Although it took a little longer to close than originally anticipated, LifePoint Hospitals Inc. completed the deal to acquire Sumner Regional Health System (SRHS) on Sept. 1.
The financially ailing, private, not-for-profit health system with hospitals in Sumner, Trousdale and Smith counties filed for Chapter 11 bankruptcy at the end of April. Simultaneous to the filing, system officials announced the decision to sell to LifePoint after reviewing bids from 10 suitors. The Brentwood-based, public hospital management company made an offer to purchase the system for $145 million plus working capital in the range of $10 million and a promise to infuse another $60 million in capital investments into the four hospitals over the coming decade. The purchase would add Sumner Regional Medical Center in Gallatin, Riverview Regional Medical Centers North and South in Carthage and Trousdale Medical Center in Hartsville into the LifePoint fold increasing the company’s operational reach to 52 hospital campuses in 17 states. In addition to the four hospitals, SRHS included medical offices, outpatient facilities, a family physician group, and home health and hospice care.
“The system in many ways consists of several communities that fit in what I call ‘our sweet spot,'” noted Jeff Seraphine, Delta Division chief operating officer for LifePoint. “We continue to build a company that focuses on community hospitals and on being the best at running them. That’s our goal.”
What was seen as a love match between the administration and medical staff of the affected facilities and the company with expertise in operating non-urban hospitals ran into a glitch when officials in Sumner County raised objections to the transaction. The marriage planned for the end of June turned into a slightly prolonged engagement as the county’s concerns were addressed. The points of contention were not aimed at LifePoint as an owner/operator but were instead rooted in terms outlined in 2004 when the county sold Sumner Regional Medical Center to the SRHS healthcare organization.
Due to the bankruptcy proceedings, Seraphine noted LifePoint’s contact with county officials was restricted. “It wasn’t that we couldn’t reach agreement, we just couldn’t have the conversation,” he pointed out. However, it became clear the main sticking points centered around inmate and charity care and the county’s right to retrieve assets if Sumner Regional was closed or sold. Indigent care became a “non-issue” according to Seraphine when officials reviewed LifePoint’s record in other Tennessee markets and found the company to exceed the county’s baseline expectations. While Seraphine readily recognized the prisoner care stipulation has “the opportunity to be a very expensive proposition,” he said ultimately LifePoint “agreed that we would fulfill the obligations in the previous agreement with the hospital” and extend care to that patient population until 2034.
In late July, Sumner County commissioners were satisfied the outstanding issues had been settled and voted unanimously to approve the transaction. After review and approval by the State Attorney General (as is required in Tennessee when a tax-exempt hospital is sold to a for-profit company), the deal was finally consummated. By the beginning of last month, the hospitals and allied facilities serving 11 counties along the Highland Rim were set to begin the next chapter in care delivery under the LifePoint umbrella.
With the finalization of the sale, the system was promptly renamed HighPoint Health System (HHS), and veteran healthcare executive Mary Jo Lewis, FACHE, was quickly tapped to become the system’s new chief executive officer. Lewis has been with LifePoint since the company’s inception in 1999 and has served as CEO of LifePoint’s acute care hospital Jackson Purchase Medical Center in Mayfield, Ky.
“All of the hospitals are positioned for growth,” Lewis noted of the new challenge. “The opportunity to work with these people and get the system back on solid ground was very exciting,” she continued, adding with a laugh that it didn’t hurt that she has four grandchildren in nearby Nashville.
Seraphine said Lewis is working with key stakeholders at the two acute care and two critical access hospitals to assess needs and create a strategic plan to move forward. Of the $60 million investment committed to capital improvements, he said much of that expenditure would be predicated by the strategic plans. However, he added, some immediate investments would be needed to address physical plant issues in Carthage and Hartsville. Recent additions to Sumner Regional clearly benefited the flagship facility but also added to the system’s financial woes. “They made a significant investment in the new tower … it also stretched their balance sheet beyond the limit,” he said.
With the financial distress came a freeze in spending. “There are equipment needs in all the facilities,” Seraphine continued. In addition to purchasing both minor and major equipment, Seraphine said LifePoint’s strong balance sheet has afforded the company the opportunity to buy out leases on some equipment already in use.
Lewis said she has already begun the process of open communication with the facilities. She stressed that staffing would stay the same but said a key operational difference would be the emphasis on teamwork between the medical staff, larger medical community, employees and administration. She added, “I think they will see all the facilities be more involved in civic activities. We look forward to getting back to the community.”
Despite the hiccup in closing the deal, Seraphine noted the reaction to the sale has been positive. “There’s a great deal of community support,” he said. “It’s one of the things we think is a key ingredient to make those hospitals successful.” He added that LifePoint isn’t a completely new presence in Smith County. The company was the previous owner of the 63-bed Riverview Regional Medical Center – North in Carthage (previously Smith County Memorial Hospital) and actually sold the facility to SRHS so there is a sense of coming full circle with that hospital. “We always felt the hospitals should work together more,” Seraphine noted. “The opportunity to go back to a community and work with a single focus in a consolidated manner is really exciting to us.”
For the hospitals, having access to the depth and breadth of resources of a large, financially stable corporate entity improves functionality on a variety of levels ranging from benchmarking to physician recruitment to increased leverage and group purchasing power to assistance with regulatory compliance issues. “All of a sudden, you’re not alone anymore,” said Seraphine. “We can help them meet and rise to the challenges of whatever is coming their way.”
Lewis concurred. Having led a hospital similar in size to Sumner Regional, she has had first-hand experience in the benefits of being able to tap into a larger system of analytics to inform decision-making. “Healthcare is a very complicated industry these days,” she said. “You can’t know everything about everything. I think the hospitals will learn quickly they have a lot of resources at their fingertips.” Lewis added, HighPoint Health Services has the benefit of being in the corporate headquarters’ backyard, which she believes will enable HHS to move faster when it comes to ramping up services.
“We’ve spent a long time looking at these communities,” concluded Seraphine. “We feel that we have an opportunity to make a difference. We think we can work together to grow their hospitals and their medical communities. I think as we work through this, LifePoint and these three communities are going to have a great story to share.”
Source: Nashville Medical News
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