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UAMS Shakes Up Conway Hospital RivalryLock Icon

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Since opening in 2016, Baptist Health Medical Center-Conway has relied on doctors from the University of Arkansas for Medical Sciences to provide certain services. And because UAMS is a taxpayer-supported teaching hospital, Conway Regional Health System sees this as unfair competition.

“It turned UAMS from an educator into a competitor,” said Matthew Troup, president and CEO of the nonprofit Conway Regional, which operates a crosstown hospital with 150 beds. “It tilts the scales to support a business decision that Baptist made.”

The soundness of that business decision is a matter of opinion. While Baptist Health says the Conway facility is successful and performing as expected despite continuing operating losses, Troup believes the Little Rock nonprofit erred in building a $150 million, 111-bed hospital in a city that didn’t need it. That, he said, is why it has needed help from UAMS.

The health care industry is complicated, Troup said, but it always requires two things: doctors and patients. He speculates that Baptist Health banked on luring doctors away from Conway Regional, expecting their patients to follow. When that didn’t happen, he said, Baptist Health hired UAMS doctors to provide emergency room services in 2016 and orthopedic services in January 2017.

UAMS would not reveal how much Baptist is paying for those services. 

“Under our contracts, UAMS is compensated for its actual costs of providing the services, with the potential for incentive payments if quality targets are achieved,” UAMS spokeswoman Leslie Taylor said in an email to Arkansas Business.

The amount of revenue received “would fall under the competitive advantage exemption of the Arkansas FOIA,” she said, referring to the state’s Freedom of Information Act.

There is no question that Baptist Health Medical Center-Conway has cut into Conway Regional’s revenue. 

Conway Regional has seen a 25 percent decrease in emergency room patient volume and a 9 percent drop in admissions since the September 2016 opening of Baptist Health Medical Center-Conway, Troup said. He said that cost Conway Regional about $13 million in patient revenue. 

In 2016, Conway Regional had net patient revenue of $143.4 million and net income of $6.4 million, according to the most recent data available to Arkansas Business.

Troup said he’s not sure what the future holds for the Conway hospital market. “We’re in a very strong financial position and can continue operating like we are today for a very long time.”

Costly Startup
Meanwhile, Baptist’s Conway hospital has been losing money, according to Baptist Health’s financial statements and reports to bondholders filed with the Municipal Securities Rulemaking Board. Between Jan. 1, 2016, while the hospital was still under construction, and Sept. 30, 2017, Baptist Health Medical Center-Conway reported seven straight quarters of operating losses totaling $47.1 million.

Baptist Health spokesman Mark Lowman declined to answer several questions about the Conway hospital and its arrangements with UAMS. Instead, he said in an email statement that “Since opening 15 months ago, the Baptist Health Medical Center in Conway has continued to successfully perform as expected, both financially and operationally.

“The costs of starting our new hospital facility from the ground up is expected to result in financial losses in the early years,” Lowman wrote. “It is a positive that BHMC-Conway is currently performing on schedule consistent with the start up financial projections.”

BHMC-Conway has seen increasing patient volume. In fact, emergency room visits increased from 5,191 during the first full quarter the hospital was open at the end of 2016 to 6,171 for its quarter that ended Sept. 30, according to Baptist Health’s filings. The emergency room volume has risen so much that in June Baptist and UAMS revised their original contract to add three more full-time equivalent ER doctors to the Conway hospital, bringing the total staffing to as many as nine physicians, according to the contract provided by UAMS in response to an FOIA request.

Still, Troup calculated that only about seven more patients are spending the night in a Conway hospital than they did before Baptist opened its 111 beds. He said Conway Regional’s patient census averaged about 80 before the Baptist hospital opened. Now its average is 72, while Troup estimated that Baptist’s is 15. Baptist has not yet reported an average for 2017.

Stephanie Gardner, interim chancellor at UAMS, said she wasn’t involved in the initial discussions about providing physician services to Baptist’s Conway hospital.

But UAMS has worked with Baptist Health for more than 20 years, “and so a natural discussion occurred, I think, about our needs and expanding our footprint to meet our mission,” she said.

In 2016, UAMS saw more than 40,000 patients from Faulkner County or its surrounding counties, Gardner said. “So having some presence in that area should improve access for people who live there,” she said. 

The agreement with Baptist Health Medical Center-Conway also makes sense, she said, because UAMS’ hospital beds are almost always full and Baptist’s Conway hospital has open beds and surgical suites available. In addition, it’s only 30 minutes away from UAMS’ main campus.

Working with other hospitals is nothing new for UAMS, Gardner said. In the last few years, UAMS has considered working with other medical centers in Arkansas — including Conway Regional Medical Center.  

UAMS’ talks with Conway Regional occurred in 2013 and 2014, but no agreement could be reached, Gardner said.

Instead, Conway Regional decided to align with Baptist’s rival, CHI St. Vincent of Little Rock, which has provided management services to Conway Regional since August 2015. (In 2012, St. Vincent Health System started talks with UAMS about working together, but no agreement ever materialized.)  

Arkansas Gov. Asa Hutchinson said last week in an email statement to Arkansas Business that UAMS has a long history of partnering with area hospitals in order to carry out its mission of educating future physicians and health care workers, as well as improving overall health and access to care for Arkansans. 

“As a state, we have reduced general revenue funding for UAMS and this means UAMS must be financially independent in terms of its broader mission of clinical care,” the governor’s statement said.

