissioners will tell you we will negotiate the incentives later. But why not do it when there is still competition among the prospective management firms? It’s akin to buying a Chevy then telling the dealer after you sign the papers that you’d like to negotiate the warranty. Or worse, never even mentioning to the Chevy dealer that you may buy a Ford. It’s how you get the best value, and it’s an opportunity missed.

I had asked my colleagues to delay last week’s vote for only a few days so we could personally meet and negotiate with all potential management firms the details of their incentive arrangements to get the best value for you. I made the motion at our public meeting to do just that. For reasons unbeknownst to me, and likely indefensible to you, my effort was not supported by either of my colleagues. As a result, regrettably I had to vote no.

I have no personal issue with the firm they hired. It is reputable, has some county clients, and it even offered some incentive concepts in its proposal. But we need to demand accountability in county contracts, and we passed over an opportunity to do it right up front when we were in the strongest possible negotiating position.

I certainly believe in the professionalism of the Manor staff – both nursing and administrative – that they will continue their exceptional efforts to provide high-quality care for the residents. But I cannot vote for a deal that knowingly excludes crucial details that impact the financial well-being of this important public institution. It’s not in your best interest.

The recent uncertainty surrounding the future of Westmoreland Manor has been bad for the home, its residents and their families, and our staff. But we owed it to everyone to not just get a deal done, but to get the deal done right.