Leader Blues

Tuesday, October 07, 2008

TOP STORY > >Hospital to see changes

Leader staff writer

The board of directors of North Metro Medical Center has signed a letter of intent to begin negotiations with Allegiance Health Management about leasing the hospital building, which is owned by the city of Jacksonville. In effect, this means Allegiance would assume control of operations of the hospital. With that could come new services, and possible elimination of others.

Last week, the Jacksonville City Council voted to clear the way for a lease agreement with a for-profit entity, such as Allegiance.

“This is an effort to maintain an acute-care hospital in the city of Jacksonville,” Mayor Tommy Swaim, who is also the chairman of the hospital’s board of directors, said on Monday.

The letter of agreement with Allegiance, a Shreveport-based firm, “does not keep another entity from making a proposal,” Swaim said.

Discussions have also been opened up with Baptist Health and St. Vincent Health, North Metro’s main competitors.

Also to be negotiated would be leasing of other assets, which includes everything used in hospital operations – from bed linens to furniture to medical equipment.

The hospital continues to confront financial challenges, with losses at more than $3 million. The hope is that Allegiance or another company would turn the hospital around while continuing essential healthcare services.

Currently, the building is leased to the hospital board of directors. If another company were to come in to operate the hospital, the arrangement would be a sublease from the board.

Part of the plan, ideally, is to be able to offer after-hours care at the hospital.

“An after-hours clinic is one of our negotiating points, one of our requests, but whether that would remain in the end” is not certain, Swaim said.

Keeping current staff is also a goal, if hospital operations change hands.

“We asked that they maintain as many of the staff as possible, if not all, if Allegiance comes in and operates the hospital,” Swaim said.

The mission of Allegiance Health Management is “to provide maximum assistance to rural and community healthcare facilities enabling them to prosper and succeed with their mission of providing for the diversified healthcare needs of their communities,” its Web site states.

This is accomplished via “ownership assistance, consulting and management services, and acquisition of services.”

According to its Web site, Allegiance has 31 facilities in eight states – Arkansas, Florida, Georgia, Louisiana, Mississippi, North Carolina, Oklahoma and Texas – that includes in Arkansas, eight counseling centers, three behavioral-health hospitals, a medical center and a specialty hospital.

The Allegiance corporate office did not respond to a request for further information about actual Arkansas locations.

North Metro’s financial difficulties stem from tough competition from two much larger hospitals within 10 miles – Baptist North in North Little Rock and St. Vincent North in Sherwood – and a low reimbursement rate to smaller hospitals for services provided to patients with government insurance (Medicaid, Medicare, and Tricare).

A large proportion of North Metro patients have government insurance.

Allegiance may be able to bring in services with a better reimbursement rate, such as long-term acute care, Swaim said.

From the fiscal year 2006 (ending June 30) to FY 2007, North Metro’s annual net loss increased from $804,000 to $3 million, according to an Arkansas Business report out this week.

For FY 2007, the hospital had a 3.45 percent negative return on total billed charges and $4.8 million loss in uncompensated care billed to insurers, out of a total $46.8 million billed.

The report is based on data from Arkansas Blue Cross and Blue Shield provided by hospitals.

North Metro is not the only hospital in Arkansas that is struggling financially. The ones having the most difficulties are small and rurally based.

“It is just tough on small hospitals,” Swaim said.

In 2007, the hospital hired a new CEO, Scott Landrum, in hopes of improving the bottom line.

With his administration has come a new name for the hospital, a sharper public image and improvements to the facility and services.

How much difference all that has made in financial sustainability is not certain. Hospital administrators have been reluctant to publicize the latest information about profitability.

Landrum and the North Metro chief financial officer, Cal Brummund, are employees of the management firm Quorum Health Resources (QHR), contracted to perform management services.

With the possibility of hospital operations being taken over by Allegiance or another entity, the future relationship of QHR and the hospital is uncertain, Swaim said.