HCA has agreed to acquire Memorial Health’s financially struggling hospital in Savannah in a $710 million deal.
The agreement, announced Wednesday night, would provide much-needed cash infusion for Memorial University Medical Center, a large safety-net hospital that has been looking for a partner.
The deal would also vault HCA, a national for-profit hospital chain, into a stronger position in Georgia. The Nashville-based company already operates seven hospitals in the Peach State. But none is a big safety-net hospital such as Memorial.
The Memorial Health board unanimously agreed to a proposal from HCA to sign a letter of intent to purchase the assets of the hospital and the Chatham County Hospital Authority.
If the acquisition is finalized, HCA would take a stronger position in the eastern half of the state, with hospitals in Macon, Augusta, Dublin, and Savannah. In addition, the company is nearing the purchase of Mayo Clinic Health System in Waycross.
And HCA has facilities in the Jacksonville, Fla., area as well.
Included in the $710 million purchase price is $430 million to pay off bonds and other debts for Memorial Health, as well as $280 million over the next 10 years to fund capital improvements, the Savannah Morning News reported. All other proceeds of the sale will go to the Chatham County Hospital Authority for creation of an indigent care trust fund.
The centerpiece of Memorial is Memorial University Medical Center, a 604-bed hospital.
Memorial would switch from a nonprofit organization to a for-profit entity under HCA.
“This will essentially be a sale of the hospital,” said J. Curtis Lewis III, board chairman of Memorial Health, according to the Morning News. “I think it’s a very positive thing for the community.”
He praised HCA as “the gold standard.”
The purchase, if consummated, would reignite the trend of hospital consolidation that has shaken up the industry in the state. Nonprofit systems WellStar and Piedmont health systems have also bought hospitals recently.
Major economic forces are driving consolidation in Georgia and across the nation. Health care is an increasingly competitive business, and bigger players have more clout in the marketplace.
Getting bigger may help hospital systems cut costs and meet the new demands for improved quality. And bigger hospital systems have more leverage with insurers in negotiations over payments for medical services. In addition, greater size can lower the costs for medical supplies, equipment and even administration.
Dr. Frank Rossiter Jr., chairman of the Chatham County Hospital Authority, said that HCA has committed to maintaining major services at Memorial Health, including pediatrics, neonatal care/level 3 nursery, Level 1 trauma, and the residency education training program.
Rossiter and Lewis said Memorial will continue to serve as the region’s safety-net hospital and that its core mission will not change.
HCA South Atlantic Division President Hugh Tappan said in a statement Thursday that “we are delighted by this opportunity to further our discussions with Memorial Health, which has a proud tradition of caring for communities in southeast Georgia and parts of South Carolina for more than 60 years. The work that they have done at Memorial University Medical Center as a Level I trauma center, teaching hospital, children’s hospital and elite specialty center provide remarkable care for this entire region.”
The deal is expected to close by the end of the year.
Memorial’s 2016 financial report showed a loss of almost $44 million, with total revenues of $581 million — a significant increase from the previous year’s $22.5 million loss, but one that officials had warned of for several years, the Morning News reported.
Christopher Press, a consultant with Morgan Healthcare Consulting in Atlanta, told GHN on Thursday that a safety-net hospital isn’t the typical fit for the HCA system. Yet he added, “HCA loves the South and probably sees growth in the South.”
With the huge Memorial loss, Press said, HCA will probably make some cuts to turn the financials around. He noted that safety-net hospitals have been helped by states expanding Medicaid under the Affordable Care Act. But Georgia has continued to reject expansion, citing costs.
HCA’s bid came after Memorial’s proposed partnership with Novant Health Inc., a Winston-Salem, N.C.-based nonprofit, fell apart last year.
The Morning News reported that Rossiter called the HCA proposal a better deal than the one offered by Novant — “definitely, no question about it.”
The joint announcement comes just days after Memorial interim CEO Kerry Watson began work Monday to replace Maggie Gill as president/CEO of Memorial Health, the Morning News reported. Gill resigned in February from the post she had held since 2011, but agreed to remain to assist in the transition.