The SSM Health hospitals in Jefferson City and Mexico that are being reviewed for possible purchase by University of Missouri Health Care have lost millions in recent years and those losses increased dramatically after St. Mary’s in Jefferson City moved to a new building in late 2014.

According to financial reports filed with the Internal Revenue Service, SSM Regional Health Services, which is the legal entity organized for the Jefferson City and Maryville hospitals, lost a combined $23.7 million in 2016. SSM Audrain Health Care Inc. lost $6.4 million in 2016 and ended the year with $13.6 million more in liabilities than assets.

MU Health Care and SSM announced last week that the university is in exclusive negotiations to purchase the Jefferson City and Audrain County hospitals. Mosaic Life Care, based in St. Joseph, is negotiating to buy the hospital in Maryville.

The operating results and trends for those hospitals are the opposite of the financial picture at MU Health Care. While full figures for the year ending June 30 are not available, hospital CEO Jonathan Curtright said Tuesday that the hospital will record a surplus in excess of $100 million for the first time, a year after setting a record net margin of $98.5 million.

The university thinks it can have a different result by expanding the clinical partnerships of those hospitals and emphasizing the availability of specialized care in the region, Curtright said. It will know after it completes “due diligence” reviews over the next 60 to 90 days, he said.

“Health care in general, nationally, many, many hospitals are either acquiring or being acquired,” Curtright said. “Consolidation is just so much more of the norm. With small, independent hospitals, it is very, very difficult to make it work economically.”

With large surpluses, MU Health Care has money to invest. A decision about purchasing the hospitals won’t reduce MU Health Care’s commitment to supporting medical academics at MU. About 25 percent of the net revenue goes to academic support, with about $20 million for the School of Medicine, a $3 million contribution to a new building for the Sinclair School of Nursing and a “major commitment” to construction of the Translational Precision Medicine Complex, he said.

“Our strategy is to create an academic health system that will serve 1 million central Missourians and beyond,” Curtright said. “The cornerstone of it, certainly, is going to be the main hub here in Columbia. But there are incredible opportunities to work with private practice doctors and community hospitals.”

While it is not possible from the IRS filings to determine how much of the losses for SSM Regional Health Services are due to operations in Maryville and how much are due to operations in Jefferson City. But a $444,958 net loss in 2013 grew to $21.96 million in 2015, the first full year the new building in Jefferson City. Filings showing 2017 operating results are not available.

In an email to the Tribune, SSM spokesman Brian Westrich did not directly address the question of whether the losses are why SSM is looking to sell three of its 24 hospitals.

“This decision is driven by many factors, but is centered on our desire to ensure the long-term sustainability of quality health care for the people of Jefferson City, Mexico, Maryville and surrounding communities,” he wrote. “In order to provide safe, high-quality health care that is convenient and affordable, health systems must integrate all points of service across the entire continuum of care.”

The change will provide greater access to care, more reliable physician recruitment and a larger network of providers, he wrote.

“As such, we believe this transition will best serve these communities in the long-term,” Westrich wrote.

MU has been expanding its clinical holdings and partnerships with physician groups for several years. During most of 2017, it was in exclusive negotiations with Boone Hospital Center to take over the management lease, talks that reached an impasse in January. If it acquires St. Mary's in Jefferson City, it will operate both of the city's hospitals. MU Health Care has managed Capital Region Medical Center for 21 years.

Boone Hospital, which also experienced losses in 2016 and 2014, is leased to BJC Healthcare of St. Louis in a deal that ends in 2020. The hospital trustees are considering whether to seek another management lease or resume operation as an independent hospital.

A deal to buy the Jefferson City and Audrain County hospitals seems to make sense for the university’s health care and academic missions, Curtright said.

The School of Medicine has partnerships with hospitals in Springfield for medical students to complete their clinical training, an arrangement that will allow the school to graduate more physicians. That training could potentially be provided in Jefferson City and Audrain County as well, Curtright said.

“We must produce more physicians as a society,” he said. “We must produce more nurses as a society. And furthermore we must produce more nurses and doctors that will tend to stay in the state of Missouri, one, and two, hopefully who will practice in more of a rural setting. If we grow our enterprise it will help with our academic mission.”

Any purchase would ultimately be up to the UM Board of Curators. The hospital has grown to where it now produces about half of the total revenue of the entire university system. Surpluses generated by the hospital must be used to benefit the taxpayers that own it, board member Maurice Graham said.

“I believe that the exploration makes a lot of sense,” Graham said. “I think it can be good for the communities and good for the university. Certainly I think it can and if, in fact, it means that we are going to graduate more physicians who will stay in the Midwest and provide quality health care, everybody benefits.”

rkeller@columbiatribune.com

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