A circuit court judge in Calhoun County, Ala., is expected to rule by June 1 on whether Stringfellow Memorial Hospital, a 125-bed not-for-profit community hospital in Anniston, may move closer toward its goal of becoming a for-profit chain hospital.
Last month, Stringfellow Memorial signed a three-year management contract with Health Management Associates, a for-profit chain based in Naples, Fla. The management contract is the first step toward an eventual sale to HMA, a Stringfellow spokeswoman said.
Stringfellow Memorial was established in 1920 by Susie P. Stringfellow, who bequeathed $30,000 and her property to a trust in her name to establish a community hospital.
The catch, however, is that Mrs. Stringfellow's will stipulated that the hospital not be sold or run for a profit, said Juliette Doster, Stringfellow Memorial's chairwoman. Ms. Doster was MODERN HEALTHCARE's Trustee of the Year in 1992. She has served on the board for 34 years (Jan. 20, 1992, p. 29).
After exploring several local affiliation options, Stringfellow Memorial trustees earlier this year asked the court for permission to break the will and allow the hospital eventually to be acquired by HMA.
First, however, the court must rule on whether the hospital may enter into a mortgage for real estate, which would pave the way for further agreements, said Rob Smith, an HMA lawyer. If the court approves, Stringfellow trustees would consider a proposed 30-year management contract with HMA, said Michael Cassidy, Stringfellow's administrator.
"We need the will interpreted to allow us to generate capital (by mortgaging the assets)," Mr. Cassidy said. Unlike other hospitals, Stringfellow only has the clear authority to raise capital by putting up its equipment for security, he said.
The long-range goal of both Stringfellow and HMA is to enter into a purchase agreement, although no timetable has been agreed upon, executives of Stringfellow Memorial and HMA said.
Stringfellow Memorial's long-range plans, while not openly controversial, have raised some objections, especially among the board members of its chief competitor, 286-bed Northeast Alabama Regional Medical Center.
Earlier last year, Stringfellow Memorial and Northeast Alabama discussed a possible merger. Stringfellow trustees approved a letter of intent to merge, but Northeast's trustees nixed the potential deal.
Several months later, in October, HMA made its offer to acquire Stringfellow, Ms. Doster said. Then, in December, Northeast offered to begin acquisition talks with Stringfellow, Ms. Doster said. Stringfellow's trustees declined because they already had signed a letter of intent to link with HMA.
"If I had my way we'd go back to how things were 10 years ago," Ms. Doster said. "But we can't. It's either sell (to HMA) or close. We don't want to close. This community needs two hospitals."
There are three hospitals in Calhoun County. The third is 56-bed Jacksonville (Ala.) Hospital, a public facility that's managed by Quorum Health Resources, Nashville, Tenn. Jacksonville is located 12 miles from Anniston, a small town with a population of 30,000 some 50 miles east of Birmingham.
Ms. Doster said the board voted to go with HMA because the hospital's financial condition has been deteriorating over the past two years. The census at the 125-bed facility has dipped to about 30 patients a day, she said.
In 1992, Stringfellow Memorial reported net income of $923,142 on total revenue of $17.1 million, according to HCIA, a Baltimore-based healthcare research company. Its total assets were $15.1 million in 1992 and total liabilities were $8.5 million, HCIA said.
However, Ms. Doster said the hospital lost money on operations in 1993 and that projections indicate continued losses. Mr. Cassidy declined to give precise figures.
The value of the contract with HMA wasn't disclosed.
If HMA acquires the hospital, proceeds from the sale would be funneled into the Stringfellow Trust, the hospital's foundation, to support local healthcare needs, Ms. Doster said. The trust has assets of about $100,000, which now are earmarked to purchase equipment for the hospital, Mr. Cassidy said.
With the management contract at Stringfellow, HMA now operates 22 hospitals in 11 states with 2,356 licensed beds. HMA manages three other hospitals under contract to be acquired, he said.