The Health Care M&A Monthly: Hospital M&A Goes On Vacation--

Two Deals Announced, But Interest Remains High

 
Vacations may account for the relative dearth of mergers and acquisitions in the Hospital market. Even dealmakers have to take time to recharge their batteries before plunging back into the frenzy of activity that has characterized this market over the past four quarters. Despite just two announced deals this month, the M&A market is still abuzz with news of upcoming transactions.

MedCath (NASDAQ: MDTH) continues the sell-off of its facilities in the light of recent legislation that limits the future expansion of physician-owned hospitals. This month the company sold 70-bed Hualapal Mountain Medical Center, a specialty hospital in Kingman, Arizona focused on cardiology, to 187-bed Kingman Regional Medical Center for $31.0 million plus the retention of working capital. The assets include an 18.6 acre parcel of land adjacent to the hospital. Kingman Regional plans to utilize the target facility on a limited capacity to reflect the current local demand for hospital services. Hutchinson Shockey Erley & Co. provided advisory services to Kingman Regional related to the deal. In related news, we have more details on MedCath’s sale of its 70.3% interest in 112-bed Arkansas Heart Hospital to AR-MED, LLC. The deal, first covered in our June 2011 issue, is being financed with a package of $65.0 million from Tulsa’s Bank of Oklahoma ($35.0 million), Arvest Bank of Fayetteville ($20.0 million) and Summit Bank of Arkadelphia ($10.0 million). AR-MED is led by Bruce Murphy who is part of the 15-physician group that owned the 29.7% minority interest in the hospital. It is a sad commentary that Dr. Murphy had to relinquish his medical license to comply with new federal laws on physician ownership of hospitals just so he could become the facility’s CEO.

Iowa Health System, based in Des Moines, has received its final approval to proceed with its merger with Methodist Health Services Corp., which operates 298-bed Methodist Medical Center in Peoria, Illinois. While no money will change hands or debt be assumed, the composition of the hospital boards will change to reflect the new relationship. The merger received the FTC’s blessing last month; this month, it got a certificate of exemption from certain taxes from the state of Illinois.

Deals In The Making. Johnson Memorial Medical Center (JMMC) in Stafford Springs, Connecticut has entered into an agreement to explore an affiliation with Saint Francis Care of Hartford, the largest Roman Catholic hospital in New England. The goal of the affiliation is to preserve an inpatient hospital presence in north-central Connecticut, expand clinical services and assist in implementing key capital projects. Assisted by Cain Brothers, JMMC and Saint Francis Care will develop a capital plan.  Lawrence & Memorial Hospital in New London, Connecticut and Westerly Hospital in Rhode Island are exploring a possible strategic alliance between the two health care systems...Want to read more? Click here for a free trial to The Health Care M&A Monthly and download the current issue today