Last edited 4:55 p.m., April 2, 2012Mounting operating losses have sent Branson-based Skaggs Regional Medical Center officials on the search for a strategic partner to help shore up its financial picture and maintain its delivery of health care.
Skaggs Media Relations Specialist Michelle Leroux said while the 165-bed community-owned hospital finished roughly $500,000 in the black in fiscal 2011, though it posted an operating loss of $1.9 million. Skaggs has recorded operating losses in each of the last five fiscal years, with the deepest of losses at $6 million in 2009.
Officials said Jan. 31 the hospital would issue requests for proposal to like-minded health systems, though the move does not mean Skaggs is up for sale. Leroux said Skaggs wouldn’t rule out a buyout, though.
“We are looking to the future. We are looking at what health care reform is putting in front of us, as well as obstacles that the ever-changing health care landscape is providing us,” she said. “We want to be able to think ahead and still be able to provide the services that are needed in this community.”
Meanwhile, Standard & Poor’s Rating Services listed the medical center’s bonds – totaling $40.6 million – with a “BB” or junk grade. S&P’s rating in its May 2010 report of Skaggs reflects challenged operations due to a negative 1.7 percent operating margin in the 11-month period prior to the report and a balance sheet that saw 51 days of cash on hand during fiscal 2010. According to
StandardAndPoors.com, the high-risk rating is “less vulnerable in the near-term but faces major ongoing uncertainties to adverse business, financial and economic conditions.”
Skaggs has hired Knoxville, Tenn.-based Pershing Yoakley & Associates PC to handle the RFP, which Leroux said should be prepared by Feb. 10. Leroux said the hospital is mostly seeking a health care system that can blend in well with the Skaggs culture while still offering a new level of expertise.
“There will be large facilities that will want to throw money at us and think that that’s going to look great, but what it comes down to is what kind of resources are they going to be able to provide us in types of services, physician recruiting and being able to keep up-to-date with the changing rules and regulations,” Leroux said. “We are not looking for a buyer initially. We are not going to exclude that, but we are looking for someone who is going to meet the needs.”
Lisa Cox, a spokeswoman for Mercy Springfield Communities, said Mercy plans to review the RFP once it is issued to see if the hospital systems could work together.
“Mercy has a long-standing presence in the Branson community with several clinics,” Cox said in an e-mail. “We also have a unique position to offer in a partnership because of our proven success in building relationships in other communities in southwest Missouri and northern Arkansas, i.e. Lebanon, Aurora, Cassville and Berryville. We look forward to receiving a request for proposal from Skaggs in order to evaluate a potential partnership with them.”
CoxHealth spokeswoman Stacy Fender also said officials would evaluate Skaggs’ RFP to see if a partnership was viable, and she expects CoxHealth to take action.
“We will carefully evaluate the request for proposal, and we are very likely to respond. Skaggs is currently a part of our network, and we have a history of partnering with the hospital on a variety of patient care services and programs,” Fender said in an e-mail.
According to consolidated financial statements prepared by accounting firm BKD LLP, Skaggs’ 2011 revenue was $182.5 million, up 3.8 percent from $175.8 million in 2010. Its total assets were $122.1 million last year, down 2.1 percent from $124.8 million in 2010.
Once the RFP is issued, Leroux said interested parties would have a 40-day window to respond. PYA will discard those that don’t match the criteria Skaggs outlines.
At that time, the board will start reviewing proposals and may perform some on-site visits and interviews to narrow down the candidates. When a partner or buyer is selected, the board will take the proposal before the hospital’s 900 trustees for a vote. Leroux said she expects the entire process to take between five months and nine months.
Calls to Barry Silver, chief operating officer of PYA, were not returned by press time, and Skaggs President and CEO William Mahoney was unavailable for an interview.
Other factors that point to an evolving health care landscape and could be contributing to the need for a partner include Skaggs’ sources of payment for patient services. According to filings to the Industrial Development Authority of Taney County, which issued Skaggs’ bonds in 1998 and 2005, Medicare payments are 55.2 percent of all payment sources in fiscal 2011, up from 52.6 percent in fiscal 2008. Medicaid payments also are up 1.3 percent during that time frame to 11.2 percent of all payments in fiscal 2011, which ended April 30.
“At this time, I don’t think there is any leading factor. I think it’s just a combination of everything,” Leroux said, adding that reductions in Medicaid reimbursements due to health care reforms are expected. “I can say that capital improvement is something we’d like to see in a partnership; however, that’s not the sole reason we are seeking a partner.”[[In-content Ad]]
