Mercy to transfer Ark. hospital to CHI

Four months after dropping a deal with a different suitor because of regulatory hurdles, Chesterfield, Mo.-based Mercy health system plans to transfer its Hot Springs, Ark., hospital and physician clinic to Catholic Health Initiatives.

The two Catholic health systems signed a letter of intent Oct. 11 and, if they come to a final agreement on terms, would complete a transaction by the end of the year, and Mercy Hot Springs would be operated as part of an integrated network with CHI's Little Rock-based St. Vincent Health System.

Mercy previously planned to sell its Hot Springs assets to Capella Healthcare, a for-profit chain based in Franklin, Tenn., and the owner of Mercy Hot Springs' only direct competitor in the small city, about an hour's drive from Little Rock. The Federal Trade Commission signaled to the organizations that the government would challenge the transaction, and they walked away from it in June.

Mercy Hot Springs, however, has suffered significant losses in recent years, and its Chesterfield parent has argued that it can’t compete with the larger players in Little Rock. Those competitors include St. Vincent, anchored by 409-bed Infirmary Medical Center. The biggest by far, though, is seven-hospital Baptist Health.

Mercy and CHI said in a news release that St. Vincent would retain Mercy Hot Springs’ existing physician relationships and “is committed to creating a strong and integrated regional physician network.”

Financial terms were not disclosed.

“Mercy and CHI recognize the extremely challenging healthcare environment in Arkansas and agree that enhancing the Catholic health ministry and strengthening access to healthcare is a key objective of the proposed transaction,” the organizations said in the release.