Top 5 business/economy story — No. 1: Sparks Health System

Editor’s note: With the days, weeks and months seemingly passing faster than ever, it can be difficult to remember what happened yesterday much less the past six months. To that end, The City Wire will during the next three weeks highlight the top 5 stories of the first half of 2009 in the following categories: Business/economy, political, and cultural. The top 5 business/economy stories will be counted down between July 20 and July 24; the political top 5 between July 27 and July 31; and the top 5 cultural between Aug. 3 and Aug. 7.

The Sparks Health System Board of Directors announced March 30 that the hospital system would be purchased by Alpharetta, Ga.-based Jackson Healthcare. Terms of the deal were not disclosed and both parties were aiming to close the deal no later than June 30, 2009.

Prior to the announced deal, Sparks Health System — with its more than 2,000 employees and more than 12,000 patients a year — was on the financial ropes. Moody’s rating service said the hospitals cash on hand of $7.5 million as of Dec. 31 was “a weak 11 days cash on hand and 12% cash to debt.” Also, Moody’s said in its February 2009 report that $6.9 million in 2008 capital expenditures served to lower the hospital’s cash position. In the first six months of fiscal year 2009, the hospital lost $12.9 million and posted a negative operating cash flow of $4.3 million. Moody’s suggested bankruptcy was a likely option.

While there was no official announcement from the hospital, it became common knowledge in the Fort Smith area that Sparks officials were looking for financial relief, even if it meant selling the operation.

Jackson Healthcare, founded in 2000, is in the business of helping hospitals find qualified staff, hospital management, and health information technology systems and equipment. The company, which does not own a hospital, employs 400 at its corporate headquarters and more than 600 nationwide. Sparks Health System has more than 2,000 employees and sees about 12,000 patients a year.

The deal with Jackson would have required the $62 million in public bonds and associated bond servicing fees to be extinguished. The bonds were facilitated for a nonprofit organization through a public facilities board. Any acquisition of a nonprofit by a for-profit requires the public indebtedness to be cleared.

But on June 1 the Sparks board called off the deal. An inability to secure the long-term financial health of the hospital and “unsettled” financial markets were a few of the reasons given for the Sparks decision to withdraw from the deal.

(On July 3, Sparks CEO Ted Woodrell said the hospital began seeing positive cash flow in January and that continued through May. It will take “several years” before the hospital is financially strong, but Woodrell said the pressure is off the Sparks Board of Trustees to quickly find a financial relief valve.)

PREVIOUS TOP 5 BUSINESS/ECONOMY STORIES
No. 5 — The Compass Report
No. 4 — Economic development changes
No. 3 — Intermodal authority
No. 2 — Job losses – unemployment rate