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Arkansas Heart Hospital Keeps Up Steady FlowLock Icon

4 min read

Even though cardiac surgeries are down across the country, Arkansas Heart Hospital in Little Rock hasn’t missed a beat.

Its revenue was $177 million for its fiscal year that ended Sept. 30, up 17.5 percent from the previous year. Arkansas Heart Hospital ranked No. 57 on Arkansas Business’ list of the 75 largest private companies in the state.

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The specialty hospital has grown from the 21 beds it offered when it opened in 1997 to 110 beds and 30 clinics across Arkansas, said Dr. Bruce Murphy, hospital CEO.

Arkansas Heart Hospital treats about 100,000 patients a year. Murphy attributes the growth to new partnerships and clinics added in recent years.

In April, the hospital announced an alliance with the Medical Center of South Arkansas of El Dorado to work together on several issues, including the recruitment of cardiologists.

“We are always welcoming to the potential for alliances with other facilities,” said Murphy, 65. “We are independent, and so we’re not part of a big system.”

He said the Heart Hospital is in talks with other hospitals in Arkansas, but declined to say which ones. “We’re open to many other relationships, and I’m sure we’ll have some.”

In January, the hospital said it had added the Malvern Diagnostic Clinic to its network.

This month, the Heart Hospital named Drew Jackson, who was its chief strategy officer, as its president. Murphy said the hospital hasn’t had a president in three or four years and Jackson was promoted to make it clear to the 850 full-time employees and 300 part-time workers that he is the No. 2 person in the administration. Jackson had been the chief strategy officer since 2014.

Murphy said one constant challenge the hospital faces is regulatory compliance. Every hospital is overseen by about 130 different federal or state health care-related regulatory bodies, he said, and their impact on costs can be significant. “They have tremendous power to make things more expensive to do,” he said.

Hospitals have seen their margins become slimmer “in order to be, quote, in compliance,” Murphy said. “So that’s one of the big hurdles we face.”

Arkansas Heart Hospital reported a loss of $3.9 million for its fiscal year that ended Sept. 30, 2016, the most recent figure Arkansas Business could obtain from the Heart Hospital’s Medicare cost reports. It had net income of $11.5 million for its 2015 fiscal year.

The number of heart operations across the country has been declining, Murphy said, because instead of heart bypass surgery, stents are being used to unblock heart arteries. In addition, medications are reducing the need for procedures.

Nevertheless, the heart hospital has seen a stream of new patients. “Our new patients are growing at roughly 20 percent year over year over the last six years,” Murphy said. “And so our total [patient] numbers have not gone down.”

Most of the Heart Hospital’s patients have Medicare, the federal health care insurance program for people who are 65 and older and for the disabled.

Court Battle
In its first decade, some Heart Hospital cardiologists spent time in Pulaski County Circuit Court battling Baptist Health of Little Rock, the largest health care provider in the state, over its policy restricting their credentials.

In 2004, a group of doctors — partners in Little Rock Cardiology Clinic and owners of 14.5 percent of the Heart Hospital — sued Baptist Health, alleging that Baptist’s policy prevented doctors from serving on staffs or having hospital privileges if they or a family member had a financial stake in a competing facility. The doctors said Baptist’s policy was an effort to limit competition.

Pulaski County Circuit Court Judge Collins Kilgore issued a preliminary order in 2004 to prevent Baptist from enforcing the policy.

In 2009, Kilgore ruled that Baptist Health can’t rescind doctors’ privileges if they have a financial interest in another hospital. He said in his ruling that Baptist Health acknowledged the policy was put in place to suppress competition from specialty hospitals.

“This is a victory for patients throughout Arkansas, and throughout the nation,” Murphy said in a 2009 news release. “Patients should never be forced to choose between their doctor and a hospital and now, at least in Arkansas, they will not need to.”

The Buyout
In 2010, Medcath Corp. of Charlotte, North Carolina, decided to sell its 70.3 percent ownership in the Heart Hospital, a stake that it had had since 1997.

Murphy and other local doctors-investors owned the remaining shares of the hospital and worried that a new majority owner would change the hospital’s mission of treating Arkansans and reinvesting in technology.

“If you were an out-of-state hospital-managing company, then your business model is centered around taking dollars from Little Rock and exporting those health care dollars to wherever your headquarters are in whatever state you’re in,” Murphy said.

So Murphy led a $65 million buyout of Medcath to keep the hospital locally owned.

The move meant, however, that he would have to hand over his medical license to comply with federal laws concerning doctors owning hospitals. Murphy agreed to end his 30-year career as a cardiologist to be the heart hospital’s full-time CEO and administrator.

“Transition-wise, it has not been terribly difficult,” Murphy told Arkansas Business in 2011, after the deal closed. “I was making management decisions the last 10 years anyway.”

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