After losing $112 million, Boone Health declines to release financial records
Boone Health has lost more than $112 million since becoming an independent community hospital in 2021. Now, both the hospital’s elected officials and its administrators say the hospital is on track to stabilize its future finances.
But Boone County residents will have to take their word for it.
For more than two months, the Missourian has sought to understand Boone Health’s financial condition at a critical moment in the institution’s 102-year history. Boone Health’s operational losses in 2021 and 2022 are roughly equal to the $112 million breakup fee paid by the hospital’s former operator, BJC HealthCare, according to publicly available documents. In addition, pandemic-era federal funding to hospitals ended this year.
Those losses were partly due to the major shifts generated by the COVID-19 pandemic, hospital officials said. The American Hospital Association reported in 2022 that hospitals across the country were expecting to face billions in losses in that year alone, due in part to high pressure on their staff and resources.
Hospital officials also said the pandemic affected their transition planning.
To stem losses, Boone Health officials say they have laid off 15 staff members, left 50 open positions unfilled and ended contracts as part of an $11 million cost reduction plan implemented earlier this year.
On top of that, the hospital announced Thursday that it will cut its home care and hospice divisions in December, affecting 26 more jobs and approximately 50 patients. Most of those patients live in the county and receive care in their homes.
Boone Health interim CEO Gene Meyer said the cuts have not impacted care.
“Despite the challenges, financially and operationally … the quality of care at Boone is at the highest level of any hospital in mid-central Missouri,” Meyer said.
But officials, including elected trustees, have declined to release documents describing its current financial position and how exactly the hospital reduced its costs.
They have claimed that Boone Health is a private, nongovernmental entity and that its documents contain trade secrets it must protect from competitors such as MU Health Care. The publicly elected board of trustees sometimes conducts business in a non-elected body it created, in effect shielding those actions from the public.
In interviews, hospital officials suggested that documents requested by the Missourian aren’t necessary to judge the fiscal health of the hospital.
“Do you think the public’s out there worrying about the quarterly reports of the hospital?” said Jerry Kennett, chair of the Boone Hospital Board of Trustees.
“They’re much more concerned about our quality,” added Randy Morrow, an appointed director and former executive for the hospital.
A complex hospital structure
Boone Health began construction in 1920, when county residents approved spending the equivalent of $2.79 million in today’s dollars to build the hospital. The trustees also have bonds issued in the name of Boone County payable through 2038, according to their most recent annual reports. However, those bonds are paid with hospital revenue rather than county taxes.
Since its beginning, the public has elected a five-member board of trustees to oversee the hospital.
Decades later, in 1985, the board created a company called CH Allied Services Inc. to lease the hospital to third-party operators, most recently St. Louis-based BJC HealthCare. Community members were unhappy with BJC’s revenue-share agreements and lack of new facilities as far back as 2008, according to previous Missourian reporting.
The trustees issued a request for proposals from other hospital management groups in 2016 and entered into exclusive negotiations with MU Health Care to form a partnership or merge a year later. But those negotiations were marred by antitrust concerns and differences between MU Health Care’s teaching model and Boone Health’s community model, hospital officials said at the time.
In 2019, the trustees announced the hospital would operate as an independent community hospital and officially became self-operational in April 2021. The move was opposite to the larger trend of hospitals merging in Missouri and the rest of the country in recent years.
The trustees also created another separate company, Boone Health Inc., to run the hospital day to day. Boone Health Inc. was placed in charge of CH Allied Services. The trustees then signed a lease with CH Allied Services until 2051.
Officials said that the lessor-lessee structure was kept during the transition to independence to avoid having to reregister with various hospital licensing groups such as the Centers for Medicare and Medicaid.
“It would have been a disaster to try to go through all that in getting new licenses for a new entity,” Kennett said.
When the Missourian requested various documents about Boone Health’s operations and its breakup with BJC, Boone Health Director of Legal Services Kate Pitzer said CH Allied Services was not a public body and is not subject to open records law, known in Missouri as the Sunshine Law.
But in 1998, a state appellate court ruled that a corporation created to operate a municipal hospital while remaining under the control of that hospital’s board of trustees is a “quasi-governmental body” and subject to the state’s Sunshine Law. That ruling came after the North Kansas City Hospital Board of Trustees denied a Sunshine request from St. Luke’s Hospital System by claiming it was separate from the company that operated the hospital.
That ruling remains among the body of Sunshine case law listed in the Missouri attorney general’s reference guide as an example of a quasi-governmental body.
When the Missourian updated its records request citing this case law, Pitzer said Boone Health had an opinion from an outside law firm arguing it is not a quasi-governmental body.
When the Missourian requested that opinion, Pitzer said it was private under attorney-client privilege.
As part of the transition in 2021, the trustees added six positions, called directors, in an expansion of the Boone Health Inc. board, including Gary Thompson, CEO of Columbia Insurance Group, and Stephens College President Dianne Lynch.
