JACKSON, Miss. — A possible merger of Jackson-based Mississippi Baptist Health Systems and the larger Baptist Memorial Health Care of Memphis, Tennessee could create the largest hospital group in Mississippi.
Discussions were announced Thursday as the smaller Mississippi Baptist struggles with years of operating losses and a balky electronic health record system.
The two systems said discussions about ways to work together remained “conceptual,” but said there could be a merger. Robby Channell, a spokesman for Mississippi Baptist speaking jointly for both systems, said the next step in any discussions would be a letter of intent.
“Discussions are focused on how the organizations can work together to deliver faith-based, efficient, high-quality health care,” the announcement said. The statement specifically mentioned extending the Memphis system’s electronic health record system to Mississippi Baptist.
The Memphis system already has five hospitals in the northern part of the state, and plans to take over a sixth in Calhoun City in October. It also counts seven hospitals in western Tennessee and one in Arkansas, with a second one planned for West Memphis, Arkansas. The Mississippi system has hospitals in Jackson, Carthage, Kosciusko and Yazoo City.
Credit rating agency Fitch Ratings said in March that problems with Mississippi Baptist’s electronic health record system were hampering efforts to cut time patients are spending in the hospital, costing the system as much as $30 million yearly. Fitch, which downgraded Mississippi Baptist’s credit in 2014 and warned in March of another possible downgrade, wrote that managers said the record system “will need to be replaced at a considerable additional cost to the system,” creating more concerns about implementation.
Channell said the two systems have worked together on patient care for almost five years. He said discussions about expanded cooperation began several months ago, as the Mississippi system decided to adopt the electronic record system Memphis now uses.
Mississippi Baptist had a $17 million operating loss on $461 million in revenue in the year ended Aug. 31, 2015, according to an audit. The system has posted an operating loss in seven of the last eight years. Fitch reports show Mississippi Baptist burning through cash, with its $166 million reserve in February $70 million below 2012 levels. The system spent heavily to renovate its main hospital and build a new hospital in Carthage. It also took on the debt of the hospital it acquired in Kosciusko.
Memphis Baptist has incurred big losses in recent years, too, although the system may be getting closer to break-even. The system posted an operating loss of $100 million in 2015 on nearly $2 billion in revenue after losing $300 million on $1.9 billion in revenue in 2014, according to an audit. Investment income cut the size of both of those losses, but its cash and investment reserves fell by $133 million. The last time the system turned an operating profit without investment income was in 2011.
Community Health Systems became the largest hospital care provider in Mississippi when it took over Health Management Associates, giving the for-profit company 12 hospitals across the state. However, Mississippi Health Department data show the two Baptist systems, combined, had more inpatient nights in 2014 across their hospitals.
Hospitals nationwide have been merging rapidly over the last 20 years, in many cases bulking up to gain leverage in negotiations with insurers. A merger could be a concern for the University of Mississippi Medical Center, which has been trying to steer complicated surgeries to its Jackson campus instead of patients going to Memphis. It also could be an issue for Tupelo-based North Mississippi Health Services. The Calhoun City hospital where Memphis Baptist is assuming management was previously run by North Mississippi.