Tim Ryan tryan@wolfrivermedia.com
A final stab at salvaging a deal to allow the former Shawano Medical Center to become a medical training facility collapsed on Friday after a round of last-ditch negotiations between the city, ThedaCare and development group Shawano Medical Holdings LLC.
“Unfortunately, we were not able to come to an agreement, so the opportunity for the residency training center at the existing hospital is now over,” said City Administrator Brian Knapp. “An opportunity has been lost, I’m afraid.”
Approval from ThedaCare was the last item needed before developers could move forward with the project after the hospital relocates next month to County Road B next to ThedaCare.
The proposed medical residency training center would have catered to medical school graduates, potentially from across the country, who need additional training in residency to qualify for licensing.
The apparent sticking point and ultimate downfall of the deal, however, was defining the patient population that the residents would treat.
The proposed agreement stated the facility would have operated as a hospital and clinic targeting military veterans.
“The issue was defining the patient population this facility could see,” Knapp said. “ThedaCare was no longer able to accept ‘targeting.’”
Knapp wouldn’t say what language ThedaCare was proposing, but said, “it changed the dynamic of the language enough to make it unacceptable and reduce the likelihood of success.”
Jeffrey Remsik, a ThedaCare spokesperson who has been a consultant on the project, said ThedaCare understood from the start that the medical training program would treat veterans, and was willing to accept that.
Remsik said treating veterans was worth about $1 million in revenue for ThedaCare.
“We were willing to give up that revenue as part of our partnership,” he said. “It’s a good thing if we can train more physicians.”
However, according to Remsik, a new wrinkle was thrown in Friday when the developer informed ThedaCare that the training program would target “any and all population” until it receives the necessary accreditation to begin treating veterans; something that could take six to 18 months.
That would put it into competition with the soon to be relocated and renamed ThedaCare Medical Center-Shawano, Remsik said.
“It’s a competing, duplicated health care system,” he said.
“If Aurora wanted to come in and create a competing facility, I don’t think we would want to partner with them,” Remsik said. “They’re a competitor. Why would you partner with them?”
Todd Schultz, lead consultant for Shawano Medical Holdings (SMH), declined to comment on the negotiations or respond to Remsik’s comments.
Even before Friday’s meeting, city officials had all but given up on ThedaCare’s participation in the project.
At a special Common Council meeting Tuesday, city officials approved looking into alternative sites for the medical residency center in the event that ThedaCare wouldn’t approve the deal.
Knapp said several locations in the city where a medical training facility could be built have been toured since then.
“We’ve identified a handful of potential sites,” he said. “We’re actively engaged in that process.”
Knapp said the city would approach the SMH project as it would any other development proposal, offering what incentives and resources it could.
He said there are Tax Incremental Finance district resources if the new site is in a TIF district.
“If it’s not in a TIF, we would consider creating one if it makes financial sense,” he said. “To the extent we can assist we will do so.”
Knapp said the failure of a deal means both the city and ThedaCare will have to cover the costs of marketing and clearing the title to the hospital property; something SMH would have paid for had the deal been approved.
Knapp said that means roughly $189,000 in costs for the city and $174,000 for ThedaCare.
Under the agreement rejected Friday, SMH would have acquired the hospital property from the city and ThedaCare for $1 but would have reimbursed them for the costs they incurred clearing the title to the property.
“Our opportunity to recover that from this development has ended,” Knapp said.
The agreement also called for SMH to put up a either a $1.5 million irrevocable letter of credit or a performance bond to cover the estimated cost of razing the Shawano Medical Center building if the residency training program was not successful.
Knapp said it remains to be seen who will pay for razing the hospital building if a new developer isn’t interested in using it.
“That’s yet to be discussed or determined,” he said. “It was one of the earlier concerns that caused us to start this process together with ThedaCare. We’re back to where we were some time ago.”
Remsik said ThedaCare is willing to cover that cost.
“ThedaCare would absorb the cost of demolition if it ever came to that,” he said.
However, Remsik said, ThedaCare is hoping to find another developer that would make use of the building.
“We’re committed to the creative reuse of the old hospital,” he said.
Remsik said ThedaCare has made a substantial investment in the community, including a $20 million clinic and a new Shawano Medical Center hospital at a cost of $52 million.
He noted ThedaCare had also been willing to donate the old hospital building, valued at $13.8 million, under the agreement with the city and SMH.
Remsik said ThedaCare has partnered with the city in good faith, but city officials were in a rush to push through the agreement with SMH.
“At the end of the day, city officials are supposed to be focused on what’s best for the city, not any one developer,” he said.
City officials at Tuesday’s special council meeting said they had been waiting for a response from ThedaCare on the finalized agreement for a month. They also said SMH needed to know it had final approval so it could apply for the necessary licensing for the training program.
SMH had hoped to take possession of the building immediately after Shawano Medical Center moves out, which is planned for Sept. 19-20.
In a press release after Friday’s meeting, ThedaCare said it was re-opening its search for developers for the hospital property.
“We will be contacting those who demonstrated earlier interest, as well as newcomers. We will coordinate with the city, as we have all along,” the release stated.