Leader Blues

Tuesday, December 30, 2008

TOP STORY > >Hospital deal sealed

By NANCY DOCKTER
Leader staff writer

After months of negotiations, a deal has been sealed assuring the continued existence of North Metro Medical Center as an acute-care center for Jacksonville and surrounding areas for the next four years. On Monday, the hospital board of directors and Allegiance Health Management of Shreveport signed an agreement for a takeover of the hospital administration New Year’s Day with the option to buy the facility from the city at the end of four years.

Mayor Tommy Swaim, who also serves as chairman of the hospital board of directors, said he would sleep better now that the deal is settled. He and members of the board have been working almost daily since August to iron out the details of an agreement with Allegiance.

“It is a very positive thing for the community, but it has been a difficult process; so many things had to be worked out, had to be right,” Swaim said. “We’re very pleased with the result.”

When asked the share of revenues Allegiance would get in return for running the hospital, Swaim would only say, “a whole lot less than the other management company.” Quorum Health Resources, based in Brentwood, Tenn., has managed the hospital since 1983. Scott Landrum, who was brought in as chief executive officer in 2007 by Quorum, will remain as CEO. The current directors of nursing and support services will also be retained.

Under Allegiance, the hospital will keep its ER and existing medical and surgical services. Prospects are uncertain about opening of an after-hours clinic. In negotiations with Allegiance, the board had lobbied for a clinic as part of the deal in order to provide urgent but non-emergency care and relieve the hospital’s overloaded emergency room.

“An after-hours clinic has been discussed at length, and there are plans to start a clinic. I just don’t know how soon,” Swaim said.

Allegiance will continue and expand services it already provides at North Metro, which include a geriatric psychiatry unit, an intensive outpatient program, behavioral health care and home health and physical rehabilitation. The company has a good track record of attracting customers to the hospital, Swaim said.

“They are not strangers to us. We have already used their services, and they have done a good job,” Swaim said.

Allegiance will also establish a long-term acute-care hospital at North Metro as part of its plan to return the hospital to profitability.

An LTACH provides care to patients with complex medical needs that usually require a ventilator. Many come directly from a hospital intensive-care unit and need the same focused around-the-clock attention. The average stay at an LTACH is 25 days.

Allegiance recently celebrated the one-year anniversary of an LTACH it operates at the former Southwest Hospital in Little Rock. Cardiac and multi-system failure, ventilator dependence, infectious, renal and respiratory diseases, malnutrition, complex wounds and post-surgical healing are among conditions treated there.

Swaim is optimistic that the hospital’s financial health under Allegiance will be restored, having observed how the organization researched prospects at North Metro.

“Allegiance is taking a chance; they made many visits, talked to employees, looked at the books. I am confident they can make it a profitable operation,” Swaim said.

The last year that the hospital operated in the black was 2003-04, when it closed the fiscal year the end of June with a $652,000 profit.

The next year, net income slipped to the other side of the ledger with a $98,000 loss. In 2006-07, losses jumped to $3 million.

The 2007-08 fiscal year closed out with a net loss of $2.38 million. Since then, the net loss ranged as high as $400,000 each month.

The hospital was able to pay its bills by drawing on reserve funds put away during better times.

Meanwhile, its board of directors searched for a solution to the persistently slumping revenues and had hopes of a purchase or lease deal to come through with Allegiance.

But existing bond debt of more than $10 million used for renovations at the nonprofit facility was not something Allegiance, a for-profit entity, could take on.

The hospital will remain a private, nonprofit entity. If Allegiance eventually purchases the facility, it would become a corporate, for-profit entity. Allegiance would pay the appraised price or existing bond debt, whichever is more.

“Whether we own the building or they own the building doesn’t really matter. The bottom line is as long as we keep a hospital that provides the services we need, we’re happy,” Swaim said.