Branson-based health care provider Skaggs Regional Medical Center is one step closer to naming its strategic partner, and a Springfield health system is in the running.
CoxHealth and Brentwood, Tenn.-based LifePoint Hospitals were named as finalists from a group of six identified in early April. Skaggs CEO William Mahoney said either of the two systems would provide a good cultural fit for the Branson hospital, which is seeking a partnership designed to secure a favorable financial future. Mahoney said the request for proposal process generated more than a dozen qualified candidates.
The move to secure a partner comes on the heels of underwhelming financial performance. Skaggs has recorded operating losses in each of its last five fiscal years, the deepest of which was a $6 million loss in 2009.
Now, Mahoney is optimistic that Skaggs, with its 165-bed hospital and regional clinics, is on the path to land a partnership and be able to confidently forecast a brighter future for health care in Branson.
Meet the partnersIf Skaggs leaders are looking for a partner specialist, LifePoint offers a fitting résumé.
LifePoint boasts more than $3 billion in annual revenues and 54 hospital campuses in 18 states, 23 of which are in nonurban markets. The hospital company, which specializes in acquisitions to develop networks to enhance resources and buying power, employs more than 23,000, according to
LifePointHospitals.com. Calls to LifePoint officials were not returned by press time.
Should Skaggs choose to keep it local, CoxHealth is waiting in the wings.
CEO Steve Edwards said CoxHealth was pleased to be named a finalist, and he said the system’s mission, culture and beliefs are compatible with the Branson medical center.
“As a locally owned not-for-profit, we propose to forge a unique alliance allowing local governance. We (would) keep the Skaggs name and board of directors, and ensure that every dollar will remain in the Ozarks,” Edwards said via e-mail. “We are absolutely committed to growing services to better serve the Branson area. Too many patients have to travel long distances for care, and we want to expand local services to serve the needs of the community.”
Before CoxHealth and LifePoint were named as finalists, Mahoney said six candidates sent officials to Branson to meet with Skaggs’ senior management in a 90-minute meeting to make pitches and answer questions about what they’d bring to the hospital.
Mahoney said CoxHealth and LifePoint did the best job of responding to the objectives outlined in the RFP and in presenting to board members, administrators and physician leaders. He declined to name specific objectives and said each of the parties has signed agreements to keep RFP details in confidence.
Larry Shmitt, president of The Track Family Fun Parks in Branson and a board member at Skaggs, said the board has agreed not to comment publicly on the partnership process in accordance with the confidentiality agreement in place.
Sign of the timesA changing health care environment is a key reason why Skaggs is seeking a partnership, Mahoney said.
Factors such as increases in the percentage of Medicaid and Medicare patients and emergency room visits are a reality for community hospitals. For example, Skaggs’ Medicare payments rose to 55.2 percent of all payments in fiscal 2011, up 2.6 percentage points from fiscal 2008, and Medicaid payments increased 1.3 percentage points to 11.2 percent of all payments during the same period. During fiscal 2011, two out of three Skaggs patients received care through Medicare or Medicaid. At the same time, costly emergency room care has risen more than 15 percent since fiscal 2008, according to hospital officials.
“Obviously, the health care environment is changing. We’ve decided to look for a partner and be proactive with that to ensure that we have high-quality health care in Branson and jobs in Branson that are health care-related,” Mahoney said. “That partnering may be a joint venture, it may be an acquisition. We’re not sure at this point what that will look like.”
Mahoney said a partnership would allow Skaggs to take advantage of economies of scale.
“Those who buy large amounts of supplies get better pricing than those who don’t,” Mahoney said. “Instead of having two fees for audits, (we) would have one. There are some different business savings there. And being able to coordinate strategically would be a very beneficial move.”
The prognosisWith the finalists named, the hospital has entered a 60- to 90-day review period where it will send its administrators to visit each system, meet key staff members and administrators, and review the health systems’ financials. After that period, Mahoney said Skaggs’ board of directors would sign a letter of intent with one system and start another 60- to-90 day period where the proposed agreement would be reviewed.
“Assuming we find that they are who they say they are, and they see we are who we say we are, then a recommendation would be made to the full board of trustees,” Mahoney said.
According to Michelle Leroux, a spokeswoman for Skaggs, the hospital has about 90 members on its board of trustees. Mahoney said a two-thirds vote of approval is required to cement the deal.
