B Magazine
SMART. POWERFUL. BUSINESS IN SOUTHEAST MISSOURI.

What's up: Updates on past stories in B Magazine

Friday, August 24, 2018

HOSPITALS

The inaugural edition of B Magazine featured hospital CEOs Ken Bateman and Maryann Reese as "agents of change," more open to collaboration than their predecessors at SoutheastHEALTH and Saint Francis, respectively, while fully engaged in "healthy competition." The story reported on talks about "a jointly-owned new line of business, which would have a dramatic impact on an area of health care that the region sorely needs."

Half a year later, contract details are still being worked out, but both leaders say the project is moving forward. Who is involved and the shape of the deal is still in negotiations. Adding complexity is that the new business involves a world-renowned service provider as third owner, and final ownership percentages and scope of supermajority voting requirements are sticking points among the parties.

Here's what you need to know: the project involves the construction of a new $29.2 million, 102-bed hospital specializing in behavioral health in Cape Girardeau. SoutheastHEALTH's Bateman initiated the project in partnership with Universal Health Services (UHS), a Fortune 500 corporation with annual revenue near $10 billion. UHS specializes in behavioral health services on both an inpatient and outpatient basis.

After an outreach from Reese to Bateman, the tentative ownership group was expanded to include both local hospitals. The idea is to create a major new, vital service line that attracts patients from a multi-state region. While negotiations progressed, Southeast and UHS sought and received unanimous approval from the Missouri Health Facilities Review Committee through the "Certificate of Need" process, which regulates the number of hospital beds and types of equipment a community may have. Saint Francis' Reese testified at the hearing in favor of the certificate of need, something that rarely happens among competitors.

According to multiple sources, as part of their equity investment in the new hospital, Southeast is contributing land on the west side of Cape Girardeau, which necessitated careful review among the potential partners. Saint Francis' review process also requires approval from the bishop's office, based in Springfield, Missouri. Initially, Southeast was going to be a 24-percent minority interest holder in the project, with UHS as majority owner and manager of services. With Saint Francis invited in at the same 24-percent level -- putting the local owners near parity with UHS -- discussions slowed on whether the percentages should be altered further and what authority local hospital management will have on operations.

Boards for the two local hospitals have repeatedly supported continuing the process, but details remain to be resolved.

According to Bateman, service offerings at the new hospital will include child, adolescent and family counseling; health psychology programs; women's reproductive mental health and wellness; headache and pain management; methods to lower stress, change lifestyle and build resilience; treatment of anxiety, OCD, ADHD and eating disorders; and more. Some people refer to a behavioral health center as a "psych hospital," but health care professionals usually make a distinction between "mental health" and "behavioral health." Whereas "mental health" primarily encompasses the biological aspect of wellness, according to online resources, "behavioral health" encompasses all contributions to mental wellness, including substances and their abuse, behavior, habits and other external forces.

Stay tuned to Bmagazine.io and semissourian.com for the latest about the new hospital project. In the meantime, the two local CEOs underline that other, smaller areas of collaboration continue to be studied, even at the same time that competition abounds, including most recently with announcements by both hospitals regarding future strategies around orthopedic services. Saint Francis recently acquired the area's largest independent practice, Advanced Orthopedic Specialists, while Southeast announced a partnership with Washington University's Department of Orthopaedic Surgery. Meanwhile, on Aug. 9, Saint Francis announced acquisition of Sikeston-based Ferguson Medical Group, adding more than 40 medical providers to the hospital's system and enhancing its pipeline for hospital services. In summary: collaboration remains a stated goal of the two local CEOs, but the biggest aspect of that -- the new behavioral health hospital -- remains stuck in first gear.

ESQUIRE

Another previous B Magazine story reported on a plan to renovate Cape Girardeau's Esquire Theater into an event venue. Key to the private developers' plan: Tax Increment Financing (TIF). Without TIF, the developers couldn't make a business case to proceed.

On Aug. 6, the City of Cape Girardeau approved a TIF deal with the development team based in Bloomfield, Missouri, that would cover up to $870,000 plus interest of the $2.65 million project.

What TIF does is designate a portion of future taxes -- which would not be generated otherwise -- to be returned to the developer for a limited period of time (or maximum amount) to offset construction costs. Annual "baseline" taxes that flowed into taxing entities from the property before the project would continue to be channeled to those entities on an ongoing basis.

As negotiated with the city, the risk of this project remains wholly with the developers and their creditors, in this case TAG (Together Always Giving) Development, Cape Theaters LLC and The Bank of Missouri. If the TIF project isn't successful, taxpayers have no obligations. If successful, however, the local taxing entities (in this case, Cape Girardeau City and County, the library board, Cape Girardeau public schools, etc.,) stand to benefit immediately from a portion of increased sales taxes, new economic activity in the area, as well as higher property taxes in the future, once the TIF expires or meets the agreed maximum. The City's TIF commission, composed of representatives of the taxing entities, unanimously recommended the project to the Cape City Council at a July 19 meeting, which followed a public hearing.

