Sparks officials bittersweet about deal to sell hospital

The first thing likely seen by a visitor to the administrative offices of Sparks Health System is a 1902 photograph of the simple 2-story Belle Pointe Hospital at N. 10th and B Streets in Fort Smith.

Many iterations, generations, frustrations and celebrations later finds the hospital about to be swallowed by a multi-billion healthcare company based in Naples, Fla.

And that’s OK, according to Sparks Board of Trustees Chairwoman Judy Boreham, because each historic change has always been about what’s good for health care in the region. She posits that the deal to sell Sparks Health System to Health Management Associates is yet “another relay in that (Sparks) history.”

“The whole issue of all those years, those years of change, was health care for the River Valley,” Boreham said in a Thursday (Nov. 5) morning meeting with The City Wire.

A definitive agreement to sell Sparks Health System to Naples, Fla.-based HMA was signed Nov. 4. The two parties announced Aug. 14 their intent to seek the transaction. According to the definitive agreement, ownership of the hospital will transfer to HMA on Nov. 30.

HMA is a publicly held company that reported $104.05 million in net income on total revenue of $3.418 billion for the first nine months of 2009. HMA also operates Summit Medical Center in Van Buren and two Van Buren clinics — Cornerstone Family Clinic and Internal Medicine & Associates.

THE DEAL
Boreham, Sparks CEO Ted Woodrell, Dr. Charles Jennings, vice chair of the Sparks Board, and Pete Lawson, an HMA executive vice president, visited with the media Thursday to explain the deal.

Key issues:
• Money
Lawson said the company is not now disclosing the value of the deal. Any transaction would have to be valued at more than $60 million just to defease the public bonds held by Sparks and pay any associated bond servicing fees.

• Management
Other than Sparks CEO Woodrell and Dan Hamman, Sparks’ chief financial officer, the management team will stay in place, Lawson said. Woodrell and Hamman are exceptions because they are employees of Brentwood, Tenn.-based Quorum Health Resources which has a management contract with Sparks. That contract, obviously, will not be needed when HMA assumes control.

• Federal approval
Because HMA manages Summit Medical Center in Van Buren, the deal required consent from the Federal Trade Commission. The FTC rendered “no notice of inquiry” on the deal, which allowed the parties to proceed.

• Personnel
No changes, or cuts, are expected. In fact, Dr. Jennings said most physicians “view it (HMA deal) as a positive” that will see the expansion of patient services and a “stabilizing factor” in overall employment.

WHAT’S NEXT?
Lawson said the biggest challenge to bringing Sparks into the HMA network is information sharing. He said the effort to best integrate Sparks’ information (billing, patient data, personnel, etc.) began shortly after the Aug. 14 announcement of intent to buy Sparks.

“When we flip that switch (of ownership), we don’t want to see any information drop,” Lawson explained.

The Sparks Board also has to decide how it will structure the philanthropic arm of the Sparks Foundation. Boreham said that effort will continue, and a committee has been appointed to determine the future role of the Sparks Health System philanthropy.

The other big question between now and Nov. 30 is one of hospital leadership. The future of Woodrell and Hamman at the hospital is wrapped up in decisions to be made by them, their employers and HMA. Britt Reynolds, a division vice president for HMA, will be the direct boss over Sparks and Summit, Lawson explained.

One thing certain is the branding (signage, image, logo, etc.) of Sparks will not change. Lawson said HMA is eager to keep the appearance constant for the community, patients and employees.

“Amazingly, a lot of things will stay the same,” Lawson said.

WHY NOW?
There was a time that Sparks officials believed a sale was necessary to preserve the hospital as a going concern. But in the past 12 months, Sparks improved its finances enough to pull back from the brink of bankruptcy, and improved its level of patient care.

So why sell if conditions have improved?

“We have asked, ‘Gee, are we right there where we could go ahead and stand alone?’” Boreham admitted, and then noted that the answer was the improvements weren’t happening fast enough to provide the kind of financial support needed for long-term success.

Boreham said it was a tough decision, but the board became convinced they needed to find a partner with the capital to add the facilities, equipment and personnel needed to continue the Sparks’ focus on providing quality regional healthcare.

“We’ve had to look at all our options to improve health care. … It was just a matter of selecting the right partner,” Boreham explained. She said the board made a “very comfortable and unanimous” decision to go with HMA.

But the decision remains bittersweet with Boreham.

“The only thing worse than selling a community hospital is not selling a community hospital,” Boreham said, adding later that her sentiment is no reflection on HMA, but merely a comment on the overall situation that required the action.

During the interview, Jennings stressed that Boreham has been the strong leader in improving Sparks and seeking a capable buyer.

“This has been very difficult at many levels for her, but she has stayed with it. … I don’t think people realize just how important this is (keeping Sparks open). She has put a lot of time, a lot of work and a lot of struggle into this. And she’s done an outstanding job,” Jennings said.

HMA IN CHARGE
Beyond Nov. 30, HMA is likely to use its capital resources to invest millions of dollars to build out the advanced surgical center that is now just a shell in $40.4 million Renaissance Project the hospital completed in 2008. The 142,000-square-foot addition to the hospital included new areas for emergency services and a critical care center. Lawson said that would likely be finished within 3 years.

As to the addition of patient services/procedures, Lawson said HMA will gather “good, thoughtful feedback from the medical staff as to what is needed right now.”

Another planned change is greater sharing of information — primarily through electronic health records — between Sparks and Summit. Lawson said the two hospitals will operate as separate organizations, but will better communicate and coordinate with respect to patient and community needs.

Although HMA now operates 54 hospitals, the best practices of patient care will not necessarily come from the larger company.

“On the flip side,” Lawson injected after Boreham explained the benefits to Sparks of having HMA buy the hospital, “we’ll learn some great things from what Sparks has done.”