Malvern Hospital Seeks Baptist Health Deal

Hot Spring County Medical Center of Malvern is in talks to form a partnership with Baptist Health of Little Rock.

If the deal is approved by the Hot Spring County Quorum Court, Baptist Health would operate the 72-bed hospital, said HSC Medical Center CEO Sheila Williams.

The county owns the hospital’s building and the property, and HSC leases the space from the county. Pending approval, Baptist would enter into a sublease agreement with HSC Medical Center.

Mark Lowman, the spokesman for Baptist Health, declined to comment on the specific arrangements of the partnership because the transaction isn’t final.

Williams said she was unsure when the Quorum Court would vote on the issue.

The quorum court is “taking their time and conducting a thorough investigation before they make their decision,” she said.

The Arkansas Heart Hospital in Little Rock and St. Vincent Health System recently gave a presentation to let the Quorum Court know that the county has other options, Williams said.

The hospital began pursing a partnership in early 2012 because of looming governmental cuts, she said.

Just from Medicare alone the hospital was facing revenue reductions of $12 million during the next decade, she said. “Our board was trying to be proactive in light of those cuts,” Williams said.

And the county’s 0.5 percent sales tax, which was approved in 2008 for the hospital, is set to expire at the end of this year. The tax money generates $1.2 million to $1.5 million a year, but it’s earmarked for the maintenance and upkeep of the building.

The Quorum Court will decide in May if the tax will be placed on the ballot again to be renewed.

Williams said the hospital had been financially stable in recent years. For the fiscal year that ended June 30, 2011, the latest figures available to Arkansas Business, the hospital reported total patient revenue of $51.1 million and a net income of $410,951. For the fiscal year that ended June 30, 2010, it reported total patient revenue of $54 million and a net income of $1.7 million.

The board considered St. Vincent and the Heart Hospital, but decided on Baptist.

Baptist “was the only Arkansas-based health care system. … And we felt that it would be the best fit for our community,” Williams said.

Baptist also has hospitals in Arkadelphia, Heber Springs and Stuttgart.

Paul Cunningham, executive vice president of the Arkansas Hospital Association, said there isn’t “a wholesale move” of smaller hospitals in Arkansas looking to merge or affiliate with larger hospitals. But that prospect might be on the horizon.

“As we begin to see effects from the dramatic Medicare cuts found in the Affordable Care Act kick in, it would not be surprising to see more actions like this take place as a strategy for long-term viability,” he said in an email to Arkansas Business.

Arkansas hospitals are bracing for $42.6 million in lost revenue this year from 2 percent Medicare cuts. And it will just get worse.

During the next 10 years, Arkansas hospitals are projected to lose $2 billion in revenue from Medicare cuts, Cunningham said.

In 2012, a number of health care companies in Arkansas announced deals to work together in an attempt to save money.

Capella Healthcare of Franklin, Tenn., which owns National Park Medical Center in Hot Springs, announced plans to buy Mercy Hot Springs. That deal is still waiting for regulatory approval.

And in late August, St. Vincent and the University of Arkansas for Medical Sciences announced that they were studying an “affiliation” that would allow them “to deliver collaborative and/or integrated services.” A decision on whether they will work together hasn’t been announced.