In December, UAMS said it was reviewing ways to increase revenue and slash costs to cut a projected deficit of $72.3 million for the current fiscal year, which ends June 30. At the beginning of the fiscal year, UAMS had projected a much smaller deficit of $39.8 million.  

Gardner said everything “is on the table” for cuts, including possible layoffs to its staff of about 10,000. UAMS is one of the state’s largest employers.

Coming to Conway
In October 2013, Baptist Health first announced that it was considering expanding into Conway. Russ Harrington, then CEO of Baptist, told Arkansas Business in late 2013 that about 30 doctors from the area had urged Baptist to enter their market.

The doctors “had a strong desire to see a new hospital where they could have more direct input into the planning and operation of the hospital,” Harrington said.   

Conway Regional, the city’s longtime hospital, naturally did not agree. “We feel like we meet the needs adequately, and there’s not a need for a second hospital,”Jim Lambert, then CEO of Conway Regional, told Arkansas Business at the time. 

He said the health care market in Conway wasn’t growing fast enough to support another hospital. Conway’s population, however, was growing. About 65,000 people, an increase of about 10,000 over the past decade, live in the city.

Harrington said the number of patients coming to existing Baptist facilities from Faulkner County and the surrounding area indicated a need for another hospital.

“It’s always been an important part of our market, and this gives us a chance to solidify that and hold onto it,” he said at the time. “We also see it as an opportunity to spread our area of service.”

Baptist Health said in a bond disclosure document filed in 2014 that it anticipated the Conway hospital “will eventually be” a key material contributor to the financial success of the health system.

But if the hospital doesn’t meet the financial projections, Baptist’s ability “to pay operating expenses and meet debt service requirements … could be adversely impacted.”

The bond document didn’t reveal financial projections for the hospital.

Physician Partnership Cited
A groundbreaking for the Conway hospital was held on July 7, 2014.

“Today’s groundbreaking is the culmination of years of hard work and perseverance by a dedicated group of physicians and [a] steering committee who have worked closely with Baptist Health administration on the development of this project,” Dr. Ben Dodge, an orthopedic surgeon and chairman of the Physician Steering Committee, said in a Baptist Health news release. 

“We are impressed with Baptist Health’s professionalism, integrity, and insight into the healthcare needs of Arkansans. We now look forward to construction and subsequent opening of Baptist Health-Conway in early 2016.”

Baptist Health said in its 2014 bond document that “a partnership of 30 physicians specializing in various medical fields has agreed to key elements of a co-management agreement to operate BH-Conway.”

No further details were given about that arrangement.

It’s unclear to Arkansas Business what role Dr. Dodge played in the management of the hospital. He did not return a call for comment, and his name is not listed as a doctor who practices at Baptist Health Medical Center-Conway.

At the time of the groundbreaking the estimated cost of the hospital was $130 million, for 216,000 SF with 96 beds. The cost of the hospital and its size would grow by the time it opened in September 2016.

Baptist Health Medical Center-Conway

Quarter Ended Sep. 30
Dec. 31
Mar. 31
Jun. 30
Sep. 30
Operating Loss
Admissions 43 364 480 496 547  
Patient Days** 116 1,053 1,538 1,490 1,582  
Average Length of Stay (days) 2.7 2.9 3.2 3.0 2.9  
Outpatient Visits 241 1,899 2,777 2,894 3,457  
Emergency Room Visits 732 5,191 5,582 5,603 6,171  
Inpatient Surgical Cases 8 95 105 113 127  
Outpatient Surgical Cases 22 165 241 286 287  
Operating Loss# -$5,388 -$13,225 -$6,700 -$8,317 -$8,224 -$47,118

*Hospital opened for patients on Sept. 16, 2016
**Excluding newborns
#In thousands. Includes -$1,206 for quarter ended March 31, 2016, and -$3,858 for quarter ended June 30, 2016.

Source: Baptist Health’s unaudited consolidated financial statements and statistics on file with the Municipal Securities Rulemaking Board

‘A Business Need’
An FOIA request turned up no documents, emails or other communication relating to the discussion between UAMS and Baptist Health Medical Center-Conway that resulted in the contracts for services. 

But Conway Regional’s Troup had a lot to say about it.

“Despite a nearly four-year planning phase, Baptist Health-Conway has done very little to add new physicians or services to the community it seeks to serve,” Troup said in a Nov. 10 letter to UAMS’ Gardner to discuss his concerns about the arrangement with Baptist Health. He also said in the letter, which was released by UAMS, that only 13 percent of BHMC-Conway’s staff listed Conway as their primary practice location.

“Why should Baptist Health-Conway rely upon UAMS physicians to provide for its basic needs?” Troup said in the letter. “Actions and data suggest an answer: they either did not see community need to support more physicians and/or they anticipated the medical staff moving over from Conway Regional. It is evident that, lacking local physician support and justifiable community need to support the recruitment and retention of more physicians, Baptist is leaning upon its relationship with UAMS to fill a business need — not a community need.”

Gardner said in her letter responding to Troup that UAMS’ intent was not to harm Conway Regional “in any way.

“We are trying to provide academic medical center care closer to home for the residents of that area, relieve some of our capacity constraints in Little Rock and extend our education mission,” Gardner said. “At the same time, we can help stay ahead of health care, education and health research needs in the second fastest growing area of the state.” 

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