Magazine September 2018

The Bigger The Better

By Chris Price

Healthcare systems are expanding to improve their offerings and chances for economic success.

Health care, its costs and how it’s delivered are hot-button issues on the national stage and closer to home, here in Arkansas. The industry is in flux. Seemingly gone are the days of the standalone, independent hospital. Today, health care organizations are expanding and joining forces to create systems with multiple hospitals, clinics and related facilities in order to improve their offerings and chances for economic success.

The movement is Darwinian in nature. Larger organizations are expanding into new markets, swallowing up or impacting existing smaller facilities with increased competition and changing the way hospitals operate and deliver health care.

That was seen in Conway, in 2016, when Baptist Health opened a $130 million, 111-bed hospital, which competes directly with Conway Regional Health System’s 150-bed acute-care medical center.

There are 106 hospitals in Arkansas, which have an $11.7 billion annual economic impact on the state, according to statistics provided by the Arkansas Hospital Association. While the number of facilities may seem large for a state this size, 22 of the 75 counties in Arkansas — more than 29 percent — do not have a local community hospital. Forty counties have a single hospital and 19 of those have a hospital with 25 or fewer acute beds.

In 2016, Arkansas hospitals covered $371 million in uncompensated care for patients who could not afford to pay for the services they received. Filling those holes impacts hospitals’ bottom lines and affects the services and offerings they provide. The effect was most noticeable last year when the University of Arkansas for Medical Sciences (UAMS) was forced to lay off 253 employees and eliminate hundreds of unfilled positions to gain better economic footing.

In order to stave off crisis, many hospital systems across Arkansas are expanding in hopes of limiting risk and being able to improve their purchasing power through economies of scale. This summer, Baptist Health announced its intention to buy the two-hospital Sparks Health System in western Arkansas, Saline County made public Arkansas Heart Hospital’s (AHH) intention to build a new facility in Bryant and UAMS released plans to expand in ever-growing Northwest Arkansas.

UAMS eyes expansion in NWA, rural areas

When UAMS entered its 2019 fiscal year in July, it was the first time in four years the organization had a balanced budget, according to Chancellor Cam Patterson, M.D., who took over the state’s only health sciences university at the beginning of June. By regaining solid economic ground, Dr. Patterson says UAMS is thinking about innovation, new programs and expansion.

“It was a painful process, but it was necessary to right-size UAMS,” says Dr. Patterson. “We managed to improve our performance last year compared to budget by about $26 million. We still ended the year with about a $15 million deficit, but our 2019 budget is conservative with more upside than downside opportunities. It gives us an opportunity to enter growth mode and better prepare ourselves to cover all 3 million citizens in the state of Arkansas.”

Dr. Patterson says UAMS’s footprint will continue to grow. The system currently has eight regional campuses, but he says the right number for the system is about 12 or 13. Northwest Arkansas, where rapid economic and population growth has caused the health-care need of the area to exceed capacity, is an area where UAMS sees opportunity for expansion.

The organization is also focusing on ways to better deliver care in more rural areas.

“We need to figure out ways to increase the number of our trainees and increase the probability that those trainees will practice in certain areas,” he says. “Little Rock doesn’t need more cardiologists, but there are plenty parts of the state that do. There are a number of approaches that we are taking to ensure the probability that that will happen — recruitment, residency programs — so that once our trainees finish their education they are more likely to stay in those communities.”

Baptist Health buys Sparks

In July, Baptist Health announced it had entered into a purchase agreement with Community Health Systems (CHS), headquartered in Franklin, Tenn., to acquire the two-hospital Sparks Health System, which serves more than 350,000 people in an 11-county area and includes Arkansas’ first hospital, Sparks Regional Medical Center (a 492-bed acute-care hospital in Fort Smith that opened in 1887), Sparks Medical Center (a 103-bed acute-care facility in Van Buren) and affiliated physician clinics and fitness centers covering western Arkansas and eastern Oklahoma.

Baptist Health currently employs more than 9,300 people and operates nine hospitals with more than 1,500 beds combined, including locations in Little Rock, North Little Rock, Arkadelphia, Heber Springs, Stuttgart, Malvern and Conway. It is the largest health care provider in Arkansas, fifth largest employer in the state and the third largest private-sector employer behind Walmart and Tyson Foods. The addition of the Sparks facilities will increase the total number of hospitals in the Baptist Health system to 11 and add approximately 2,000 employees.

“I’m humbled to think of the opportunities we have for the state’s first hospital in Fort Smith to join Baptist Health, the state’s largest and most comprehensive health-care system,” Troy Wells, president and CEO of Baptist Health says in a press release announcing the deal. “It is an honor to align our organization with the outstanding reputation of the entire Sparks family and its team of dedicated physicians and caregivers.”

