MedCath plans to dis­solve

Modern Healthcare - - The Week In Healthcare - Paul Barr

MedCath Corp. ex­ec­u­tives last week made it of­fi­cial: The shrink­ing for-profit heart-hos­pi­tal chain is try­ing to go out of busi­ness. The Char­lotte, N.C.-based com­pany, which has been shed­ding as­sets at a quick pace, an­nounced that it would ask share­hold­ers in an up­com­ing proxy fil­ing for ap­proval to sell off its re­main­ing hos­pi­tals with­out seek­ing fur­ther share­holder ap­proval and dis­trib­ute the pro­ceeds. MedCath also said it would seek share­holder ap­proval of de­fin­i­tive agree­ments to sell two of its six af­fil­i­ated hos­pi­tals, Arkansas Heart Hos­pi­tal in Lit­tle Rock and Heart Hos­pi­tal of New Mex­ico in Albuquerque.

The pub­licly traded com­pany’s de­ci­sion to get out of the heart hos­pi­tal busi­ness was driven in part by car­di­ol­o­gist groups across the coun­try sell­ing to hos­pi­tals, cre­at­ing a less-at­trac­tive mar- ket for stand­alone heart hos­pi­tals and be­cause of dif­fi­cul­ties ne­go­ti­at­ing at­trac­tive in­surer con­tracts (Sept. 6, 2010, p. 18). MedCath ex­ec­u­tives did not re­turn calls for com­ment.

The MedCath deals an­nounced last week re­flect dif­fer­ent re­sponses to those pres­sures. The 112-bed Arkansas Heart Hos­pi­tal will be merged with a 17-physi­cian car­di­ol­ogy group, Lit­tle Rock Car­di­ol­ogy Clinic, while 55-bed Heart Hos­pi­tal of New Mex­ico will be sub­sumed by a nearby hos­pi­tal.

Dr. Bruce Mur­phy, an in­vestor in Lit­tle Rock Car­di­ol­ogy and, through AR-MED, the pur­chaser of MedCath’s stake in the Arkansas hos­pi­tal, said the deal will keep what is a prof­itable hos­pi­tal un­der lo­cal con­trol. Other po­ten­tial buy­ers were real es­tate in­vest­ment trusts, and “their in­ter­ests were not nec­es­sar­ily our in­ter­ests,” he said.

A ca­su­alty of the agree­ment will be Mur­phy’s med­i­cal li­cense, which he said he plans to give up in or­der to take own­er­ship of the hos­pi­tal un­der the tighter re­stric­tions of the Pa­tient Pro­tec­tion and Affordable Care Act. “This is cer­tainly not the choice I would pick if I had to choose,” he said.

Mean­while, Lovelace Health Sys­tem plans to merge the Albuquerque hos­pi­tal with 162-bed Lovelace Med­i­cal Cen­ter. David Van­de­wa­ter, pres­i­dent and CEO of Ar­dent Health Ser­vices, Nashville, Lovelace’s for-profit par­ent, said the deal makes sense be­cause the heart hos­pi­tal is “do­ing well” and is next door to Lovelace.

The Arkansas Heart Hos­pi­tal deal val­ues the hos­pi­tal at $73 mil­lion plus a per­cent­age of avail­able cash, with MedCath ex­pected to net $60 mil­lion. The Heart Hos­pi­tal of New Mex­ico agree­ment val­ues the fa­cil­ity at $119 mil­lion. The com­pany that cur­rently owns the hos­pi­tal is 74.8% owned by MedCath, which will re­ceive about $62 mil­lion in net pro­ceeds on the sale, ac­cord­ing to MedCath.

MedCath said this month that it sold six hos­pi­tal-based catheter­i­za­tion labs and three mo­bile catheter­i­za­tion labs to a joint ven­ture be­tween Duke Univer­sity Health Sys­tem, Durham, N.C., and LifePoint Hos­pi­tals, Brent­wood, Tenn., in a deal val­ued at $25 mil­lion and net­ting MedCath $16 mil­lion. In a re­lated trans­ac­tion, MedCath sold its 9% own­er­ship in­ter­est and man­age­ment agree­ment in Coastal Carolina Heart to New Hanover Re­gional Med­i­cal Cen­ter, Wilm­ing­ton, N.C., net­ting MedCath $4 mil­lion.

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