Leader Blues

Friday, December 19, 2008

TOP STORY > >Hospital deal almost done

By RICK KRON
Leader staff writer

Jacksonville is close to turning over the reins of its hospital, North Metro, to Allegiance Health management.

“We have a verbal agreement and it’s a sound agreement,” Mayor Tommy Swaim told aldermen Thursday, “but it’s not a deal until all the paperwork is signed.”

He told the council there were still some technical issues that needed to be solved before the Shreveport, La.-based management firm took control of the hospital.

The city wanted to lease it to Allegiance, but in the current economic conditions that fell through. Instead Allegiance will manage the hospital and have an option to buy it.

Back in October, the city council approved leasing the hospital to Allegiance, but the mayor came back to the council earlier this month to get permission for the current management-option deal. “There’s no guarantee that Allegiance will buy it right away or even after a few years, but it will help seal the deal,” the mayor pointed out.

“We cannot continue to maintain a hospital,” the mayor told the city council at its Dec. 4 meeting. “North Metro is losing $400,000 a month.”

“Negotiations have been going on everyday for weeks. Our goal is to have something final no later than Dec. 31,” said the mayor, who also serves as chairman of the hospital’s board of directors, “and in the meantime, it’s business as usual at the hospital.”

If and 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.

Brig. Gen. Rowayne Schatz, top commander at Little Rock Air Force Base, said in an interview last week that the base relies on the hospital. “North Metro is the closest emergency room facility,” the general said. “We don’t have an ER in the base clinic. We rely on them for medical services in our local community, to provide an emergency room and in-patient services.”

“We do send several of our airmen and their families to North Metro and they’ve been a good provider for us and we’ve been monitoring their situation as a customer,” he said. “But we have no sway.”

The proposed 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’s, but neither submitted proposals. He said Baptist has reported a loss of $17 million and St. Vincent is $3 million in the red.

The mayor added that the company current managing the hospital had no interest in leasing or buying the hospital.

The last year that the hospital operated in the black was 2003-04, when it closed the fiscal year June 30, 2004 with a $652,000 positive income. The next year, net income slipped to the other side of the ledger with a $98,000 loss.

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 $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.

Much of North Metro’s losses are attributable to uncompensated and charity care, as well as the low reimbursement level for

Medicaid and Medicare patients.

The federal Emergency Medical Treatment and Labor Act mandates that any hospital that gets Medicare and Medicaid funding – and essentially all do – must provide a medical screening and treatment if necessary for anyone who comes to the emergency room, regardless of their ability to pay.

Swaim said another part of North Metro’s financial problems 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.

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