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National hospital giant enters new proposal for Memorial Health

Subheadline: 
Nashville-based company renews financial, essential service offer within days of Novant deal breakdown

A new player in the broken Memorial Health-Novant partnership deal surfaced Thursday with pledges of a long-term lease of Memorial, an acquisition or a joint venture with the health care provider.

Hospital Corporation of America official Joe Sowell, in a two-page letter to Chatham County Hospital Authority Chairman Don Waters, said that while his group was not a player in the original process, “We are re-affirming our interest in the lease, acquisition or joint venture of Memorial.”

“Toward that end, we request the opportunity to engage with the Chatham County Hospital Authority and Memorial to understand your respective goals and requirement and most recent financial results so that we might confirm or adjust the terms of our original proposal.”

He made the offer for HCA Holdings Inc. and its affiliates.

The new offer mirrors a Sept. 9, 2015, proposal to Memorial Health President/CEO Maggie Gill, which placed the value of the hospital between $550 million-$575 million with a payment at closing at 80 percent of the total value.

According to its website, HCA, the Nashville, Tenn., for-profit health care provider is comprised of locally managed facilities that include 165 hospitals, 115 freestanding surgery centers in 20 states and England and employs about 204,000 people.

Waters said Thursday evening that while he had not ruled out further discussions with Novant Health officials, he was heartened by interest expressed by what he called one of the largest hospital operators in the country.

“I take this as a very, very serious offer that we should consider very seriously,” Waters said. “We have to be open-minded and consider all alternatives available to the community.”

He noted that the HCA proposal included the guarantees for core services the authority has sought in discussions with Novant and called it a good sign that there are competent and capable management who will run the hospital “very efficiently while preserving safety-net services to the satisfaction of the authority.”

“I will encourage a thorough review of HCA’s offer, but it does not foreclose further discussions with Novant,” Waters said.

Memorial board chair Harry Haslam Jr. said Tuesday night that, “The negotiating group, which included board members, the Memorial board chair and CCHA board chair, developed a criteria for partnership that would best meet the needs of the organization and community and fulfill the mission. This criteria was followed throughout the lengthy vetting process.

“We have no further comment on this letter.”

 

The proposal

Included in the HCA proposal were:

  • HCA will work with Memorial’s physicians, nursing leaders and management to leverage best practices and standards for delivering patient care;

  • A cash purchase price or prepaid lease payment, which would create a significant foundation to fund needs of the community and extinguish Memorial debt;

  • A commitment to make capital expenditures for growth and maintenance of Memorial;

  • A commitment to fund the completion of the Children’s Hospital;

  • Covenants and governance/oversight rights including: maintenance of charity care and uninsured discount policies, continuance of key service lines, participation in governmental programs, funding community benefits and periodic community needs assessments;

  • Paying local and state taxes.

The letter also pledges to recognize core services: pediatric and neo-natal care-Level 3 nursery, Level 1 trauma program, residency training program in relationship with the Mercer University School of Medicine at Memorial.

The letter also states that “HCA would commit to continuing these core services and not terminate any of these core services without the consent of the hospital authority, provided such consent is not unreasonably withheld given all the facts and circumstances that might exist at that time, including availability of physicians on the hospital’s medical staff and community needs.”

“We are available to begin discussions concerning a transaction with Memorial and would be willing to schedule a meeting or a call as soon as feasible,” said Sowell, senior vice president and chief development officer.

 

Novant breakdown

The proposal comes just days after Novant, a Winston-Salem, N.C. based nonprofit pulled out of months of back and forth discussions over a partnership with Memorial.

As part of that deal, Novant pledged to insure $295 million into Memorial over the first 10 years of the agreement and to pay $163 million in bonds backed by Chatham County.

Among the contributing factors to the breakdown in negotiations was the insistence by the Chatham County Hospital Authority that core safety-net services be guaranteed over the life of the 40-year lease held by the authority.

In a memo to end negotiations Monday, Novant President/CEO Carl S. Armato said concerns over the hospital authority’s role in the Memorial operations and apparent contention between the authority and the Memorial Health Board of Directors did not bode well for a successful partnership.

Waters and authority treasurer Art Dana both said they were surprised — Dana said “blind-sided” — by the abrupt end of discussions.

On Wednesday, Dana said the authority was reaching out to Novant officials in an effort to revive negotiations in what authority leadership agreed was a good deal for Memorial, Chatham County taxpayers and the region.

“We are ready to resume negotiations with Novant whenever they are ready,” Dana said.

But he made clear that the authority would not abandon its insistence that core services be protected in any new lease agreement.

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