After nearly three years of informal talks, Mercy Fort Smith has entered into a management agreement with Booneville Community Hospital that will begin Nov. 1 with a two-month transition period that will culminate into a fully leased facility that will become Mercy Hospital-Booneville beginning Jan. 1.

Mercy is not assuming any of the Booneville hospital’s debt. As an entity, the Booneville hospital remains intact, Mercy Fort Smith President Ryan Gehrig said. It will continue to be responsible for its city bond issues and a pending breech-of-contract lawsuit of $174,856. Dr. Sean Champion, a surgeon, alleges the hospital breached a contract, interfered with business expectancy, violated the Arkansas Whistleblowers Act and wrongfully terminated the doctor.

In 2003, Booneville voters approved a 1 percent sales tax to support the hospital’s operation. In 2007, the tax issue was amended to pledge one-fourth of its $400,000 annual revenue toward bonds that went toward construction of a new, $18 million, 25-bed hospital. The interest associated with the bonds is about $90,000 per month.

The merger announcement was made Thursday evening at the fourth annual Mercy Community Roundtable at the MovieLounge in Fort Smith, an event bringing community leaders together with Mercy executives to brainstorm ways to improve and exceed expectations within the community.

Financial challenges brought about by the Affordable Care Act was a main topic of discussion. Mercy must find ways to increase its income this fiscal year, Mercy Fort Smith CFO Mike McCurry said.

Increasing use of "telemedicine" will be a major part of that revenue increase, McCurry added.

One of the biggest benefits to the agreement, Booneville Community Hospital CEO Dave Hill said, was having Mercy’s network of physician recruiters.

"We need more (health) providers and Mercy has shown success with full-time physician recruiters," Hill said.

Booneville Community Hospital Chief Financial Officer Stuart Lisko told the Booneville Democrat in late July that the Booneville hospital was seeing a year-to-date loss of more than $1.5 million and the hospital has cut all the expenses it can. Fewer outpatient services and a census drop of 0.6 patients per day led to an operational loss of $87,000 in February, and an overall loss of $144,000. The larger figure includes the monthly payment required for the bonds sold to build the hospital.

"We have reduced expenses to the point that you can no longer reduce expenses without cutting out services," Hill told the Booneville Democrat July 31. "Many of those services are revenue producing services."

Financial troubles are being seen across the board in the medical industry, but recruitment of physicians to rural areas like Booneville is an added challenge.

A major benefit to the merger, Gehrig said, would be the availability of Mercy physicians to hold periodic clinics at the Booneville hospital. Coupled with telemedicine, this could provide improvements to the community’s health-care options.

In addition to its 365-bed hospital, Mercy Fort Smith also operates three critical-access hospitals in Ozark, Paris and Waldron, as well as Mercy Clinic with 123 providers in more than 20 locations across the region.

A not-for-profit corporation, Booneville Community Hospital Inc. operates the hospital through a seven-member board. The city oversees collection and disbursement of the sales tax, but hospital management is independent of city government.

Ownership of the hospital will revert to the city upon retirement of the bonded debt. The payout schedule is for 40 years and 36 years remain. Additional funding comes from the federal government, private insurance and private payments.