The board of Magnolia Regional Medical Center is considering the conversion of the facility from a city-owned hospital to a non-profit corporation.

Magnolia Regional Medical Center trustees discussed the potential transition to 501(c)(3) status during Monday’s meeting.

Chief Executive Officer Rex Jones said the hospital is still looking at 501(c)(3) status. He said a proposal has been submitted, but he is concerned about the level of control that could be exerted in that scenario.

“It may not pass muster with either the (Medicare Upper Payment Limits) program or the auditors from a governmental entity standpoint,” he said.

Jones said the hospital’s BKD auditing firm felt under the proposed setup that they “would not feel comfortable calling that a non-governmental entity for audit purposes.”

He added that on the other side, the UPL people have taken the approach that they are liberally interpreting a private facility as “as long as you have a 501(c)(3).”

They have not looked at the make-up and control of the board.

One concern is how hospital personnel would fit under an Arkansas Municipal League benefit program if MRMC is reorganized as a 501(c)(3).

“We met with them and they wanted to make sure that there was some appointment and (Magnolia) city council representation on the board so they have some input into the operations of the facility.”

Jones said the proposal worked up would be a seven-member board, with the mayor as an ex-officio and two city council members. That would be three city appointees.

Then the mayor would nominate the remaining board members to be approved by the City Council. So, the mayor and city council would still control who is on the board.

“That level of control did not make the auditor feel like he could do anything other than still make that a governmental controlled entity,” Jones said.

He added that they want to make sure to balance that by having the mayor and two city council members and have the remaining four positions become board-appointed with City Council authorization.

Mayor Parnell Vann said, “Along with that, the city council could, as they do now, either accept or reject.”

Jones said the easiest thing would be a self-perpetuating board, that would clear everybody’s hurdle. The board would select the four remaining members that would then be taken to the City Council for approval.

He said the 501(c)(3) would be a completely new corporation which would lease operations of the facility from the city. “The 501(c)(3) board could not include anybody in this room, except the mayor. But it wouldn’t have to if it weren’t for the Municipal League issue.”

Changing the hospital employees’ insurance to the Municipal League would save the hospital around $350,000 on insurance.

Jones added that he’d like to see at least one physician on the board.

In other board news:

The hospital ended the month of June with a positive EBITDA of $129,980.

Net revenue for the month was $1,619,703.

The hospital had a non-operating income of $61,474, including $52,786 in sales tax revenue.

Financial officer Roxanne Stewart said the hospital received a UPL payment, a Medicare cost settlement, and a Medicaid DSH payment during the month of June.

Year-to-date, the hospital has a negative EBITDA of $760,554.

Gross revenue is $33,417,784, with a net revenue of $13,932,123 after contractual allowances and charity care deductions of $241,143.

The net labor expense is $9,202,508. Non-operating income for the year is $649,265 including $462,383 in sales tax revenue.

Stewart said work has begun on the 2020 budget.

The next meeting will be Aug. 26.

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