Mercy in talks to sell Arkansas hospital, potentially acquire Missouri hospital

June 1, 2012

Mercy health system of Chesterfield, Mo., is in negotiations to sell St. Joseph's Mercy Health System of Hot Springs, Ark., to Franklin, Tenn.-based Capella Healthcare. Mercy and Capella have signed an agreement in principle for the ownership transfer and expect to close the deal by the end of the year.

The privately held, for-profit Capella operates 13 hospitals in seven states, including the 166-bed National Park Medical Center in Hot Springs. Mercy's St. Joseph's includes a 282-bed hospital, an 80-physician clinic system and a cancer center — all of these facilities would be included in the sale. After the sale, Mercy St. Joseph's no longer would be Catholic (all of Capella's facilities are secular).

According to Mercy and Capella administrators, it is a challenge for multiple providers to operate in this community of about 35,000. They said they believe Hot Springs has redundant and duplicative health services, a concern that is amplified by the fact that the facilities face competition from providers in Little Rock, Ark., about 55 miles away. Also, given challenges related to health care reform and economic uncertainties, the providers would benefit from working together in a more coordinated system, according to Capella Chief Executive Dan Slipkovich. Such coordination could lead to improved quality and greater efficiency in health care delivery, he said.

The partners would not disclose the working sale price for St. Joseph's.

The day after Mercy and Capella announced their agreement, Bishop Anthony B. Taylor of the Diocese of Little Rock issued a statement decrying that the diocese had no role in the negotiations, nor was it consulted prior to the signing of the agreement in principle. The statement said this is an "apparent violation" of the Ethical and Religious Directives for Catholic Health Care Services. Bishop Taylor said in the statement that St. Joseph's has been the primary provider for the poor in the region, and while the diocese understands the need for the hospital to remain financially stable, it believes it is the mission of the hospital to care for this segment of the population. The diocese, the statement said, is skeptical that the sale is acceptable, given the potential harm to underserved populations.

In response, Mercy President and Chief Executive Lynn Britton said in a statement that Mercy shares the diocese's concern for the poor, and the system appreciates the opportunity to talk with Bishop Taylor now that Mercy and Capella are conducting due diligence. Britton said Capella's practice of caring for all regardless of their ability to pay and Capella's community outreach programs were important factors in Mercy's decision to negotiate with that organization. "We are asking Capella to assure the continued care for people who are poor, along with giving careful attention to the well-being of St. Joseph's community of coworkers and physicians," Britton said in the statement.

He added that if the deal closes, an endowment will be created, to continue the Sisters of Mercy's ministry in Hot Springs — potentially through support of the Cooper-Anthony Mercy Child Advocacy Center. That center serves children who have been abused or neglected.

Mercy and Capella have a public website to provide updates on the affiliation discussions.

Separately, Mercy is in talks to potentially acquire the 251-bed Jefferson Regional Medical Center in Festus, Mo. Jefferson Regional, which is a secular, nonprofit stand-alone hospital, issued a request for proposal to four organizations; and it selected Mercy as its preferred bidder. Bill McKenna, the chair of Jefferson Regional's board of directors, said in a statement that the board determined it would benefit the hospital to be part of a large, regional system. Mercy has a network of hospitals and health systems in Missouri, Arkansas, Kansas and Oklahoma.

Mercy and Jefferson Regional hope to complete negotiations by the end of this year.

Separately, Capella entered a partnership with Ascension Health's Saint Thomas Health of Nashville, Tenn., for Capella and Saint Thomas to jointly own and operate four Capella hospitals in middle Tennessee. Saint Thomas now operates the hospitals as part of its network and has a minority equity interest in those four facilities. The four Capella facilities remain secular. Under the agreement, Capella is the exclusive development partner for Saint Thomas Health in Middle Tennessee and Southern Kentucky.


Copyright © 2012 by the Catholic Health Association of the United States
For reprint permission, contact Betty Crosby or call (314) 253-3477.

Copyright © 2012 by the Catholic Health Association of the United States

For reprint permission, contact Betty Crosby or call (314) 253-3490.