Fayette County

Shriners Hospital's long-term future may include leaving Lexington

Lexington's Shriners Hospital for Children plans to hire a consultant early next year to plot its future, one that could include it leaving Lexington to partner with another children's hospital.

The hospital's administrator said its immediate future is secure, but given its reliance on an endowment to provide free care to children, "there are concerns about the sustainability of the system."

"We need to plan prudently, so we can be around for another 80 years," said Tony Lewgood.

The hospital may just stay put, but one potential option is to consolidate with another area hospital. Local Shriner Recorder Larry Looney said the membership has heard the hospital may look to move into the Shriners Hospital in Cincinnati, which provides burn care. Lexington's hospital focuses on orthopedic care.

"That is one possibility," Lewgood said.

Another could be a partnership with the University of Kentucky.

"There has been some talk given their aggressive construction projects," Lewgood said.

The two already have a long-standing partnership, sharing four of the five pediatric orthopedists that work at Shriners.

Lewgood said the discussions began a couple of years ago as part of the pair's "usual communication" but there has been no talk of that as a firm option.

"There are many, many others, and in no way right now is there any predetermined plan for consolidation," Lewgood said.

He met with the hospital's 210 staff members in a number of meetings last week and told them of the plans to hire a consultant.

"We've done this type of strategic planning, but using a consultant is new," he told the Herald-Leader on Monday.

Lewgood was to meet Monday afternoon with the hospital's board, whose 21 voting members come from the five states served by the hospital. Among the planned discussions was the consultant hiring.

Lewgood said talk that the property might be put up for sale "is just pure speculation at this point and completely unfounded."

The decision to hire a consultant comes as the hospital, like every other business, is facing the tough economy.

"Although we are blessed by being funded by philanthropy, we are part of an economic environment that is volatile," Lewgood said.

He emphasized, though, that the hospital is "completely operational."

"We are open to new patients ... and we are adequately funded ..." he said. "But has there been some belt-tightening? Yes."

He said the hospital's budget will increase about 2 percent next year, and patient volumes have increased so far this year.

The hospital, like the 22 in the Shriners system, is funded by charitable contributions. The system's combined financial statements for 2007 showed that 74 percent of its assets are in marketable securities — $8.3 billion — making it particularly vulnerable to market fluctuations.

And it's income from those investments that fuels the system. In 2007, $580 million, or 88 percent, of the system's operating revenue came from investment income.

A hospital system spokesperson did not immediately return a call for comment on Monday about the investments' performance.

The local Shriners of North America chapter "lost a ton of money in the last quarter" because of the market, said Looney, a Shriner for 38 years.

"It's getting kind of scary," he said. "Of course, it's getting scary for everybody."

Looney said he would be crushed if a decision would ultimately be made that could see the move of the Lexington hospital's operations.

"I hope it waits until I start pushing up daisies or something," he said.