LITTLE ROCK — St. Joseph’s Mercy Health System has purchased 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.
The St. Joseph’s system will add about 277 employees when it integrates Health-First and HealthPark. About 15 jobs will be eliminated, and the affected workers already have been notified. St.Joseph also will gain 19 physicians, and a total of 11 nurse practitioners and physician assistants.
Before the purchase, St. Joseph’s had 1,903 employees. A sale price wasn’t disclosed.
St. Joseph’s has more than 300 beds at St. Joseph’s Mercy Health Center, the largest hospital in Hot Springs.
Johnsen said HealthPark decided to sell for several reasons. One is that the federal health-care overhaul signed by President Barack Obama in March restricts physician-owned hospitals from expanding. HealthPark also had a series of “ transi-tional” chief executives in recent years, Johnsen said.
“They saw the future getting a little bit tougher for them,” Johnsen said.
He said the purchase meant more than just buying a competitor.
Besides adding specialties such as orthopedics, he said, the purchase will build on an approach that St. Joseph’s began more than two years ago that more heavily integrates its physician clinics and hospital.
HealthPark executives in the past few years also had complained of what they said were low reimbursement rates from commercial insurers such as Arkansas Blue Cross and Blue Shield.Larger community hospitals were paid better by insurers, they said.
In recent years, Health-Park 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. They claimed the disparities violated the state’s “any-willing-provider” law and the issue still hasn’t been resolved.
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 surpluses in recent years, “but it’s been diminishing.”
The St. Joseph’s system continues to struggle financially. In part because of its investment in an electronic health-record system, it 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 the system has hope that things will improve with the focus on a more integrated relationship with physicians.
“That entire integrated model has proven successful in other places” around Mercy, he said. St. Joseph’s is part of the Sisters of Mercy Health system, which operates in Arkansas, Kansas, Missouri and Oklahoma.
Having more than 80 physicians should help, he said. With more specialties, patients won’t leave the Hot Springs market as often.
The system also is benefiting from improved reimbursement from Medicare and Medicaid, Johnsen said.
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-square-foot medical office building adjacent to Health-Park Hospital, the release said.
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 give them 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.
While doctors owned most of HealthPark, Johnsen said the Cirrus Group of Dallas owned about 84 percent of the land and building related to HealthPark.
Some of the proceeds from the sale will benefit Cirrus, he said.
St. Joseph’s still has competition in town including the for-profit National Park Medical Center, which is owned by Capella Health Care of Franklin, Tenn.
Business, Pages 25 on 07/31/2010