Government, Health Care, and Law

Forum set on Metro, CHS deal

Attorney General hosts public hearing Thursday.

April 17, 2015
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Citizens and competitors will get their say on a proposed hospital sale when Attorney General Bill Scheutte hosts a public hearing Thursday in Wyoming.

The AG’s office is hosting a public forum on the proposed joint venture between nonprofit Metro Health and Tennessee-based Community Health Systems, a for-profit corporation. The hearing is set for 5-7 p.m., April 23, in the Metro Health Conference Center, 2225 Main St. SW, Wyoming, and will include representatives from the AG’s office, as well as Metro and CHS. Other entities invited to attend include regional hospitals, regional and statewide medical associations, and local and county government officials.

Sydney Allen, a communications representative for Scheutte, indicated in a written statement the review of the proposed venture between Metro Health and CHS is standard practice for proposed mergers and joint ventures between nonprofit and for-profit entities.

“Our review of these transactions is extensive and always includes an opportunity for the public to comment on the proposed transaction,” said Allen. “We welcome public comment by mail, e-mail and phone throughout our review process, but it’s also important that the public has the opportunity to present their concerns directly to representatives of the Attorney General and to representatives of the parties to the transaction, in this case Metro Health and CHS.”

Metropolitan Health Corp. announced in January the approval of a definitive agreement with CHS, which incorporated the “contribution and sale of substantially all of Metropolitan Hospital’s assets to a newly formed limited liability company, Metro Health Holdings,” according to the transaction narrative submitted to the Attorney General by Metro Health.

The proposed venture approved an 80 percent ownership sale of the newly formed LLC with Wyoming Michigan Holdings, a CHS subsidiary, while Metro Health would retain 20 percent ownership interest.

The transaction narrative memorandum, revised April 6, indicated Metro Health and CHS agreed the asset value is approximately $260 million plus the net working capital of Metropolitan Hospital and its affiliates. The total asset value is also dependent on a couple of additional factors: effective time of the venture and long-term debt or capitalized leases.

If the joint venture is approved, during the first five years Metro Health would receive $100 million to $125 million in capital investment for facilities, services, medical technology and physician recruitment, officials said in January.

Despite its financial stability, Metro Health indicated the need for access to capital was a key component for seeking a strategic partner moving forward. Due to the amount of bond financing used to build the 600,000-square-foot, $150 million hospital at Metro Health Village, its lender limited the use of capital funds.

Other benefits of the sale include the continuation of the residency and fellowship teaching programs, the formation of a local board of directors comprised of Metro Health’s medical staff and local community leaders, and hiring all active employees in good standing at the time of the transaction, hospital officials said.

As part of the process for nonprofit mergers or sales, the proposed venture is subject to review by the Office of the Attorney General. During the process, the AG can request documentation, such as the transaction narrative, board and committee minutes for the last year, copies of due diligence materials, and pre-and post-closing organizational charts.

If the sale is approved, Metro Health Hospital Foundation will be restructured, and restricted assets will be protected. The use of additional proceeds from the proposed venture would also be subject to review by the AG.

“It’s our responsibility to protect charitable assets in Michigan, including nonprofit hospital assets, and review these transactions to ensure charitable assets are not diverted for private benefit,” said Allen in the written statement. “We also protect restricted charitable assets, i.e., those assets donated for a specific purpose, to prevent these assets from being misused.”

Diana Sieger, president of Grand Rapids Community Foundation, said in the event the 80/20 split sale takes place, one viable option to preserve the charitable assets given by donors to the hospital foundation would be to place some of the proceeds in a fund with Grand Rapids Community Foundation.

“In many communities across the country when there has been a sale of nonprofit hospitals bought by for-profit entities, many times the proceeds are placed with the community foundations.

“I know we have not, at least in West Michigan, experienced the sale of a nonprofit hospital to a for-profit, but it has been happening for a long time across the country,” said Sieger. “Detroit Medical Center was purchased by a for-profit hospital and the proceeds from that sale went to the Community Foundation for Southeast Michigan in preservation of those assets.”

Grand Rapids Community Foundation, established in 1922, has grown to manage nonprofit endowment funds and community funds for Cascade, Ionia County, Lowell, Hudsonville-Jenison, Sparta and Wyoming.

“Metro Health itself was built upon the intention of many very generous people over the course of decades. To preserve that is essential, and to make sure the earnings from those proceeds can be pumped back into the things those donors felt were important,” said Sieger. “I think it is absolutely essential to be placed in a location such as the Community Foundation where we can honor the intention from the very beginning.”

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