Blount Memorial Hospital rounds off 12 months of change, talks with nonprofit partners

Blount Memorial Hospital will cap 12 months of change with the close of its fiscal year on June 30.

Those changes range from the dramatic to the subtle. Some of the more noteworthy shifts involve the end of a lengthy legal and political dispute between Blount Memorial and the Blount County government over hospital ownership and leadership.

A year ago, in June 2023, the hospital’s board of directors voted to start a federal lawsuit against the Blount County government. Since then, the board’s makeup has shifted; the majority of the board’s members — five of nine — were appointed after June 2023, and the hospital has a new (interim) CEO in Jonathan Smith, after former administrator Dr. Harold Naramore offered his resignation in a November board meeting.

This spring the hospital and the county opted to settle both that suit and one filed months before it in state court. Their leaders agreed, among other things, that the county owns the hospital itself, but that Blount Memorial properties, aside from the main campus on East Lamar Alexander Parkway, are titled to the hospital’s longtime manager, Blount Memorial Hospital Inc., which holds them in trust for the government.

That agreement enabled the sale of two hospital properties — MorningView Village Senior Community and the hospital’s Transitional Care Center. Since the sale was approved by the hospital’s board in July 2023, it had been the subject of major dispute with the county.

The sale, valued at $22.8 million, is expected to conclude over the summer, adding a major cash infusion to what’s been months of a positive financial run at the hospital. Hospital staff are now projecting a nearly $10 million improvement over the fiscal year that ended in 2023.

More changes are coming. The hospital and the county are currently working with an investment firm to find a health system to affiliate with the hospital. The forms that affiliation may take — a management agreement, consolidation, merger or acquisition are all among the options — have not yet been defined, but hospital leaders say now that the only systems left in contention are not-for-profit organizations.

Finances

The hospital in late May tracked losses for the fiscal year up to April that amount to $993,000. But though hospital leadership had aimed to end the year in the black, the nearly-$1-million loss represents an improvement of about $9.5 million from the fiscal year that ended last June.

Blount Memorial is also due to receive an additional $22.8 million this summer, once the MorningView and TCC sale clears. The sale proceeds may not be the hospital’s only boon; interim CEO Jonathan Smith earlier this year also reached out to the federal government over about $4 million in pandemic money for which Blount Memorial staff applied years ago.

And the hospital had its best month since 2020 in April, the latest in a series of months spent marking positive operating income. Blount Memorial CFO Brian Hollomon told hospital directors during a May board meeting that the hospital’s operating income for April was $1.04 million.

“It’s been at least eight to 10 years since we’ve had a month like we did in April,” Hollomon said.

While finances have been a trigger for disagreement between the county and the hospital in the past, decisions around money that once sparked major debate are now taken without any apparent sense of controversy to come. A means of addressing a current liquidity issue — and the need for the hospital to meet a bank requirement tied to its debt — by moving investment money into an operations account in May offered a direct contrast to a similar incident last year, when shifting about $30 million into operations precipitated a clash with the county.

The next 12 months

The past year at Blount Memorial has been historic, with a change in CEOs, the end of disputes with local government and a written definition of the link between the hospital and the county. The next 12 months are likely to outstrip it.

The Blount County Board of Commissioners and the Blount Memorial board in January contracted with Juniper Advisory, an Illinois-based investment firm specialized in health system mergers. The purpose of that contract is to seek out a health system with which the hospital might affiliate and find other means of improving hospital finances.

Any strategic affiliation would be made, both hospital and county leaders have said, to bolster the hospital’s viability in a healthcare landscape that has proved increasingly difficult for independent operators like Blount Memorial. Hospital officials have commented in the past that Blount Memorial retains the ability to reject an affiliation it deems against its interests.

The affiliation search is underway. While the hospital was advised against excluding for-profit health systems from discussions, the current contenders are all not-for-profit organizations, interim hospital CEO Jonathan Smith told The Daily Times.

What form an affiliation might take is not yet established, Smith said in a recent email. “The hospital and the county are still exploring what a potential affiliation could look like and learning more about potential partners. They are being extremely diligent and are truly committed to doing what’s best for the hospital, the county and the patients we serve,” he wrote.

“We remain pleased with the work of our Advisory Committee, board and outside advisors and believe we are on track to make a decision by the end of the summer,” he wrote.