Cancer center to modify corporate structure after hospital sales

By Jennifer L. Drey

The corporate structure of the Tri-Cities Cancer Center will change in the wake of RCCH HealthCare’s acquisition of member hospitals Trios Health and Lourdes Health, but patient care and related services will continue as they have for nearly 25 years.

The intention on all sides is to find a public-private partnership model that meets the IRS requirements to keep the Kennewick cancer center’s nonprofit status in place.

“The good news – and we’ve had a couple of meetings with the parties – is that everyone wants to make this happen. And for the patients in this community and the ongoing future of the cancer center, that’s the great news,” said Chuck DeGooyer, chief executive officer of the cancer center.

Created in 1994, the Tri-Cities Cancer Center was established as a joint venture between Trios Health, which was Kennewick General Hospital at the time, Lourdes Health in Pasco and Kadlec in Richland. The center is a separate corporation with its own board, but its ownership resides with the three member hospitals. At the time of its creation, all three hospitals had nonprofit status. Accordingly, the center’s bylaws state that only nonprofit entities may be owners of the Cancer Center.

However, 25 years later, two of the three hospitals – Trios and Lourdes – are now owned by for-profit Tennessee-based RCCH HealthCare.

To avoid violating the center’s bylaws during the hospital sales to RCCH HealthCare, Trios Health’s ownership stake in the center was temporarily transferred to the nonprofit Kennewick Public Hospital District and Lourdes Health’s ownership was temporarily retained by nonprofit Ascension, which was the hospital’s owner prior to its sale to RCCH HealthCare.

The third partner, Kadlec, is already owned by nonprofit Providence St. Joseph Health.

Now, with the Trios and Lourdes sales having closed, attorneys are working under a six-month timeframe to create a partnership that would allow for-profit RCCH HealthCare and nonprofit Providence St. Joseph Health to become the member-owners of the Tri-Cities Cancer Center.

“What we’re looking for is something that meets the IRS standards, that meets the for-profit needs of RCCH and the nonprofit, tax-exempt needs of Kadlec, as well as the nonprofit needs of the center,” DeGooyer said.

RCCH spokesman Jeff Atwood confirmed that it is also RCCH’s intention to create a partnership that would allow the cancer center’s nonprofit status to remain in place.

“Since the beginning of these conversations, we were aware of the way that the cancer center was set up,” Atwood said. “We’re going to work with all parties involved to figure out the right structure.”

At this point, it is too early to speculate on what that structure might look like, he said.

However, with 18 regional health systems in 12 states throughout the United States, RCCH HealthCare is accustomed to encountering unique situations when it goes into new communities, Atwood said.

“Every time we partner, there are always things that are different or unusual. There’s not a one-size-fits-all model for what we do,” he said.

For the Tri-Cities Cancer Center, the importance of the current corporate structure lies in its nonprofit status, which allows the center to avoid a number of taxes, including property tax. That exemption frees up more money to be put back into the needs of the center, DeGooyer said.

Possibly more important, however, is the fact that the center’s nonprofit status also allows it to be supported by the Tri-Cities Cancer Center Foundation, a separate 501(c)(3) nonprofit that serves as the fundraising arm for the cancer center. All money raised and community contributions come in through the foundation, which in turn grants them back to the cancer center based on its needs.

“Fundraising is a critical part of what our foundation does for the programs that we don’t receive funding for,” DeGooyer explained.

In 2017, the foundation raised $1.5 million for the center through special events, individual and business contributions, and planned gifts left during estate planning.

The foundation’s goal is to exceed that number in 2018, which is already shaping up to be an incredibly successful fundraising year, according to Elizabeth McLaughlin, foundation director.

The foundation also has a growing endowment, which was established to ensure funds in the future.

McLaughlin said she does not expect the cancer center’s new corporate structure to have any effect on fundraising operations at the foundation.

“As far as we see it, no change, just opportunity for us to offer even more support, and we at the foundation look forward to continuing to work with all three hospitals,” McLaughlin said.

She added, “The cancer center has been around for 25 years. It’s incredibly consistent and strong, and we want to make sure that everyone in the community who has made an investment either in our foundation or who has received treatment knows that we’re going to continue to be world class.”

Tri-Cities Cancer Center board Chairman Jeff Petersen reiterated both the idea that the center has brought world-class cancer care to the region and the sentiment that there are no changes expected on the operational side.

“Based upon all of the indications provided by all of the stakeholders involved, I have no reservation that we will be able to successfully achieve resolution to the ownership structure,” he said.

Petersen also noted that the cancer center partnership between the three hospitals is key to the level of care it provides because it means it can see higher volumes of patients than the individual hospitals would if they took on cancer care independently. In many treatment procedures, higher patient volumes correlate to better outcomes.

The cancer center sees about 700 to 800 patients per year, though the number can fluctuate. About 20 percent of patients come to the center from outside the immediate Tri-City area.

In 2017, the cancer center offered 16 types of radiotherapy treatments, with the most common being for the treatment of breast cancer. The center also provided more than 1,000 no-cost or reduced-cost cancer screenings, along with wellness initiatives and ongoing support groups for those affected by cancer.

“We are the cancer center that serves the needs of doctors, of patients and of the families of those who are treated in our local community hospitals,” DeGooyer said. “We will continue doing everything we always have in this interim time and make sure that the patients get the very best care.”

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