Sheridan Memorial Hospital presents nonbinding affiliation term sheet with Billings Clinic; commissioners raise governance concerns

Sheridan Memorial Hospital provided commissioners with a draft, nonbinding term sheet proposing a collaborative affiliation with Billings Clinic, hospital CEO Mike told the Sheridan County Board of Commissioners during an information update.

"We exist in this community to take care of our families and our neighbors and our friends. That's why the hospital is here," Mike said as he began a presentation that reviewed national rural-hospital pressures, Sheridan’s payer mix, and the operational rationale for an affiliation.

The presentation said roughly half of U.S. rural hospitals operated in the red last year and stressed Sheridan’s local demographics: a large Medicare/VA population that reduces margins and a declining commercial payer share. The CEO said an affiliation could improve quality, provide group-purchasing power, and offer access to health-record and IT investments that would be hard for a small hospital to acquire alone.

The proposed affiliation model described in the draft term sheet would retain local identity and governance while creating a new nonprofit (501(c)(3)) operating board. Under the proposal, the county commissioners would appoint an initial seven-member ‘‘legacy board’’ that would lease the hospital asset to the new nonprofit. The nonprofit’s board would have seven members: five locally nominated or shared seats and two seats selected by Billings Clinic, according to the CEO’s description. The CEO role would be employed by Billings Clinic but accountable to the new nonprofit board.

Commissioners asked procedural and policy questions during the discussion. One commissioner asked how the two Billings Clinic appointees would be selected; the CEO said initial appointments would come from the existing Memorial Hospital board and that a nominating committee on the 501(c)(3) would handle later nominations. Another commissioner asked whether state statute would need to change; the CEO replied, "This fits within state statute." A commissioner said he was uneasy with the idea of the CEO being an employee of Billings Clinic rather than Sheridan, and the CEO replied the 501(c)(3) would recruit and appoint the CEO and that the CEO would be accountable to that board.

Commissioners also raised questions about artificial intelligence and patient relationships. The CEO said the proposed affiliation would give the hospital access to digital tools while aiming to preserve local clinical relationships: "One of the things that we're doing around this partnership is to hold on to the best of what we have relative to those relationships for as long as we can."

The CEO left a copy of the draft, nonbinding term sheet with commissioners for review and said legal and administrative steps (CMS enrollment, tax identification changes and related transition work) would be required before any formal change. No binding motion or vote was taken during the meeting.

The hospital emphasized continuity of local services and the hospital’s existing foundation would remain unchanged under the proposed model. The CEO cited previous joint ventures and partnerships (for example, a past dialysis joint venture) as examples of prior collaboration and sought to distinguish the affiliation from outright sale or merger events.

The board did not take formal action. The draft term sheet and related materials were left with commissioners for further review and upcoming public meetings.