Articles of incorporation and by-laws have been drafted that may led toward the Magnolia Regional Medical Center becoming a private, non-profit corporation.
MRMC board members met with the Magnolia City Council on Wednesday to hammer out differences, especially regarding the make-up of an MRMC board following the change.
At Wednesday’s meeting, MRMC Chief Executive Officer Rex Jones pressed for a quick decision about the board makeup and for council approval of the articles of incorporation. But Mayor Parnell Vann and City Council members wanted time for City Attorney Mike Boyd to examine the proposal.
The council agreed to take up the matter during its regular monthly meeting on Monday, September 23.
MRMR has been owned by the City of Magnolia since it opened in the late 1930s. The mayor nominates the MRMC’s seven board members for five-year terms. City Council members vote to approve the board members.
The MRMC board operates the hospital independently from the city and appoints the hospital’s CEO. City residents pay a sales tax that supplements the hospital’s revenues. A separate city sales tax is financing the bond issue that led to the hospital’s construction almost 10 years ago.
Discussions have been taking place for months about restructuring the hospital from a government-run facility to a non-profit 501(c) 3 corporation. The driving force behind the change is the belief that the hospital could achieve about $770,000 annually in savings through benefits available to non-profit corporations that government-operated hospitals don’t enjoy.
The point of conflict has been the composition of the new board.
Magnolia Mayor Parnell Vann wants the City Council to appoint three members of a seven-member board.
Jones wants the hospital’s current board to become the basis for non-profit corporation’s new board. He also wants the new MRMC board to be self-perpetuating – meaning that the MRMC board would select future board members. The City Council would approve of the selections.
Jones said auditors and other hospitals with which he’s consulted say that having a government body such as the City Council appointing future MRMC board members might jeopardize federal government payments to a 501(c) 3 corporation.
Regulatory agencies that review funds that hospitals receive change personnel, and change their interpretation of policies. Among Jones’ concerns is that a future federal agency or regulator may decide that the City of Magnolia has too much control over the operation of a non-profit hospital. The hospital might be deemed ineligible for programs or funding, and be forced to repay money it received.
“While that may sound ludicrous to people, that happens all the time, and it happened to this facility. They went back three years on a cost report and we had to pay back $1.3 million over an interpretation issue,” Jones said.
Hospitals are not operated like normal businesses and their funding is complex, Jones said. While Jones and Dr. John Alexander – the board chairman -- praised the current board as the best group in years, they agreed that it takes board members years to grasp the intricate nature of hospital finance.
Other board members are Angie Eaves, Todd Emmert, Brad Smith, Jonathan Baird and Shawana Reed – respectively, an investment advisor, a heavy equipment business owner, two bankers and Southern Arkansas University’s vice president of Finance. The mayor is also an ex-officio member of the board.
Jones said the hospital board’s proposal tries to mitigate as much risk as possible, for as much gain as possible.
“This is beyond just having a hospital. As the mayor has pointed out several times – and I agree with him – this hospital is an economic engine for this (local) economy,” Jones said.
The hospital pays $10 million in salaries to workers, Jones said. Insurance rates of local businesses would “go through the roof” without a hospital.
Jones said the hospital has reduced operating expenses by $1 million in the past two years. Realistic expectations for funding growth are positive developments. Disruption “is the last thing you want to see.”
“If we continue to go down the path we’re heading, we will be in good shape,” Jones said.
Vann said the City Council has been accommodating of the hospital’s requests, but now feels that the city government is being “put on the curb.”
“Rex, you do see that when you came to us, you needed us and you asked us to do something and we did,” Vann said.
MRMC wanted to know months ago if hospital employees would continue to be covered under the Arkansas Municipal League’s health insurance plan if the hospital became a non-profit corporation.
“We got your health insurance,” Vann said. “Three seats to the City Council, however, it kind of feels like the council has been put on the curb and you don’t need us and you don’t want us.”
Vann is concerned about the shrinking daily patient census at the hospital. In Vann’s eight-plus years as mayor, the daily count “has gone from 30 to 15 to 11 to now down to less than eight on the census,” he said.
“We’re responsible to the taxpayers and the taxpayers own the property. We’d just like to be there to help, to have a vote in that,” Vann said.
Dr. Alexander said most rural hospitals and many larger ones are struggling.
“Our sole purpose for coming here with this change is to try to improve some government assessments and repayments on our upper payment plan,” he said.
Alexander said the hospital’s financial outlook is improving. “Things are a slight better. We are not going to make a great profit. We still have a lot of funds out there to pay. There are still thousands of dollars we are giving back to the community each year in charitable care or writing off bad debts,” he said.
“I feel the current board is going a good job,” Alexander said.
Businesses are constantly changing their legal structures as tax interpretations change, he said.
“This is a change we are making to maximize reimbursements,” he said.
City Councilman Jamie Waller said he initially thought guaranteeing the city three seats on the new MRMC board was a good idea, but that he’s changed his mind in light of new information.
City Councilwoman Tia Wesson said she would still prefer to have two or three sitting council members on the MRMC board.
Vann also raised the issue whether MRMC should enter into a long-term lease with the city for the facility, but there was no resolution reached on that issue.
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