Health Care Deal News: Spotlight on Hospitals - February 2012

Community Health Systems (NYSE: CYH) announced plans to acquire Memorial Health Systems, which owns Memorial Hospital, a 100-bed acute care facility in York, Pennsylvania. This would add a 17th facility to CYH’s network in Pennsylvania. CYH plans to build a replacement hospital within five years on the site of a former golf course. Included in the deal are several ancillary properties such as the Surgical Center of York. With just $97.0 million in net patient revenue Memorial competes with nearby 563-bed York Hospital, which has net patient revenue of $741.0 million.

With the backing of Leonard Green & Partners, Prospect Medical Holdings is branching out from its Los Angeles home base and expanding into the San Antonio, Texas hospital market. It is acquiring Nix Health System, a 183-bed hospital and health care system in San Antonio, from Merit Health Systems, which is based in Kentucky. The deal, which closed February 1, establishes the buyer in Texas, and if Prospect stays true to form, it will seek to build a network by acquiring other facilities.

In Castro Valley, California, Eden Township Healthcare District is getting back into the hospital operating business. Several years ago, the District sold Eden Hospital to Sutter Health, but retained an ownership interest in the facility. The District does not appear to be entirely happy with some of Sutter’s decisions and has been grooming St. Rose Hospital, a 163-bed acute care facility in Hayward, for a takeover. St. Rose Hospital saw the writing on the wall and concluded that it required public support and resources to assure its long-term viability, and could implement that plan if it became part of a hospital district which is eligible to receive public funds. Eden Township stands ready to supply that need.

Northern Michigan Regional Hospital (NMRH), a 214-bed acute care hospital in Petoskey, Michigan, is joining forces with McLaren Health Care Corp., based in Flint. NMRH posted operating losses in 2008, 2009 and 2010, necessitating the search for a partner with larger financial and managerial resources. In 2008, the hospital had considered a deal with Spectrum Health in Grand Rapids, but did not follow through. McLaren currently has 10 hospitals and generates $4.0 billion in revenue.

Here and There. Sanford Health and Bismarck Medcenter One are in talks for a possible merger. If consummated, the merger would give Sanford two of North Dakota’s six tertiary care hospitals. Catholic Healthcare West has changed its name to Dignity Health to accompany a change in its governance. While Dignity will continue as a not-for-profit system grounded in Roman Catholic tradition and teachings, it will no longer be a ministry of the Catholic Church. This will allow the organization to grow nationally. It currently operates 25 Catholic hospitals and 15 non-Catholic hospitals. Hackensack University Medical Center has been approved to start renovations at Pascack Valley Hospital. Hackensack hopes to reopen the facility, but is waiting for an answer to the CON application that the company and its partner, LHP Hospital Group of Texas, submitted to the state of New Jersey. If approved, total costs of the renovation would be about $40.0 million. California’s Prime Healthcare withdrew its $104.0 million offer for Christ Hospital in Jersey City, New Jersey, due apparently to public outcry over the takeover of a not-for-profit by an out-of-state, for-profit company. Public outcry, however, could not then avert Christ Hospital from filing for Chapter 11 bankruptcy protection. Both Bayonne Medical Center and Jersey City Medical Center had previously made approaches to Christ Hospital, and they may now take another look. All that public outcry did in the end was drastically lower the ultimate purchase price, probably to the range of $35.0 to $40.0 million. Auburn Memorial Hospital in upstate New York is exploring an affiliation with Rochester General Health System. A legislative committee in North Carolina is now considering whether the state should own,  through the University of North Carolina, Raleigh-based Rex Healthcare. Last year WakeMed made a hostile bid of $750.0 million to acquire Rex, but UNC’s board nixed it. Howard Regional Health System of Kokomo, Indiana, has signed an LOI to become part of the Indianapolis-based  Community Health Network....Want to read more? Click here for a free trial to The Health Care M&A Monthly and download the current issue today