Leader Blues

Friday, December 05, 2008

TOP STORY > >City approves plan to sell hospital

By RICK KRON
Leader staff writer

North Metro, Jacksonville’s city-owned hospital, is losing $400,000 a month, Mayor Tommy Swaim told the city council Thursday.

“We can not continue to maintain a hospital,” he said, which is why the council approved leasing the facility back in October to Allegiance Health Management, but the city is having trouble locking the lease in because of the falling bond market.

So the mayor asked the council’s approval to give Allegiance the option to buy the hospital. “There’s no guarantee that they will buy it right away or even after a few years,” but it will help seal the lease, he said.

“It may not be the best deal, but it’s the only one we could find,” the mayor said. “This will keep the hospital here.”

Back in October the board of directors of North Metro Medical Center signed a letter of intent to begin negotiations with Allegiance Health Management about leasing the hospital facility. As negotiations continued, the hospital has fallen deeper in debt, losing more than $400,000 in October and again in November. (See editorial, p. 6A.)

When Allegiance decides to purchase the hospital, it will either pay the appraised price or the amount the hospital is in debt, which ever is greater, according to the mayor.

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

Local attorney Mike Wilson, who is also on the board, told the council that no matter what, the hospital would continue to operate a walk-in clinic.

The agreement with Allegiance calls for all major aspects of the hospital–the emergency room, outpatient care and surgeries–to continue. The mayor said Allegiance has plans to consolidate aspects of its operations that are in other leased locations to North Metro and believes it can make the hospital profitable within about six months.

Swaim said the city had tried to make deals with Baptist and St. Vincent, but neither submitted proposals. He said Baptist has reported a loss of $17 million and St. Vincent is $3 million in the red.

From fiscal year 2006 (ending June 30) to FY 2007, North Metro’s annual net loss increased from $804,000 to $3 million, according to a recent Arkansas Business report. For FY 2007, the hospital had a 3.45 percent negative return on total billed charges and a $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.

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, an advertising campaign and improvements to the facility and services.

Swaim said part of North Metro’s problem is that most residents in the area have a choice of hospitals within reasonable range. “But we are committed to have a hospital in our city. It’s just a question of whether we own it or a private company does,” he said.

The hospital has about 500 employees and an annual payroll of around $18 million, which translates into millions more going into the local economy, the mayor told the council.

The resolution approved unanimously by the council Thursday states that the city would prefer a long-term lease, but that “doing so is financially unfeasible in these economic times...it authorized the mayor and city clerk to negotiate at favorable terms with a qualified medical facility operations group an option to purchase.”

The mayor assured the council that the city would have first option to buy back the hospital if Allegiance buys it and then decides later to sell. “We will have first right of refusal,” 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.”

(Leader staff writer Nancy Dockter contributed to this article.)