Valley Baptist Hospital Announces Addition of Mystery Partner – Cites Cash Flow Needs

February 16, 2011 1:00 AM

HARLINGEN — Valley Baptist Health System will merge with a company that will inject money into the hospitals here and in Brownsville, to shoulder changes that result from national health care reform, and budget cuts, the company’s CEO James Eastham said Tuesday.
The partner, a healthcare organization whose name officials would not disclose Tuesday, citing a confidentiality agreement, will own a percentage of the company, Eastham said.
“We’re not being sold,” Eastham said. “It’s kind of a merger. We’re forming a joint venture.”
Valley Baptist Health System, which operates Valley Baptist Medical Center-Harlingen, with 2,345 employees, and Valley Baptist Medical Center-Brownsville, with 907 workers, may not have a “50-50” share of the new company, Eastham said.
“We haven’t (determined) what we’ll own and what percentage they’ll own,” Eastham said.
The confidentiality agreement prohibited Eastham from disclosing the amount of money the partner will infuse into the hospitals, he said.
“They’re putting in capital. It’s still to be determined,” he said.
The partner’s capital will be used to pay debt incurred since the 1990s as the result of improvements and the purchase of the Brownsville hospital, Eastham said.
As a result of the partnership, the hospitals will  become part of the new merged company and will pay property and sales taxes but not income taxes, hospital spokeswoman Teri Retana said. Local taxing entities will determine the amount of property taxes to be paid.
“As earnings are distributed from the new partnership, Valley Baptist will not pay income taxes on its earnings, and our partner will pay taxes on theirs,” she said.
Valley Baptist Health System will retain its not-for-profit status, she said.
According to a press release, Valley Baptist does not expect to lay off workers or reduce salaries, and current management will remain.
It also stated that the merger will be concluded by the end of the summer.
“We’re preparing for healthcare reform and state and federal budget cuts,” Eastham said. “We want to be a strong equity partner that’s well capitalized for physicians, for the four-year medical school, for the whole community.”
Valley Baptist considered other healthcare organizations before choosing “the partner we believe best matches our systems’ mission, culture and financial objectives,” the press release said.
The hospitals will use new capital to improve services, Eastham said.
“What will change is that sufficient capital dollars will be infused into the organization to continue our investment in the latest technology, perpetuate the mission and ensure the financial strength of the organizations for generations to come,” the press release said.
The merger will also infuse capital into the Valley Baptist Foundation, the press release said.

Editor’s Note: The most obvious way to maximize revenue is to increase the Charge Master rates and negotiate additional revenue from PPO networks. Maybe Valley Baptist officials should follow Hermann Memorial’s lead in negotiating “discounts” – see posting below.