Saline Memorial Hospital's board of directors voted to create a public-private partnership with Capella Healthcare of Franklin, Tennessee — a move the hospital's leaders said will provide for its "long-term sustainability."
The two organizations announced in May that they were exploring the possibility of a partnership, but ended the talks in December. Privately held Capella operates 10 acute care and specialty hospitals in five states, including two in Arkansas — National Park Medical Center in Hot Springs and St. Mary's Regional Medical Center in Russellville.
Positioned as a 50-50 "joint venture partnership," the agreement preserves the tax-exempt, nonprofit charitable status of Saline County Medical Center, while creating a tax-paying, for-profit entity hospital leaders said will "contribute a new source of revenues to the city and county through the paying of property and sales taxes."
"This innovative partnership provides additional resources for our community that will help us expand services, recruit specialists and continue to enhance our already strong quality," Meredith Wineland, Saline Memorial's board chair, said in a news release. "The affiliation with a larger entity and regional providers also provides for our long-term sustainability."
Officials said Saline County Medical Center will continue as a nonprofit and will focus on "assessing community needs." The county will continue to own the real estate, and the public-private joint venture will become a tax-paying organization. Excess cash flow from the joint venture to the medical center will be received tax-free.
CEO Bob Trautman said the partnership will make Saline Memorial a stronger organization with new growth opportunities. He said there no plans to change the hospital’s partnership with Arkansas Heart Hospital.
"We'll have access to more resources to continue our quality initiatives as well as new capital dollars to fuel growth strategies, including recruiting new physicians and adding new technology," he said. "Most importantly, Capella Healthcare’s leaders are deeply committed to community-based health care and high-quality services, like we are. Our mission, vision and values are highly compatible."
Officials said Saline Memorial's foundation, SMH Foundation, will continue as a separate 501(c)3 entity, raising money for community programs including CPR equipment for students, scholarships, patient and family support, and the Hospice House in Bryant.
The partnership is the latest to be announced in Arkansas and is part of the national trend toward hospital affiliations amid federal health care reform, new regulations and funding cuts. Troutman said those factors, plus more competition from outside the county, have made for a "challenging environment."
"To succeed in the future, every hospital must continue to improve quality while lowering costs and expanding access for patients," he said. "Closer collaborations and increased scale are essential for success in this new era since every hospital is being challenged to do more with less."
With 117 beds, Saline Memorial reported net patient revenue of $86.4 million and a net income of $4.1 million for its most recent fiscal year ended June 30. It had net patient revenue of $72.5 million and a net income of $3.3 million for the fiscal year that ended June 30, 2014.
Last week, Capella Healthcare announced a merger agreement with privately held RegionalCare Hospital Partners of Nashville, Tennessee. Terms of the deal were not disclosed, but the combined company will have 18 hospital campuses in 12 states with more than 13,000 employees, 2,000 affiliated physicians and $1.7 billion in revenue. The combined company's name will be RCCH Health Partners (RegionalCare Capella Healthcare).
Officials said the merger would not affect the partnership with Saline Memorial.