Health system sells 80-percent stake to public company
A health system is selling an 80-percent stake in its hospital, neighborhood outpatient centers and affiliated assets to one of the largest publicly traded hospital companies in the country.
Metro Health in Wyoming said today that its board of directors has approved a definitive agreement for the equity sale with subsidiaries of Franklin, Tenn.-based Community Health Systems, or CHS, (NYSE: CYH).
Metro Health would retain 20 percent ownership.
CHS, a Fortune 500 company, owns, leases or operates 206 hospitals in 29 different states. Metro Health said the affiliation would represent the first entry by CHS into Michigan and be the first time a community hospital in the region is affiliated with an investor owned, national health system.
The agreement includes Metro Health receiving an infusion of $100 million to $125 million in capital investment.
The deal comes after a year-long due diligence process and “exclusive negotiations.”
The agreement is subject to review by the Michigan Office of the Attorney General, which could take several months, and a certificate of need evaluation conducted by the Michigan Department of Community Health. During the approval process, the community will be invited to a public hearing regarding the agreement.
Doyle Hayes, chairman of the board of Metro Health Corporation, said the agreement would allow the West Michigan region to continue to have choices for health care.
“CHS has an outstanding reputation for high quality and patient satisfaction,” Hayes said. “We’re excited to move forward with an organization that will help position Metro Health for long-term success.”
After the sale
If the deal is approved, Metro Health would be able to leverage the larger organization’s network of hospitals for best practices and the $100 million to $125 million in capital investment for facilities, services, medical technology and physician recruitment in the first five years.
The affiliation would also designate Metro Health as a tax-paying entity, with its “substantial new tax revenues” allocated to the state and local communities.
Metro Health also cited several expected outcomes of the agreement: continuation and growth of Metro Health’s essential services and partnerships with University of Michigan, Orthopaedic Associates of Michigan and Pennant Health; retaining all active employees in good standing at the time of the transaction, with the same rate of compensation; maintaining Metro Health’s current medical staff; sustainability of residency and fellowship teaching programs; and adoption of charity care policies.
A local board of directors consisting of Metro Health medical staff and local community members will be formed and the Metro Health Hospital Foundation will also be restructured, protecting restricted assets to be used according to the donor’s intention.
Mike Faas, president and CEO of Metro Health, said the health system had the luxury of time to work collaboratively with CHS to achieve the best long-term strategic outcome.
“This recognition of Metro Health as a strong community asset and commitment to our region ensures we’ll be well positioned to serve our patients moving into the future,” Faas said.
The evaluation process also included a review of other proposals from leading national and local health care organizations to confirm if the West Michigan community would be best served by the strategic alliance with CHS.
Metro Health said the due diligence process covered several criteria: community choice in health care providers; local control of health care decisions; economic stability for the community; and commitment to improve quality and service.