Will Jack­son Health go pri­vate?

For-profit Stew­ard wants pub­licly run Fla. sys­tem

Modern Healthcare - - Front Page - Joe Carl­son

For-profit health­care opened an­other ma­jor in­road into the not-for-profit world last week with pri­vate-eq­ui­ty­backed Stew­ard Health Care Sys­tem, Bos­ton, of­fer­ing to buy Mi­ami’s pub­licly run Jack­son Health in a trans­ac­tion worth at least $1.1 bil­lion.

If the deal comes to pass in about 90 days— both sides say they are con­duct­ing in­tense due dili­gence—the ac­qui­si­tion of Jack­son Health would be­come the third mega-deal in a year’s time in which for-profit own­er­ship has swooped in where not-for-profit ex­ec­u­tives in ur­ban mar­kets have floun­dered fi­nan­cially.

In Novem­ber, equity firm Cer­berus Cap­i­tal Man­age­ment ce­mented an $895 mil­lion trans­ac­tion to buy six-hos­pi­tal Car­i­tas Christi Health Care in Bos­ton and turn it into Stew­ard Health Care, which now pro­poses to buy Jack­son. Car­i­tas of­fi­cials had threat­ened to close two hos­pi­tals if the trans­ac­tion fell through.

The fol­low­ing month, for-profit Van­guard Health Sys­tems bought six-hos­pi­tal Detroit Med­i­cal Cen­ter in a $1.3 bil­lion deal. At the time, Detroit’s most re­cently com­pleted fis­cal year ended with only $4.1 mil­lion of net in­come on $2 bil­lion in rev­enue.

The sit­u­a­tion in Mi­ami, how­ever, ap­pears the most dire of the three.

Ac­cord­ing to pub­lic records, Jack­son Health’s days cash on hand—a key mea­sure of hos­pi­tal fis­cal health—has con­tin­ued to dwin­dle de­spite cost-cut­ting ef­forts by man­age­ment and mul­ti­ple au­dits and in­ves­ti­ga­tions from out­side agen­cies.

A Feb. 21 letter from Stew­ard says that un­der cur­rent trends, Jack­son is slated to use up all of its avail­able cash by July—one month af­ter Pres­i­dent and CEO Eneida Roldan is ex­pected to let her em­ploy­ment con­tract ex­pire.

Jack­son Health ended fis­cal 2009 with a loss of $245 mil­lion, ac­cord­ing to au­dited fi­nan­cial state­ments. Re­sults for fis­cal 2010, ended Sept. 30, are not yet avail­able, a Jack­son spokes­woman said.

Lo­cal me­dia re­ports have quoted sys­tem of­fi­cials at pub­lic meet­ings say­ing Jack­son did bet­ter in fis­cal 2010, fin­ish­ing with es­ti­mated losses of about $90 mil­lion. The sys­tem is un­der in­ves­ti­ga­tion by the Se­cu­ri­ties and Ex­change Com­mis­sion for se­verely un­der­es­ti­mat­ing its unau­dited losses shortly be­fore sell­ing $83 mil­lion in rev­enue bonds in Au­gust 2009.

The Feb. 21 letter of non­bind­ing in­ter­est

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