Leader Blues

Friday, January 09, 2009

EDITORIAL >>Hospital tries new approach

The city of Jacksonville has reached a deal with Allegiance Health Management, a medical provider from Shreveport, La., to operate North Metro Medical Center in hopes of getting it back on the road to financial health.

The city-owned hospital has lost more than $5 million in recent years trying to provide care to the community while having to write off millions of dollars in uncollected debt. The last time the hospital had a surplus was in 2003-04, when it earned $652,000, but it has had to dip into its reserves to cover significant deficits since 2005, when it lost $98,000. In 2006-07, losses jumped to $3 million. The 2007-08 fiscal year ended with a net loss of $2.38 million.

This ocean of red ink is a reflection of a deteriorating economy as well as the result of mounting competition from several hospitals that have opened in the area in recent years, including St. Vincent Medical Center North in Sherwood and Baptist Medical Center in North Little Rock.

Its rainy-day fund running low, North Metro could not keep losing millions of dollars indefinitely. Fearing they might have to close the hospital if the hemorrhaging continued, the North Metro board of directors reached out to Allegiance, which will manage the hospital for the next four years. After that, it has the option to buy the medical center for its appraised value or for its remaining debt, whichever is higher.

Allegiance is reluctant to take on the existing bond debt of more than $10 million used for renovations at the nonprofit facility.

But it does have a business plan, which includes focusing on long-term acute care, a niche it has pursued at the old Southwest Regional Medical Center in Little Rock. The company has had a long relationship with North Metro (and its predecessor, Rebsamen Medical Center), where it operates an outpatient psychiatric care unit as well as an inpatient geriatric unit.

Allegiance could provide other new services to raise more revenue and will probably seek ways to cut overhead to earn its management fee — reduced somewhat from what the city paid Quorum Health Resources, based in Brentwood, Tenn., which has managed the hospital since 1983. Scott Landrum, who was brought in as chief executive officer in 2007 by Quorum, will remain as CEO.

North Metro’s prospects could brighten if the economy improves this year and revenues start pouring in again. What’s more, the Obama administration could make it one of its priorities to keep community hospitals open with additional subsidies as part of its national recovery plan.

But if we lose the hospital, patients would have that much farther to travel for emergency care, endangering the lives of everyone who needs quick medical attention. Think of it: Without North Metro, we’d have to travel longer distances to reach another hospital — for many of us, that could be 10 miles or more. Little Rock Air Force Base would lose a municipal hospital almost at its front gate.

Here’s hoping Allegiance will succeed where others have stumbled.