Why The Closing of Atlanta Medical Center Deserves Further Scrutiny

Editor’s Note: Typically whenever we have a new contributor write for Peach Pundit we ask that their first post be an introductory piece designed to let the reader know a little about the author. Because of the stature of this particular anonymous contributor, and the importance of the information they are sharing here, we are forgoing that policy.

Just a few observations and questions you should ask yourself…

Much hoopla has been made about Atlanta Medical Center (AMC) closing since their
announcement several weeks ago. Let’s look at things a little deeper and you might have a little homework when we get done as well.

AMC started life as the Tabernacle Baptist Church Hospital in 1901 to provide charitable care for residents of Atlanta and the area surrounding what we now know as The Tabernacle. It continued to grow until its founding doctor left for London in 1912 and the Georgia Baptist Convention purchased it around 1913. Around 1921 the hospital was sited where it remains today.

Building expansion programs were initiated in 1948, 1956 and 1981 adding beds, office space
and in 1981 the heliport.

After several years of internal discussion and debate (I am a Georgia Baptist and remember these discussions) about if a hospital is/was part of our denominational mission, the decision was made to sell the facility to Tenet Healthcare in 1997. Tenet went on to change the name of the facility to Atlanta Medical Center shortly thereafter. Tenet had also accumulated four other hospitals in the Atlanta area and operated each as For-Profit facilities.

Fast forward to March of 2016 when WellStar Health System bought all five facilities and converted them all to its own Not-For-Profit operating model. For the sake of this article, we will only discuss AMC.

While the current facility has the capacity and license to operate 460 in patient beds, note above the age of the facilities. Yes, the newest building is closing in on 70 years old. With the age of the buildings do come operational challenges with ceiling heights, room size, plumbing and other utilities. So, 460 beds has really meant only about 220 that have been open for patient care the last several years. Without millions of dollars being invested in the facility to bring it up to modern standards, there has been no possibility of 460 beds being available ever again.

Doing a fairly deep dive into the finances of the facility reveal that WellStar obviously gave up on the buildings a long time ago. 2021 shows only $8 million in charged depreciation on the facility as a whole – probably about what it cost to just replace burned out light bulbs.

I mentioned homework earlier – here is the first assignment. Ask around and see what you find out about just how often AMC has been on diversion the last several years. While the ER “officially” closed this past week, a strong case could be made it has been mostly closed for a couple years now.

With a system the size of WellStar, much can be done with accounting. Moves can be made to show a facility covering expenses and doing very well, conversely, moves can be made to show a facility losing money hand over fist when that makes a case for something. Looking deep into the well of financial information that is available for AMC and WellStar as a whole, there are some things that make you scratch your head.

According to documents that are filed with federal and state regulators, AMC basically made money or broke right at even most years up until 2019. Something interesting happened there between 2019 and 2020 though. AMC started losing money hand over fist (refer to the last paragraph and when a case needs to be made) almost on cue. The only thing is, no one saw a worldwide pandemic coming in late 2019 or very early 2020.

It appears that all profitable lines of business were moved out of AMC to other WellStar facilities in the Atlanta area to start making the case for closure. Had it not been for COVID-19, I and others believe WellStar would have announced the closure of AMC in the latter part of 2020, the pandemic was a great
inconvenience causing it to be kept open until now when the pandemic has eased.

Homework – Look at the attached report and decide for yourself if the system treated AMC fairly with COVID relief dollars knowing the amount of indigent care provided at AMC versus their other facilities. You may say that many of these payments came directly to the facilities from the feds and there was no way to steer them, but remember, these payments were based on self-reported information.

One of the first reactions to the announced closure of AMC was, “let’s just get Grady to keep it going”. For those of us in the cheap seats that have been watching this whole AMC thing for a while, we knew that Grady had been talking to WellStar for at least a year and a half about purchasing AMC. The idea would have been to keep it open while doing a major refurbishment of the facilities to the tune of $600-800 million over several years. That would maintain the second Level 1 Trauma Center in the City along with eventually having all of those 460 beds back on line.

Also from the cheap seats, it seemed the goal posts kept being moved by WellStar. As Grady would agree to a point, a new serious deal breaking point would arise and so on for 18 plus months. Are you catching my drift here? You have to have a willing seller.

So, as the discussions continued about Grady just stepping in at the last minute to keep things operating at AMC, some of us posed the question – are you sure WellStar wants or is willing for the facility to stay open? As the days went by and WellStar refused to talk to the Mayor, the Governor or anyone else, this question started answering itself, NO, they could not care less about it staying open.

A Not-For-Profit hospital system that is supposed to be providing care to everyone no matter the ability to pay, refusing to keep open or invest in a facility in the heart of the State’s largest city because they claim it was losing money. The same system (like others) that is tax exempt with the idea that their exemption will help offset the cost of providing indigent care and community benefit. WellStar and other health systems like it that put tens and hundreds of millions in the bank each year as “reserves” for bad times yet refuse to ever use them.

Homework – Go take a look at the size of the reserves of Not-For-Profit hospital systems around our state. You might be surprised to learn that several of them have reserves in the billions. Then, take a look at what they claim to be the size and amount of their community benefit.

So, why would a Not-For-Profit move to close a Level 1 Trauma Center in the middle of the state’s largest city taking the 460/220 beds offline, shuttering the ER, laying off hundreds of skilled workers? Money. Plain and simple money in a twofold way.

Remember I pointed to the changes in 2019 in profitability and speculated the closure was planned originally for 2020? The real estate market was returning to its white-hot state for development in Atlanta and people were moving back to town in record numbers. Does the location of AMC get much better for a live/work/play development? Not really!

Secondly, the value of shuttering 460 Certificate Of Need (CON) licensed beds in a tight highly competitive market. You lessen supply, increase demand for what is left in the market and the beds you hold are much more valuable. I will leave CON for another time when I come back to visit with you.

This closing has nothing to do with Medicaid Expansion or not, COVID lockdowns, or even the amount of paper losses shown. It has everything to do with greed and the need to show ever larger reserve funds to stroke egos. If the closing of AMC is not criminal, it probably should be.

I will also leave the discussion of executive compensation for Not-For-Profit healthcare systems for another visit.

This Grumpy Old Man isn’t much of a writer, but he hopes he has at least made you think about a few things.