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Local boards retain input, oversight role, with caveats

SoVaNow.com / May 13, 2013
Officials with Sentara Healthcare and Halifax Regional Health System refer to their pending $116 million transaction as a merger — but the text of the agreement makes plain that the local hospital system’s assets will end up solely in Sentara’s hands.

On the issue of governance, the deal allows for a measure of local control and oversight — although other portions of the agreement suggest the hospital could end up as part of a regional group, overseen by a regional board, after five years.

The Sentara-HRHS affiliation pact obtained by the News & Record spells out corporate responsibilities for both entities once the deal closes. Halifax Regional’s 36-member governance board would shrink to 18 members after one year, with all but three representatives chosen from the hospital’s three-county service area. Sentara would tap three representatives; one, Senior Vice-President Ken Krakaur, will serve initially as vice-chair under board chairman Dave White.

Also as part of the deal, the surviving incumbent, Halifax Regional Health System, essentially would become a shell corporation, responsible for monitoring Sentara’s compliance with the 10-year agreement. The board is slated to dissolve at the end of 10 years, as long as it is not engaged in a dispute with Sentara.

The $116 million agreement includes a $1 million initial payment to the HRHS oversight board, a sum that both parties deemed sufficient to fund legal and enforcement activities should trouble arise with the deal.

“No one wants that to happen because that would be a bad thing” all around, said Halifax Regional CEO Chris Lumsden. In reviewing the role of the oversight board with the hospital’s outside legal and financial counsel, Lumsden said the advisors told him they “had never seen a situation where an enforcement board has had to take any action.”

“It is a requirement of the process that that type of arm be established,” he said.

The oversight board will include 12 members, including current board chair White and vice-chair Carol Thomas of Clarksville.

Any part of the $1 million that is not spent at the end of the 10-year covenant period will go to the Halifax Foundation, a hospital entity.

Along with creation of the oversight board, the agreement calls for the continuation of the local hospital board, albeit in shrunken form. After five years, however, Sentara would be authorized to create a regional board to govern the affairs of Halifax Regional and other Sentara hospitals in the region, a group likely to be defined as including Martha Jefferson Hospital in Charlottesville and Rockingham Medical Center in Harrisonburg.

Halifax would be entitled to three members on the regional board, and Sentara would have the right to abolish the local board, provided it also did so with the other hospitals in the group owned by the chain.

Lumsden said that a regional board, “in our view, makes sense” but stressed the importance that local input will play in hospital operations, regardless of whether Sentara opts to keep the local board or not.

“I would expect that to continue because, quite frankly, it’s good business,” he said.





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