Cara Naeger, one of the owners of TAG Development, says, "The renovation will take about a year." Currently, they are finalizing financing, securing additional real estate from the University to expand into a greenspace on the building's west side, and applying for historic tax credits. Naeger previously indicated the goal was to be open by late 2019.

SPORTS TOURISM

Finally, in an update about a story on the local business of sports tourism, the Cape Girardeau SportsPlex closed out its first full fiscal year ahead of plan by $123,807, according to preliminary figures provided by the Cape Girardeau Parks and Recreation Department. The city had originally budgeted to lose roughly $377,247 during the SportsPlex's first year of operation. Actual loss came in at $253,440. These numbers do not take into consideration hotel and restaurant business (and tax revenue) generated by the sports venue. Twenty-six of 52 weekends were booked by tournaments during the first year, with a total of 34 events (some weekends had multiple tournaments).

"That is pretty good for year one, since most established tournaments and events book over a year out," says Julia Jones, Cape Girardeau parks and recreation director. "Our projection for year two is 37 weekends and 45 events."

According to Heather Davis, facility manager, "The summer was packed with tournaments almost every weekend, including the Rib City Volleyball Shootout with 71 teams and the Under Armour Select Super 16 Basketball Tournament with 74 teams." New tournaments for the current fiscal year include additional volleyball tournaments, a youth futsal (indoor soccer) tournament, cheerleading competition and pickleball club tournament. In addition, Davis says, the SportsPlex is being utilized for youth and adults sports leagues during the week and on some weekends.

In updates on other sports tourism projects, the City contracted with the same firms that built the SportsPlex -- Penzel Construction Co. and Gray Design Group -- to design-build a $1 million to $1.5 million improvement to Capaha Field as part of preparation for the start of a new wood-bat collegiate baseball league in the summer of 2019. Some of the cost will be paid for by the Cape Catfish baseball team. The work will be done on a tight schedule, as major portions of it will need to be completed before the Southeast Redhawks begin their practices in February.

According to Jones, proposed improvements include perimeter fencing, new sports lighting and an upgraded fan experience. She told the Southeast Missourian that the current plan calls for seating approximately 600 people.

Finally, the committee to make recommendations about a new aquatic center in Cape Girardeau, made up of representatives from the Cape Girardeau school board, city council and staff, held its first meeting and issued a Request for Qualifications (RFQ) for a consultant to lead the review and needs-assessment process. According to Jones, "The committee hopes to have recommendations to both school board and city council by the beginning of 2019." Part of the aquatic center will be financed by funds approved by Cape voters in a Spring 2018 parks and recreation sales tax vote.

For more updates about these and other stories, be sure to visit

bmagazine.io

and

semissourian.com.

Jon K. Rust is a contributing writer to B magazine. He previously wrote cases and textbook chapters as a Dean's Research Fellow at Harvard Business School. He is co-president of Rust Communications, publisher of the Southeast Missourian and a former vice-chairman of the Associated Press.

BITCOIN

By MIA POHLMAN

What has changed with Bitcoin since the B Magazine February story "A Currency Rearranging the World?"

A lot. In February 2018, bitcoin price high was slightly upwards of $11,000 U.S. Dollars (USD) per bitcoin. In August 2018, prices have fluctuated within the range of $6,000-$7,600 USD per bitcoin.

The Lightning Exchange Network, which could lead to widespread vendor usage, is now being tested with bitcoin. This technology can send money anywhere in the world, capable of millions to billions of transactions per second. Rather than costing the vendor a percentage of the total transaction amount as credit cards do, each lightning network transaction costs one satoshi, the equivalent of fractions of one cent in USD.

The Securities and Exchange Commision (SEC) remains in opposition to Bitcoin and cryptocurrency, and has yet to approve a Bitcoin exchange-traded fund (ETF) proposal. Despite the SEC's stance that Bitcoin markets are not "resistant to manipulation," SEC commissioner Hester Peirce spoke out in a public statement saying she "dissent[ed]" with the SEC's position that Bitcoin was not "ripe enough, respectable enough or regulated enough to be worthy of our markets." Peirce, who issued the statement in late July, is the first SEC commissioner to display support for Bitcoin.

The Intercontinental Exchange is forming a startup called Bakkt. According to Fortune's "The NYSE's Owner Wants to Bring Bitcoin to Your 401(k). Are Crypto Credit Cards Next?" Bakkt will "make cryptocurrency safe for your retirement fund, and maybe for your retail." It's backed by Microsoft and Starbucks.

All of this, Bard says, is important in legitimizing Bitcoin as a global currency. He believes the lightning network will lead to merchant adoption, which will lead to increased usage and demand among individuals. Once the New York Stock Exchange is on board, he thinks it is only a matter of time before wealthy individuals begin investing in Bitcoin, too.

Edward Jones, however, retains their position that "any investment in cryptocurrency is highly speculative at this time." Their reasoning? They cite that no cryptocurrency ETF has been registered with the SEC, the SEC chairman's warning against the currency because of its lack of regulation and the potential for government interference, reasons good as any for their clients to remain wary.