Friday, April 28, 2017

MBHS to merge

Mississippi Today reported that Mississippi Baptist Health Systems is merging with its cousin in Memphis:

The trustees of Jackson-based Baptist Memorial Health Systems voted Tuesday to finalize the merger with Baptist Memorial in Memphis, according to two sources within the hospital.
 The merger will bring together two of the biggest hospital systems in their respective states. Mississippi Baptist encompasses four hospitals and a handful of other health care services across the state and employs more than 3,700 health care professionals. Memphis Baptist includes 17 affiliate hospitals, six of which are already in Mississippi, and employs more than 14,000 people.
The year-end financial disclosure submitted by Baptist Health Systems contained this nugget of information in note IX:

On September 30, 2016,  the System entered into  a  Letter of Intent  with  Baptist Memorial  Health  Care  Corporation  (BMHCC)  with  the  purpose  of  merging  the two institutions. The form of the transaction will involve BMHCC becoming the  sole  member of MBHS, with the current Trustees of MBHS or other persons chosen by the Board of Trustees of MBHS joining the Board of Directors of BMHCC. Due diligence procedures and negotiation of the definitive agreement (Shared Mission Agreement) are presently underway and expected to be completed in February 2017. In the event the System and BMHCC enter into a Shared Mission Agreement, the closing will be subject to customary closing conditions and certain governmental and other approvals.  There  can  be  no  assurances  the  parties  will  execute the  Shared  Mission  Agreement  or the closing will occur.  It is anticipated that the closing will occur by April 30, 2017.
JJ reported in January that Baptist Health Systems posted millions of dollars in losses over the last several years.  However, it's finances have improved in 2017.  The quarterly financial statements filed in February provide this window into MBHS's  financial performance over the previous six months:

The Health System’s financial performance for the six months ended February 28, 2017 is summarized in Table 3 below.  This table shows year-to-date operating loss of  $6.7 million and operating EBIDA of $13.4 million.* Net operating revenue decreased 1.7% over prior year, and under budgeted growth by $10.9 million. Actual inpatient volume as compared to budgeted volume for the Medical Center was ahead of budget by 264 admissions and ahead of prior year by 402 admissions. Outpatient volume was above budget expectations and above prior year. Actual non-capital operating expenses are below both budgeted expectations and prior year. Actual capital related expenses are below prior year and budgeted amounts. This resulted in an operating loss  of $6.7  million for the February 2017 year-to-date financial performance as compared to a budgeted loss of $1.2 million. The non-operating gain is $17.2 million versus the budgeted gain of $5.3 million and the $12.0 million loss in the prior year.  Included in  this line item are year-to-date realized investment gains totaling $1.3 million, unrealized investment gains of $6.9 million, and a $9.7 million positive change in valuation of the fixed payer swap transaction entered into in March 2007.
 However, the operating loss also includes a $15 million expense for depreciation.  Thus cash flow was actually positive.   The revenue was higher than the same period from a year ago but lower than the projected amount.  Admissions increased by 302 patients from the previous year as well.

*EBIDA: Earnings before interest, depreciation, and amortization. 


Anonymous said...

Who or how many people are getting rich on this deal? (at patient expense ultimately)

Anonymous said...

Old news. The IT departments did this a while back.

Anonymous said...

Brilliant move that makes great sense in many ways. Good from a business model. Great from the perspective of combining cultures with a shared Christian mission and vision. This won't be perfect, but things will be better for Mississippi's patients and families because of this.

Anonymous said...

9.33 AM:

As both entities are 501(c) organizations, there are no shareholders or owners that will get rich as a result of the merger as would occur in the merger of two for-profit corporations. That being said, is it entirely possible that the BOD of one or both organizations have put in place a bonus plan for their execs that will reward them if the merger is completed. The administrators of these non-profit hospital systems do pretty well: Chris Anderson, CEO of MBMC made over $600K in compensation in 2015. Jason Little, the CEO of BMH in Memphis made over $1M in that same year.

