Baptist Health Care expansion

This article documents a current event. Information may change rapidly as the event progresses.

The expansion of Baptist Health Care away from its main Baptist Hospital campus has been attempted on several occasions, most recently in 2008, when the organization announced plans to buy West Florida Hospital. However, after a major credit crisis affected Baptist's ability to obtain the necessary financing, the deal was called off at the beginning of 2009.

Background

For years, Baptist Health Care has sought to expand its service away from its main Baptist Hospital campus, which is located near Pensacola's urban core and provides indigent care for a large number of low-income patients. The hospital averages about 50 percent occupancy at any given time, and Baptist has sought to transfer some of its allowed acute medical care beds from Baptist Hospital to other branches in more affluent neighborhoods. However, such a transfer is only allowed after following the state's Certificate of Need process, overseen by the Agency for Health Care Administration, which has repeatedly denied requests by Baptist Health Care. Baptist officials have argued that the process is anticompetitive and overly regulatory, and that the ability to serve more "paying customers" would offset losses and increase their financial capacity to provide charity care.

In 2000, a state legislative amendment that would have benefitted Baptist Health Care with a specific Certificate of Need exemption was submitted (and quickly withdrawn) under State Representative Durell Peaden's name, though he denied any knowledge of it and claimed "[a] lot of amendments get filed with my name on them … people think if they put my name on them, they'll pass." Baptist admitted that their lobbyist authored the amendment, but would not identify the sponsor. State Representative Jerry Maygarden was suspected of submitting it, as he was a senior Baptist executive and an outspoken critic of the Certificate of Need process; he insisted, however, "that was not my amendment and that was not my language."

On May 2, 2001, in the final days of the state legislative session, Maygarden quietly arranged an amendment to a massive Medicaid bill with a provision that would allow Escambia and Santa Rosa hospitals to transfer beds to satellite facilities as needed. Officials at other major health care providers came out in opposition to the measure, saying it would benefit only Baptist, Maygarden's employer, as no other organization wanted to transfer beds. "I gave the same authority to Sacred Heart that I gave to West Florida that I gave to Baptist," Maygarden said. "They all have satellite facilities without beds. … I have steadily told them that what they are doing is protecting market share, and I think that's wrong. I've given them all the same options. If they don't want it, that is their choice."

The bill passed quickly, and Maygarden's amendment survived Governor Jeb Bush's line-item vetoes. After a coalition of Baptist's competitors filed suit, the law was declared unconstitutional by Leon County Circuit Judge Kevin Davey, who wrote in his ruling, "[t]he statute does not pertain to a matter of statewide importance, nor can the statute reasonably be construed to be a demonstration project."

In 2004, Baptist announced plans to build a $60 million hospital adjacent to its Baptist Medical Park - Nine Mile facility, which would house 96 beds transferred from the main Baptist Hospital campus. The transfer would have been the result of a coalition with about a dozen other Florida hospitals who wanted legislative exemption from the requisite Certificate of Need process. The plans were again opposed by the other area health care providers — especially West Florida Healthcare, whose West Florida Hospital averaged only 33 percent occupancy and would have been less than a mile from the new hospital. The Santa Rosa County Commission considered opposing the legislation on behalf of Santa Rosa Medical Center, which would have been impacted by a new hospital nearby, but ultimately did not take action.

The legislation was withdrawn. However, in the same year, Baptist successfully lobbied to exempt Escambia County (among five others) from a "grow in place" bill that would have benefitted competitors like Sacred Heart by allowing them to expand at existing facilities without state permission.

In 2006, Baptist Health Care was said to be in talks with West Florida Healthcare about collaborating to improve their services and reduce costs. According to West Florida president and CEO Dennis Taylor, "We're trying to find ways to work together. If we can find ways to work together, it saves the community a tremendous amount of resources." These discussions were never formalized and were called off weeks later, as West Florida's parent company HCA was in the midst of a pending $33 billion buyout by a group of private investors.

2008 plans

On June 26, 2008, Baptist Health Care officials announced a major expansion project that included the purchase of West Florida Hospital for $245 million and approximately $85 million in new construction. The expansion was intended to be completed within a few months, with an agreed upon deadline of December 31.

	This acquisition will enhance the best of both organizations and provides for expansion of our services to meet the needs of our patients and the community. … We know the acquisition of West Florida Hospital will allow us to continue our high standard of personal care while expanding services to serve the entire Northwest Florida region.
—Al Stubblefield, President/CEO of Baptist Health Care

The organization signed an asset purchase agreement with West Florida's parent company, Hospital Corporation of America (HCA), after which the necessary regulatory approval was obtained. However, the frozen credit markets related to the subprime mortgage crisis and recession prevented Baptist from obtaining the financing necessary to close the deal. According to a financial expert quoted by the Pensacola News Journal, "Baptist is pretty well leveraged. They have a substantial debt load, a lot of which comes from their financing the Andrews Institute."

As late as October 2008, Baptist CEO Al Stubblefield remained confident that the expansion would move forward and that Baptist was "well positioned to go to the bond markets by the end of this calendar year." However, as the deadline passed with no bonds issued, the expansion will likely not take place.

Had the purchase been completed, the current West Florida Hospital on Davis Highway would have become the new Baptist Hospital, supplementing the presence of Baptist Medical Park - Nine Mile in north Pensacola. The campus would have featured an expanded Baptist Cancer Center in affiliation with the Moffitt Cancer Institute; Baptist Neurosciences Center complemented by a rehab hospital for neurologic and orthopaedic conditions; Baptist Heart & Vascular Center of Excellence; and an expanded Emergency Department. The new Baptist Hospital would have also offered a new parking garage and new physician office buildings. Additionally, Baptist Health Care would have assumed the current West Florida Hospital Primary Care Practices (nine neighborhood medical centers), creating the largest primary care network in the region.

Because of the merger collapse, Baptist lost an estimated $8 million in forfeited earnest money.

External links & references

• www.bhcexpansion.org – Informational website about the 2008 expansion