The transaction is undergoing regulatory, legal and operational review and is expected to be finalized by the end of the year. Financial terms have not been disclosed.

CHS, a publicly traded company, had $15.35 billion in revenue in 2017 but has sold more than 40 hospitals in the past two years as it attempts to reduce its debt after its $7.6 billion purchase of Florida-based Health Management Associates in 2014. The organization sold 30 hospitals in 2017, and made agreements earlier this year to sell six hospitals in Tennessee, Louisiana and Florida. That sale and some debt exchanges are expected to contribute about $1 billion in net revenue this year and lower its long-term debt from $14.8 billion to $13.6 billion.

Company stock, which trades on the New York Stock Exchange under the ticker CYH, traded for a five-year high of $52.71 per share at the end of June 2015. At the beginning of August 2018 it sold at its lowest point $3.22.

The company will have more than 115 hospitals in 20 states, including six hospitals in Arkansas once it divests the Sparks system.

“Baptist Health has a proven track record of supporting Arkansas communities and expanding access to the highest quality care available, and this venture is a huge win for this region,” says Brandon Bullard, Sparks’ interim CEO. “Baptist Health has a strong reputation for innovative health and wellness initiatives that are helping communities live healthier lives.”

Arkansas Heart Hospital to build in Bryant

After years of whispers that Little Rock-based Arkansas Heart Hospital (AHH) would expand into Saline County, it appears the organization has plans to make rumor reality. At a May meeting of the Bryant Development Review Committee, members received plans for a four-story, 186,000-square foot hospital and two-story medical office building in the city with the possibility of two more buildings and a parking deck. The new hospital would employ as many as 250 people.

The hospital has not made any public announcement on the planned hospital and says specific details will be released later this year. The only acknowledgement of the project from the organization has come from a press release, in which AHH President and Chief Operating Officer Drew Jackson says, “It is our intent to introduce a new project that will bring economic development and growth to Saline County. As we continue to develop plans we appreciate the continued support of the community.”

Truett Smith, Bryant’s director of planning and community development, says the construction has to be approved by Saline County’s development committee and the city planning commission. He says hospital officials hope to have a groundbreaking ceremony for the site in September and expect to complete construction in 2020.

Arkansas Children’s Hospital to expand in Jonesboro

Little Rock-based Arkansas Children’s Hospital is set to double the size of its clinic in Jonesboro, thanks to a $750,000 donation by local businessman Chris Fowler and his wife Kim.

According to reports, the money will be used to buy the building the clinic is leasing and expand their use of it from 4,000 square feet to 8,000 square feet. Renovation work on the project is set to be slated for early 2019. When completed, the clinic is expected to have a similar look and feel as the ACH clinics in Little Rock and Northwest Arkansas.

The move comes just months after the ACH opened their second major hospital in Springdale, meeting a serious need in the Northwest Arkansas region. Arkansas Children’s Northwest (ACNW) serves a primary market area of 11 counties, which accounts for roughly 200,000 children.

The new ACNW, located in Springdale, features 24 inpatient beds, 30 emergency department rooms, five operating rooms and 30 clinic rooms across its five-story facility. It also brings under one roof the various clinics Arkansas Children’s Hospital operated in the area prior to the hospital’s construction.

The hospital also boasts a full range of ancillary and diagnostic services, child-life social work, pastoral care programs, outdoor gardens, nature trails and interactive features designed specifically for children. A helipad and refueling station support Angel One, which provides pediatric intensive care transport service.

CHI St. Vincent Preparing for Neuroscience Center, Possible Merger

CHI St. Vincent’s renovation and construction project in Sherwood is well underway. The project to move the hospital system’s Arkansas Neuroscience Institute from Little Rock to the St. Vincent North campus is taking place simultaneously with the construction of a $17 million research and education center.

Renovations and furnishing for the 69-bed CHI St. Vincent North facility is estimated to cost $13 million. Once the project is complete, the hospital will boast an additional 10 beds for neuroscience procedures, a new operating room and a pharmacy.

North Little Rock’s TAGGART Architects and Little Rock’s Clark Contractors has taken on the expansion project, while Nabholz, of Conway, is handling the hospital renovation.

The hospital system, a division of Catholic Heath Initiatives of Englewood, Colorado, is also rumored to be in talks with Little Rock Diagnostic Clinic (LRDC) regarding a merger with the 32-physician specialty clinic in west Little Rock.

As reported by Arkansas Money & Politics in July, LRDC signed a letter of intent with CHI St. Vincent to explore opportunities related to integrating operations.

Leave a Comment