Mercy Health Seeks Hospital Lease Amendment

Huntsville, TN (2010-01-04) Mercy Health Partners, parent corporation of St. Mary’s Medical Center of Scott County, has offered to pay the county $1 million a year to continue leasing the local facility; however, the county would have remit most of the revenue back to the healthcare giant to pay for medical care provided to its residents.

In a written proposal to the Intergovernmental Committee Monday night, Mercy Health Partners proposed making a revision in its 15-year lease agreement with Scott County, a change that would reinstitute lease payments.  In the proposal, Mercy would re-establish their obligation to pay the county $1 million per year, the same payments the healthcare group paid prior to signing a new lease last year.  In addition, Mercy would remit an additional 10% for ancillary services for resources consumed by the county in support of the hospital.  In return, the county would agree to provide a charity care subsidy to the local facility, paying back up to $1 million a year for indigent or charity care to local residents.  The net difference to the county would be roughly $100,000 a year, dependent upon the level of charity care provided.  In 2008, St. Mary’s Medical Center of Scott County provided roughly $1.6 million of charity care to Scott County.  In the first eleven months of 2009, the company had reportedly given another $1.2 in free care.

While it was unclear how Mercy Health would benefit for changing the agreement, County Attorney John Beaty indicated the capital lease payment would assist the company with reimbursement revenues from federal healthcare, like Medicare and Medicaid.

According to the document, Mercy must have financial support from Scott County in order to fund a portion of the resources required to adequately serve the community and to offset the burden of charity care needed in the community.   If the revision is accepted, the group would be required to provide a report to Scott County detailing the amount of charity care provided on a monthly basis.

Before pursing the idea, County Mayor Rick Keeton and Beaty will be looking into the legality of the proposal, trying to get opinions from the State of Tennessee Division of Local Audit, Medicare and Medicaid.

St. Mary’s Health System of Knoxville assumed day to day operations of the local hospital January 1, 2008.  That same day, the company merged with Baptist Health System to form what would become Mercy Health Partners.  During a special called meeting on April 2009, on a 9-5 vote, the Commission entered into an agreement with Mercy Health Partners to amend its lease agreement and eliminate the annual $1 million lease payment to the county.