The elected trustees and appointed directors act together as the 11-member Boone Hospital Board of Directors, according to previous Missourian reporting.
The trustees claim they can view records about the hospital’s performance as directors of Boone Health Inc. rather than publicly elected officials, meaning those records would fall outside the scope of the Sunshine Law.
Meyer said the intent of adding directors was not to hide information from the public.
“I can tell you (the addition of the board of directors) was not to avoid transparency; it was to gain greater governance expertise,” he said.
Boone Health’s management, the trustees and the appointed directors are all listed in registration documents for both CH Allied Services and Boone Health Inc., according to the Missouri secretary of state.
Kennett and Morrow say that trustees are serving a different role when acting as directors. But the Sunshine Law states that if a majority of an elected body — in this case, the trustees — meet to conduct business related to their elected office, that is a public meeting.
The Missourian requested quarterly financial reports from CH Allied Services to the trustees, something that is required in the hospital’s lease. It also requested reports stemming from a 2022 agreement between the trustees and consulting firm Alvarez & Marsal. The contract specifically tasks A&M with identifying “additional cost reduction” alongside other operational reforms.
But Kennett said he and the other trustees see these reports in the board of directors’ meeting of Boone Health Inc. rather than as elected officials in the public trustees’ meeting. That means the reports aren’t public, he said. He also confirmed the board of directors votes on hospital matters and keeps meeting minutes.
“I don’t exactly know how to say this, but the trustees essentially take their hats off from being a trustee, and they put on the operating director’s hat,” Morrow said, describing how trustees see hospital documents in a non-public setting.
While the trustees do offer a financial report in their monthly meetings, that record only describes the trustees’ finances and not the hospital’s. Minutes from those public meetings show the trustees usually approve the report in the “consent agenda,” where it is not discussed at length. Most of those meetings ended in under 10 minutes, and in one case ended in only three minutes, according to a review of meeting records.
Sandy Davidson, a retired journalism professor at MU who taught media law and has advised other media organizations as an attorney, said the 11-member group together should be subject to open records law because three members of the board of trustees are meeting to discuss hospital matters.
“You’ve got the full five, and you bring on another six, of course it’s 11, and those 11 wouldn’t need to be reporting to the five because the five are already part of the 11,” she said. “It’s a little convoluted, isn’t it?”
Communication with the county
Kip Kendrick, Boone County presiding commissioner, said that currently trustees don’t meet regularly with the county government. While the hospital does communicate with the county, it doesn’t do so on a routine basis. Kendrick classified the relationship as one that is “improving.”
When asked whether he believed that the board of trustees must act with more transparency, Kendrick said he couldn’t speak on how the county’s sister political subdivisions are going to operate.
“My charge is the fiduciary responsibility of Boone County government, ensuring that we’re focused on our financial health and also that we remain transparent with our process,” he said.
The trustees are also required by law to submit an annual report about the hospital to the Boone County Commission every January, including details on its spending. Kendrick and Kennett said they were not aware of that requirement, nor does Kennett recall ever filing that disclosure to the county.
Competition with MU Health
Kennett and Morrow also claimed Boone Health has to shield some of its planning because of its competition with MU Health Care for patients in the region.
Kennett said Boone Health split with BJC partly because it couldn’t accept certain insurance providers or form joint partnerships with local private practices due to BJC’s network-wide restrictions.
Kennett and Morrow both argued that MU Health Care has structural advantages over Boone Health, including direct taxpayer support and, according to them, an exemption from open records law.
“Why is the Sunshine Law important for this hospital? Because we have to compete against another big entity across town who doesn’t abide by the same rules,” Kennett said.
However, the Missourian submitted a Sunshine request to MU Health Care and received a budget showing how MU is spending money this fiscal year. MU Health Care also posts annual financial records online.
Trustees’ attorney Tom Schneider also denied the Missourian’s request for reports from the consulting firm Alvarez & Marsal. He claimed there is a “strategic planning” exemption for proprietary information.
Missouri’s Sunshine statute does not mention competition or trade secrets in any of its listed exemptions. It only allows exemptions for limited items such as information about public bidding processes or information between a private company and a university about licensing intellectual property or research.
The law also specifically defines records produced by outside consultants for public bodies as a “public record.” The appeals court in the North Kansas City Hospital case specifically declined to say that competition is a reason to refuse Sunshine requests.
Schneider also cited a 2005 appeals case where the court ruled that data about homeowners’ insurance premiums in Kansas City provided from insurance companies to the Missouri Department of Insurance was a trade secret and barred its release to Legal Aid of Missouri.
Schneider said in an email that the case grants a “strategic planning exemption” for all proprietary and confidential financial information.
But Davidson said that interpretation is far too wide-reaching under Sunshine law, which requires public bodies to take a narrow view of what can be exempted.
“Think about how broad that is,” she said. “That is basically anything that could relate to how they’re doing business.”
Schneider argued Wednesday that the cost-cutting recommendations were confidential.
Less than 24 hours later, Boone Health announced it would end its hospice and home care.