Health Care Deal News: Spotlight on Hospitals - July 2012
How much is a not-for-profit hospital in receivership in Rhode Island worth? The stalking horse bid for Westerly Hospital, located in Westerly, Rhode Island, came in at $69 million, or about $683,000 per bed, and was submitted by Connecticut-based Lawrence & Memorial Hospital (L&M). Westerly has annual revenues of more than $90 million, and the stalking horse bid includes the assumption of $22 million of debt. Initial bids are due July 30, with a court hearing in mid-August. It is assumed that other bidders will come to the table, including at least one for-profit. For L&M, the acquisition would be both defensive and offensive, as it would like to have a foothold in its eastern market in western Rhode Island, and it doesn’t want others to come in and move into eastern Connecticut. As part of its stalking horse bid it has agreed to invest up to $36.5 million in the first five years, as well as $6.5 million in working capital to begin a turnaround plan. The winning bidder is expected to take over Westerly’s operations by the end of the year.
Meanwhile, Southern Maryland Hospital in Clinton, Maryland, is still looking for a strategic partner. Acording to some local rumors, Kaiser Permanente and Duke University Health System may be interested, but obviously no one will confirm anything. Although Duke is not in Maryland, the joint venture formed early in 2011 with LifePoint Hospitals (NASDAQ: LPNT) has been buying, most recently with an announced deal to acquire Marquette General Hospital in Michigan. Meanwhile, on its own LifePoint has agreed to acquire Woods Memorial Hospital, a not-for-profit in Etowah, Tennessee, a 118-bed hospital with revenues over $25 million. The county sold the hospital back in 2007 for $9 million to a group of physicians and for-profit Restoration Healthcare.
Usually, when two not-for-profit hospitals explore a merger, they are usually left alone and a third party does not bud in. That is probably what 786-bed NYU Langone Medical Center in New York thought when it started talking with Continuum Health Partners eight months ago. Continuum operates two large hospitals with about 1,600 beds, plus a small eye and ear facility with 32 beds. Continuum was then approached by Mount Sinai Medical Center, a teaching hospital with over 1,100 beds, so discussions with NYU were terminated. Everyone wants to get bigger to be more competitive with a stronger physician base and the ability to cut overhead costs. Sometimes, however, a not-for-profit bureaucracy can be overrun within indecision and politics, which will certainly not help on the competition front. NYU is out for now, but that does not mean the other two boards will come to a decision anytime soon...................Want to read more? Click here for a free trial to The Health Care M&A Information Source and download the current issue today