The News Desk is a collection of news, notes and breaking items affecting the Fredericksburg community.
Fauquier Hospital plans merger with big hospital chain
Fauquier Hospital, one of just a handful of independent hospitals remaining in Virginia, announced this week it is seeking a partnership with Tennessee-based LifePoint hospitals.
The two have entered into a memorandum of understanding for LifePoint to take over the operations of Fauquier, making it part of LifePoint’s for-profit group of hospitals. The Warrenton-based Fauquier Hospital is currently nonprofit.
LifePoint, a public company that trades on the NASDAQ, has nearly 60 hospitals in 20 states. That includes five in Virginia, all small community hospitals in Southwest and Southside Virginia.
The partnership won’t be complete for several months, as LifePoint looks at Fauquier’s books and the two sides detail various components of the agreement. Virginia’s Attorney General will have to sign off on the final agreement.
Fauquier’s CEO, Rodger Baker, said in an interview Wednesday that Fauquier has been looking at such a partnership for several years. But the effort has gained new impetus because of the federal Affordable Care Act, Baker said.
The new rules for health care and hospitals involve changes and reforms to the entire industry, he said—reforms that in some cases can be better achieved on a larger scale than that available to an independent hospital.
“Even though we’re in good financial shape, the question is, are we going to be able to survive with some of the changes that are going to occur as a result of the Affordable Care Act? We’re just starting to see some of those,” Baker said.
“There’s a push to have health care systems take more risk in terms of financial risk in caring for patients,” Baker said. “In order to do that, you actually need some scale, you need a larger population and you need to be able to cover a broader geographic base.”
Baker said he thinks a lot of hospitals are looking at those issues, and that Fauquier could “probably survive for quite some time” as it is.
But he said the hospital’s board wanted to do more than survive.
“We really do want to thrive in this new health care system, and in order to do that we think we need to have more scale,” he said.
If Fauquier’s merger goes through, it would be the latest example of local health systems teaming with larger corporate chains.
Other examples in the past few years include the University of Virginia Health System buying a 49 percent interest in Culpeper Regional Hospital; Novant Health buying Prince William Hospital; and Sentara Healthcare buying Potomac Hospital, Rockingham Memorial Hospital, Martha Jefferson Hospital and Halifax Regional Health System.
Katharine Webb, senior vice president of the Virginia Hospital and Healthcare Association, said she was surprised to hear Fauquier’s announcement. But she praised LifePoint, saying it has good leadership and has done well with its Virginia hospitals.
Webb said that with Fauquier’s partnership with LifePoint, Virginia will have just six remaining locally-controlled, independent hospitals—in Bath, Augusta, Chesapeake, South Hill, Arlington and Fredericksburg.
The independent Mary Washington Healthcare in Fredericksburg operates Mary Washington Hospital and Stafford Hospital as well as numerous other local health care facilities.
Mary Washington Healthcare President and CEO Fred Rankin said in an email Wednesday that the not-for-profit is not “actively in dialogue with anyone to be sold” and has not issued a request for proposals regarding a sale.
But he, like Baker, is cognizant of changes driven by the federal health care law.
“All that said, health care is in the midst of a massive transformation and our board has not taken any option off the table,” Rankin wrote in the email. “The most important consideration driving our board is our mission. That is how do we best deliver health care to the citizens of Fredericksburg in the future.”
Baker described Fauquier’s potential joint partnership as a relatively new model, one that gives LifePoint a majority control over the business end of the hospital but gives the board an equal voice in operations.
A 50–50 governance agreement would give the Fauquier board power to stop LifePoint from taking away a service valued by the community, Baker said. He also said the final partnership agreement will detail particular services that the board wants to keep, and said it will also require LifePoint to adopt Fauquier’s charity care policies.
Baker said the board “felt that they would like to maintain a significant amount of control and yet still have a strong partner to go down this road.”
Fauquier’s agreement also creates a nonprofit foundation, linked to the hospital, that would also focus on community health.
LifePoint will be assuming Fauquier’s debt, which Baker said is about $90 million—not atypical, he said, for a hospital of Fauquier’s size.
He hopes that over time, the partnership will allow Fauquier to offer more services. He said Fauquier will also keep its designation as a Planetree hospital. Planetree is a program that helps hospitals focus on “patient-centered” care.
Baker said LifePoint supports Fauquier’s Planetree efforts, and has a track record with community-based hospitals. Most of the company’s hospitals are small, like Fauquier.
“It’s getting more and more difficult for a sole hospital to survive,” Baker said.