Two long-term care facilities should return to full county control by September, under a settlement agreement County Executive Jan Gardner announced Wednesday.
Returning the operations and ownership of Citizens Care and Rehabilitation Center and Montevue Assisted Living to the county has been a key issue in Gardner’s first term as county executive.
The sale of the two facilities’ operations and land to Millersville-based Aurora Holdings VII was approved by the previous Board of County Commissioners in June 2013.
Aurora has owned the centers’ operation since then, but the sale of the property and buildings was never finalized.
One former commissioner who supported the sale, current Councilman Billy Shreve, said Wednesday that Aurora had no choice but to enter the settlement agreement and “succumbed to the heavy hand of government.”
Since before taking office, Gardner has said the commissioners made a bad deal.
“We’re taking what I think was a bad financial deal for the taxpayers and turning it into something better,” Gardner said Wednesday.
Under the terms of the agreement, the county will pay Aurora $7.85 million, and Aurora will continue managing the facilities for at least 18 months, guaranteeing the county $2.5 million in profits — not including their payments for management — during a transition period.
Under a continuing management agreement — one of three agreements that have been reached — Aurora will operate the facilities for 18 months, receiving a monthly management fee of 4.5 percent of the gross revenue. The agreement could be extended by 12 more months, when Aurora would receive a 5 percent management fee.
Gardner said the management agreement was reached to ensure stability for employees and residents at the facilities.
“We pledge cooperation to work with each other for the benefit of our patients and our employees,” she said.
The two other agreements are a sales agreement that returns the full interests of the operation to the county and a settlement agreement, which outlines other terms.
Some of the documents are signed by Gardner and Stanley H. Snow, president of Aurora Health Management. Other portions of the documents will be signed on the estimated closing date, Sept. 1, Gardner said.
The entire transaction will cost about half as much to the county as it would have cost to go through with the proposed sale, and the county will retain the facilities as assets, Gardner said.
In 2012, the county finished building a new 156,000-square-foot shared building for Citizens and Montevue. The construction was paid, in part, by county-issued bonds. In June 2013, the then-Board of County Commissioners voted 4-1 to sell the centers, despite organized protests against the sale.
Gardner said she believes the facilities were worth $50 million at the time. That includes $38 million for the cost of the new building, $7.5 million for the market cost of the land, and $4.5 million in accounts receivable, payments due to the facilities.
She said the deal to sell the facilities and accounts receivable to Aurora for $31.5 million undervalued the property by $18.5 million.
Gardner said the sale was structured so the county — not Aurora — would have spent $6,763,763 to pay off the remaining bonds that originally funded the facilities’ construction.
She said other costs — including a continued care agreement and property taxes that would come due once a private company operated on the county’s land — would have driven up the total cost to the county to go through with the sale to $20.9 million.
She said the total cost of the settlement is $7.85 million.
No new money will be used to implement the settlement agreement, Gardner said.
The county will pay Aurora $5.5 million under a continuing care agreement, but those payments were already in escrow, having been withheld by Gardner in 2015 and 2016 during litigation.
The county will also pay Aurora $2.35 million in future years, if Aurora meets certain requirements, including that the operations remain certified through Medicaid and that Aurora keeps the facilities at an 86 percent occupancy rate.
The written settlement agreements reflect months of negotiations between Gardner and Aurora representatives.
Gardner pledged during her 2014 campaign for county executive to return the facilities to county control.
In doing so, the county executive threatened to take back the facilities using eminent domain — government seizure and purchase of private property for public use.
Settlement documents indicate that Aurora sought the settlement as the result of continuing lawsuits.
The agreement would close all current court cases relating to the ownership of the centers.
Gardner said the county and Aurora used the help of a mediator to reach the final points in the agreement. She said she’s committed to working with Aurora in the future and a county finance employee will have an office in the Citizens and Montevue building to help with financial oversight.
“My difference of opinion has not been with Aurora. My difference of opinion has been with the former Board of County Commissioners,” Gardner said.
The former commissioners sought to sell the property, which they said had received more than $53 million in subsidies from the county’s budget between 2000 and 2013.
Shreve said he’s suspicious of the agreement’s guarantee of $2.5 million annual profit and he’s unsure that the facilities can run profitably.
To address the future operations of the facilities, Gardner also appointed an advisory board on Wednesday that will help the county determine how the county will move forward after the management agreement with Aurora expires. The advisory board includes five members who were involved with the Citizens and Montevue administration before the sale to Aurora.
The settlement documents are available online at www.frederickcountymd.gov/CitizensMontevue.