No doubt there will be some very large legal fees and probably advisory fees paid out to consummate the merger as well.

Anonymous said...

If they (Baptist) don't get rid of people like Mike Stevens the whole thing will implode. Baptist Jackson is so heavy in real estate holdings that it can't move. I would guess they have $20,000,000 in land that has not been developed and probably won't. I've seen donated property in the millions of dollars that literally mildewed to a point it could not be used.

Very poor management and very poor attitudes.

Anonymous said...

Baptist is actually well managed. And the properties they purchased were investments for the future, some pan out, some don't. Compare their management to, say, UMC... $70 million in the hole, bloated administration, mass exodus just beginning or the Merit hospital system... all 5 hospitals are for sale and only 1 of the 5 made any money last year. Though not perfect, this will most likely secure Baptist's future for the next 20+ years and with the addition of EPIC and economies of scale, will make Baptist the provider large insurers want to do business with (Remember when UMC told BCBS to pay us like we're Vanderbilt but BCBS said you're no Vanderbilt!). This is happening all over the nation... there have been dozens of major consolidations all over the country. Get big or die it seems. I've said it before... St. D's is the odd man out. Smart, hard working people at St. D's but they are really behind in the game. Baptist started its primary care network over 20 years ago. St D tried to build theirs by buying MEA, but we all know, MEA is not primary care and now they are scrambling to build the primary care+ clinics. TrustCare is the wildcard but so far all they are doing is siphoning the cream from MEA (and to some degree Baptist) but their business model is a lot like MEA's (or really, more like ValueJet's).

Interesting times ahead.

Anonymous said...

Good ole Baptists! Pass the plate.

Anonymous said...

Chris Anderson left a huge mass of financial destruction in his wake when he bolted from Singing River Health System. Just ask their retirees or their multiple sclerosis patients. They can fill you in on the blessed work of Mr. Anderson. Why Baptist hired him and kept him on for long is still one of life's great mysteries. Guess it does pay to be in the "in" crowd. You're rewarded handsomely even when all you produce is one failure after another.

Anonymous said...

"No management changes expected after the merger". Well, changes will occur
as Baptist Hospital in Memphis strictly adheres to SBC policy on hiring policy.

Anonymous said...

Interesting posts. As one who has used MEA clinics personally and in a business sense for 25 years, what do you see as the future of that group, or does it have a future? If not primary care, what is MEA other than a place to get a shot for the flu or a note to excuse one from work?

Really, the most complicated thing they seem to do there is make referrals to other medical facilities with whom they are affiliated or financially tied. Doctors at these places are part owners of MRI machines and other fancy equipment which provide, to them, a quarterly or annual check. They will refer you to high-dollar specialists who own condominiums in Denver and Destin. Baptist aside, what is the future of MEA (and other Doc-In-The-Box scams) in your opinion?

Anonymous said...


Up to this point, and probably for the foreseeable future, doc-in-the-box clinics are pretty much what you've described: a feeder network for larger health systems to acquire patients who will presumably consume higher-priced, higher-margin services. There has been a proliferation of this model across most markets over the last decade, and the valuations for these businesses has gotten frothy.

Long-term, there could possibly be a broader and more value-added role for the doc-in-a-box clinic. A larger network of more easily accessible clinics has the potential to provide more frequent, lower-cost services that help maintain health rather than treating people who are already sick. Possibly the best example would be diabetes patients. If a diabetic has a walk-in clinic around the corner that can do quick, 15-minute basic exams frequently to ensure that the patient is complying with med therapy, diet, etc, they are more likely to drop in than if they have to set an appointment with their doc that may be at the med center or in any other less-convenient location. Beyond diabetes, there are conditions like obesity, heart disease, hypertension and others that could benefit from this model.

Alas, most physicians and health systems are still dependent upon the high-dollar services like imaging, surgeries, etc., so the idea of any sort of wellness-oriented services is probably a long way off.

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