Horne: Sell Natchez Regional Medical Center

Published 12:14am Tuesday, July 23, 2013

NATCHEZ — The eventual sale of Natchez Regional Medical Center is necessary and inevitable if the Miss-Lou is going to have comprehensive health care in coming years.

That’s the takeaway Healthcare Management Partners Chief Executive Officer Scott Phillips said he had from the Horne Group’s feasibility study about the sale of NRMC. The study was presented to the Adams County Board of Supervisors behind closed doors Monday, though Phillips said it recommended putting the hospital up for sale.

After hearing the report, the supervisors voted to take the next step in the process, scheduling a public hearing in which the rationale for the sale will be presented to the public. The hearing was scheduled for 10 a.m. Aug. 14.

After the meeting, the supervisors and hospital trustees directed questions to Phillips, whose firm — HMP — has been hired to solicit and vet bids for the sale.

“The level of interest is high,” Phillips said. “I can go so far as to say all of those (major) hospitals in Jackson and New Orleans have expressed interest in being our potential buyer and operator.”

The feasibility report — which included patient utilization data, the hospital’s competitive advantages and disadvantages, staffing patterns, financial balances and organizational configuration, among other things — addressed proprietary operating information from the hospital, and could be damaging if released, hospital board attorney Walter Brown said.

Phillips said the 2008 feasibility study, which was released to the public, was done so in part because the sale was part of a larger bankruptcy move that required public court filings, and that’s not the case this time.

Not included in the feasibility report was discussion of the hospital’s 2012 lawsuit settlement with its former management company, Quorum Health Resources, which NRMC alleged had mismanaged the hospital into bankruptcy.

“The balance sheet as reflected in the Horne report is reasonably strong, but it is silent on the issue of the settlement,” Phillips said. “It doesn’t speak to the amounts and does not include post-settlement information in the balances.”

Information about the settlement will be available to potential buyers once they enter into a confidentiality agreement in compliance with the federal order that sealed the settlement, which has never been publicly disclosed, Phillips said.

While the report shows a hospital that is healthier and more efficient than it has historically been, Phillips said it also paints an honest picture of the area and the challenges health care providers in the area face.

“It is a very balanced report, but there is information in there that — to be honest — is quite negative about the economic conditions in Adams County in terms with the declining populations and the increased out migration (of people seeking health care services) out of the county,” he said.

But Phillips said the fact that many people are leaving the area to seek health care now may be counter-intuitively what helps the hospital sell as other medical systems look to expand their influence and tap into underserved markets.

“Consider the relative isolation of Natchez — for 80,000 people in Mississippi and Louisiana, Natchez is the closest hospital; they shouldn’t have to go to Baton Rouge, Alexandria or Jackson,” Phillips said.

“If you have all that out migration here, and people would stay here if they knew the full medical community was here; if you had that here and add the 40-50 doctors to support it, the direct employment in health care is 500 direct jobs and — if you add a multiplier to it — 1,000 jobs, jobs that are not minimum wage jobs.”

While some specialized procedures would still have to be done out-of-town, Phillips said HMP is developing financial models that would show the hospital’s potential if routine cardiology and orthopedic procedures — among others — were performed locally.

The Horne Group considered recommending a management contract, Phillips said, but the ultimate recommendation came down to sale for infrastructure purposes. The goal is to look out for health care in the community and not just to pay off the hospital’s bond, he said.

“The recommendation is made because we need to build a new hospital (building),” he said. “The hospital does not have the ability — nor does the county — to raise and invest the scale of capital required to replace the hospital or sustain the medical community needed to support a new hospital — we are looking at $150 million in total costs.”

HMP does not believe that NRMC or Natchez Community Hospital is sustainable for the areas medical needs in the long term in their present conditions, Phillips said.

“Both hospitals need to be replaced, and ideally, you could replace both of them at the same time with a single hospital,” he said. “For many years, Natchez Community has operated at full capacity and doesn’t have the capacity to take market share from NRMC or to go capture the outbound migration.

“Both of the hospitals in the community are structurally obsolete.”

NRMC has the space on its campus for an entirely new hospital to be built while the existing facilities continue to operate, Phillips said.

The second reason why a new hospital is necessary is because NRMC’s existing facilities have limited potential for recruiting specialists, no matter who owns the building, he said.

“You cannot attract young, qualified doctors in 2013 to practice medicine in facilities that were built in the 1960s and 70s,” Phillips said.

“What young doctors want today — because medicine is changing — is to be part of a larger group. They want to be somebody’s employee, to have an older doctor they can lean on — this has been a perennial problem for all these rural hospitals.”

While HMP tried to sell NRMC in 2008, Phillips said the timing then was bad due to the economic climate.

“Of the 60 hospitals that were sold in 2008, none were sold between September and December 2008,” he said. “We went to market in October 2008. What became clear was that it didn’t matter how qualified the buyers were, the financing wasn’t available.”

The consultant said he doesn’t believe that will be the case this time around.

“Things are quite different than they were in 2008,” Phillips said. “Hospitals that are part of bigger systems are enjoying record profits, and financing is readily available.”

“The things we should be doing here is greater than the total revenues of both hospitals — I want people focused on the business opportunity rather than the sideshow.”