To help understand how a nonpolitical, nonprofit corporation can benefit a public hospital and the community it serves, Grady's trustees need only look across the street at the turnaround taking place at the Hughes Spalding children's hospital. The Grady-owned facility — facing a crushing debt and in danger of closing three years ago — is being rebuilt and reorganized for specialty pediatric services by a subsidiary of Children's Healthcare of Atlanta, the nonprofit which took over day-to-day management of Hughes Spalding in February 2006.

Another example of the benefits of changed governance can be found in Savannah at Memorial Health University Medical Center. One of the largest public hospitals in the state, Memorial Health has always struggled to stay in the black. (Last year, it ran a deficit for the first time in nine years.)

But innovative management decisions over the last decade still allowed it to invest $14 million in a variety of new community services — like opening a clinic in a homeless shelter — all aimed at increasing access to care for thousands of poor and uninsured Chatham County residents.

The Hughes Spalding story

Faced with an $8.5 million deficit that jeopardized its half-century of service to poor and minority children in Atlanta, the aging and little-used Hughes Spalding hospital would probably have closed its doors, had not Dr. Andrew Agwunobi, then Grady's CEO, negotiated a deal with Children's Healthcare of Atlanta to allow a separate, nonprofit governing board to take over operations.

Since that change took place in February of 2006, Children's has put together an ambitious $35 million building plan for a new Hughes Spalding in downtown Atlanta, featuring a new emergency room, a specialized clinic for children with asthma and a sickle cell disease clinic. Both clinics serve a well-demonstrated need.

Changing the way Hughes Spalding operates — and who manages it — was not without controversy, especially among older, black physicians in Atlanta, some of whom were instrumental in the hospital's founding. They resisted Children's plans to cut the number of beds substantially and close the intensive care unit. Both moves were necessary to save the hospital, but the Grady trustees simply could not bring themselves to do so. The independent board Children's put together to manage Hughes Spalding did what it had to do.

As part of the agreement with Grady, Children's puts up $2 million a year to offset any operating losses Hughes Spalding incurs. Grady puts up $2 million as well. Fulton and DeKalb counties and the city of Atlanta have also agreed to another $2 million annually. The state of Georgia signaled approval of the new arrangement by chipping in $4 million to make the deal happen. Grady retains ownership of the hospital.

The new structure seems to have convinced politicians and philanthropists alike that Hughes Spalding can be saved. Those same politicians and community leaders are now waiting for a similar sign from Grady.

The Savannah story

Memorial Health University Medical Center in Savannah is more like Grady than just about any other hospital in the state. It operates one of the state's four Level I trauma centers, has a high volume of Medicaid patents (35 percent of patients, second only to Grady's nearly 50 percent) and in 2005 had to write off a net $70 million in indigent and charity care charges, compared to Grady's $69.6 million.

Like Grady, Memorial Health wants the state to do more to directly subsidize the trauma center, which serves a 35-county area. Without state help, hospital officials say, they may be unable to sustain the high quality trauma care the region has come to expect. Unlike Grady, it gets no operating subsidy from local governments, the state of Georgia or South Carolina, even though it routinely treats patients from across the river.

Over the years, the nonprofit, community-based board that runs the hospital has taken critical steps to offset Memorial Health's losses. Its nonprofit corporate status allowed it create a home-health nursing division, as well as sign contracts with doctors' groups to recruit subspecialty surgeons. New specialties in vascular surgery, breast cancer and colorectal cancer brought in Medicare and privately-insured patients who might otherwise have chosen to go to the two private hospitals in the county.

The push to attract more paying patients has not led Memorial Health to de-emphasize necessary services for the poor, a worry often expressed by Grady supporters who cling to the notion that transferring management from a public authority to a nonprofit corporation will change its historic mission. Among other things, Memorial Health has been able to contribute $14 million to a community partnership that coordinates a range of health and social service programs for poor residents in the county.

The partnership is responsible for raising $500 million for a behavioral health center for the mentally ill as well as coordinating primary care clinics, including one at a homeless shelter. All of the new programs are expected to significantly reduce the pressure on the hospital's emergency room to provide many of the same services to the poor and uninsured.

In Atlanta, Grady maintains its own network of community clinics that often duplicate services offered by the Fulton and DeKalb boards of health or those offered by federally-funded community health centers spread around both counties. Memorial Health in Savannah seems to have worked through such issues. In so doing. it is improving the health of Chatham County residents and saving them money.

The lessons for Grady are obvious.

— Mike King, for the editorial board (mking@ajc.com)