St. Joseph’s Mercy is buying some of its competition in the Hot Springs market, the 20-bed HealthPark Hospital and the HealthFirst Physicians Group.
HealthPark, which is about 98-percent owned by physicians, was shopped nationally for proposals in March, said Tim Johnsen, chief executive for St. Joseph’s.
St. Joseph’s will add about 277 employees as part of the deal for HealthFirst and HealthPark. About 15 jobs will be eliminated, and the affected workers already have been notified. St. Joseph will gain 19 physicians.
A sale price wasn’t disclosed, but officials with St. Joseph said it was a multimil-lion-dollar deal.
St. Joseph’s has 319 beds, not counting what it will add from the sale.
Johnsen said HealthPark decided to sell for several reasons. For example, the healthcare overhaul signed by President Barack Obama in March restricts physician-owned hospitals from expanding. In addition, Johnsen said, HealthPark had frequent turnover of its chief executives.
“They saw the future getting a little bit tougher for them,” Johnsen said.
HealthPark executives have in the past two years complained of what they say are low reimbursement rates by commercial insurers such as Arkansas Blue Cross and Blue Shield compared with what larger community hospitals get.
HealthPark had joined Arkansas Surgical Hospital in North Little Rock, another physician-owned facility, in a case before the Arkansas Insurance Commission in which they sought to change those differences, but the outcome has yet to be determined.
Then-Commissioner Julie Benafield Bowman said the insurers could adjust payment for cost and quality reasons, but the case is being reconsidered because a judge found that earlier proceedings showed the appearance of impropriety after Bowman subsequently took a job at one of the insurers.
Johnsen said the lower reimbursement also was likely a factor behind HealthPark’s decision to sell. He said HealthPark had had surplusesin recent years, “but it’s been diminishing.”
In part because of its investment in an electronic health record system, the St. Joseph system expects to see a loss of $4 million in the fiscal year ending June 30, Johnsen said. And last year, the system lost $9 million.
Johnsen said in a release that patients at HealthFirst would continue to see the same doctors at the same locations as before the merger.
As part of the deal, St. Joseph will gain a 21,000-squarefoot medical office building adjacent to HealthPark Hospital, the release said.
The doctor-owned hospitals have said insurers had violated the state’s “any-willing-provider law” by not paying hospitals according to a consistent formula. The law was designed to end exclusive relationships between hospitals and insurers, such as between Blue Cross and Baptist Health in Little Rock.
Glen Mays, chairman of the University of Arkansas for Medical Sciences’ Department of Health Policy and Management, said hospital consolidation is happening less often than in the 1990s, when hospitals merged to gain clout for negotiations with health maintenance organizations, or HMOs. Today, buying other facilities can help hospitals cope with the recession through the efficiencies produced and givethem more leverage with insurers.
Mays also noted that community hospitals have long worried about competition from physician-owned hospitals, and the deal to buy HealthPark would diminish that threat for St. Joseph’s.
Business, Pages 19 on 07/31/2010