In what was dubbed a “monumental achievement for South Central Kansas Medical Center,” the hospital’s board of trustees voted to move forward with the purchase of Winfield Medical Arts (WMA).
A resolution, which was approved by the six present board members, was approved unanimously in a special meeting of the board on Sept. 12.
The details of the contract signed that morning include the purchase of the building lease and all equipment owned by WMA, as well as the name of the clinic itself.
The agreement also outlines future staffing arrangements, financial obligations on the part of SCKMC and payment arrangements for the purchase of the practice.
Winfield Medical Arts is located at 3625 Quail Ridge Drive in south Winfield, just east of U.S. 77 and near Quail Ridge Golf Course.
“While we recognize there is risk with any merger, we are painfully aware of the result of remaining stagnant in an ever-changing medical climate,” SCKMC Board of Trustees Chair Carol Hearne said at the start of the meeting.
“SCKMC’s leadership has placed a great amount of effort in looking for new and creative ways to offset the expenses required to be able to continue to provide full-service hospital care. This is the next step in that continuous process, and one … which we believe will provide great benefit to not only both entities involved, but all those seeking health care within the region.”
This agreement was the product of more than a year of work, according to SCKMC Chief Executive Officer Virgil Watson.
“We think we have put a process together that will move the hospital forward. One thing that we have tried to do as we stabilize the hospital financially is … find things to give the maximum reimbursement without any increase in work load. If we get this approved today, we will have accomplished that,” Watson said.
“The Winfield Medical Arts name will survive through the test of time. Their legacy will continue. We are not changing the signage outside. We acquired all the rights to use the Winfield Medical Arts name under our management going forward. The only thing that will change is the employees will get their checks from SCKMC instead of WMA,” Watson said.
Rural Health Clinic status
It will be business as usual for the patients and staff of Winfield Medical Arts going forward, Watson said.
However, there will be some changes to the clinic operation behind the scenes.
One change is that WMA will transition from a standalone Rural Health Clinic to a hospital-based Rural Health Clinic.
This change alone should increase the amount of Medicare reimbursement the facility is able to collect.
“Medicare has really made a push for the hospital to be the hub of the medical community,” explained Holly Harper, SCKMC’s chief financial officer.
“Part of the advantage of a Rural Health Clinic is they have better reimbursement when attached to a hospital. Of course, that is the driving force behind the decision. There is better reimbursement when they take care of the patients that they are already taking care of. That really is the game changer.”
Concerns about transaction
The purchase of WMA garnered concern from some Ark City residents, considering the hospital’s own tentative financial status.
Residents took to Facebook with their concerns, posting statements such as “they need to be paying their own bills before making any purchases.”
Others voiced outrage based on the City of Arkansas City providing financial help in the last two years, while also tightening its own internal budget — which included sacrificing or delaying items such as the 2016 purchase of a new Arkansas City Fire-EMS Department tanker, the repair of the Agri-Business Building roof and a substantial repair of the elevator at City Hall.
However, hospital personnel stated the purchase would be mutually beneficial to both parties. Watson called the move a “carefully analyzed” decision.
Both Harper and Watson anticipate WMA’s hospital-based Rural Health Clinic status will allow the clinic to continue to be financially self-supporting following the purchase.
Harper said WMA has been financially solvent for the last four years. “We would not have done this if they weren’t,” Watson said.
Given the change in Medicare reimbursement, Harper estimates WMA will contribute between $230,000 and $250,000 of profit to SCKMC’s bottom line next year.
It also should serve as a source of referred patients to the hospital and its laboratory, helping to generate revenue within the hospital operation itself.
SCKMC and WMA
“The decision to merge has been discussed for several years between both the clinic and hospital leadership. The two facilities regularly work together to assist with various needs,” states a press release from SCKMC.
The transition is scheduled to take place on Oct. 1, with Dr. Kent Winblad, Dr. Chandy Samuel, Dr. Anand Kaul and advanced practice registered nurse (APRN) Jane Kaufman partnering with SCKMC as independent contractors, through a medical provider group, to continue to offer patient services through Winfield Medical Arts.
Winblad will be the chief medical officer for the provider group, as well as the medical director of the hospital-based Rural Health Clinic.
Each of the Winfield Medical Arts providers was in attendance for the meeting, showing their support for the merger.
“I think it’s great. Number one, it will help us to continue the Winfield Medical Arts legacy,” Winblad said. “Number two, it’s an incredible deal — not just for us, but for Ark City having acquired our experienced employees and the good relationships that we have with each other.”
SCKMC financial obligation
The cost of the purchase of WMA, as outlined in the contract, will be $37,500, which is to be paid in 60 monthly installments of $625 each.
However, the hospital’s financial obligation does not end with the purchase price.
SCKMC also will be on the line for the lease of the space in which WMA currently operates, which is owned by GWBC LLC, a subsidiary of Wichita-based Galichia Medical Group.
The base monthly rental fee starts at $4,000, but is renegotiated at the beginning of each lease year.
“The annual Rent Increase will be calculated by taking fifty percent of the percentage increase in the Consumer Price Index for the preceding twelve months and multiplying such percent times the prior year’s annual Rent,” the contract states. “This annual Rent Increase will then be added to the prior year’s annual Rent to determine the Rent for the coming Lease Year.”
The maximum increase per year is capped at 3 percent, but also is limited to no less than a 1.5-percent increase.
There also are additional expenses in the contract, including fees for utilities, fuel, maintenance, janitorial services, local and long-distance telephone services, internet access, building and grounds maintenance and repair, taxes, assessments, and property and casualty insurance.
The total for these incidental additions are “as estimated by (the) Landlord from time to time.”
Current WMA employees
WMA’s current employees’ contracts with the existing clinic are discontinued under the new agreement.
But SCKMC will rehire each of the 20 current employees.
Harper estimates payroll expenses for those individuals will be somewhere around $450,000 per year.
In addition to the base pay rates, SCKMC agreed to pay productivity fees to the medical group, based on actual work performed.
Also within the contract signed Sept. 12 was a section that pertains to one employee in particular.
This section, the Kaufman clause, governs the employment of APRN Jane Kaufman.
Kaufman is guaranteed an annual salary of $95,000, plus standard benefits.
The only other contractual employee compensation amount is that of the medical director, Dr. Winblad.
His medical director fees — not salary, which is calculated independently as part of the medical group’s compensation — are $26,000 per year.
South Central Kansas Medical Center Marketing Director Clayton Pappan contributed to this story.