Another Catholic sell-off
HMA to acquire Mercy Health Partners-tenn.
Negotiations announced earlier this year have resulted in a definitive $525 million purchase agreement between Health Management Associates and Mercy Health Partners-Tennessee, a subsidiary of Catholic Health Partners, Cincinnati.
According to a July 1 announcement, Naples, Fla.-based HMA will acquire the seven-hospital system, based in Knoxville, Tenn., for $525 million plus certain adjustments for working capital, and the assumption of certain long-term lease liabilities.
The HMA-Mercy agreement came as another large hospital deal closed—Trinity Health’s $100 million purchase of Loyola University Health System of Maywood, Ill.
The sale of Mercy Health Partners-Tennessee, which was formed in 2008 through a merger of CHP-owned St. Mary’s Health System and Baptist Health System of East Tennessee, is the second by CHP in recent months. In May, the system closed a $150 million deal, selling three Catholic hospitals in Pennsylvania to Franklin, Tenn.-based Community Health Systems. That deal marked CHP’s exit from Pennsylvania’s hospital market and it brought Community’s total number of hospitals in the state to 13. (May 9, p. 16).
The two deals together prompted CHP to reshuffle its management structure, according to a June 15 announcement. The system said it would pare operations to two divisions from four and reshuffle top management in order to be more nimble and better able to develop integrated delivery networks and grow under the new operating structure.
CHP had announced in May that it selected HMA for exclusive negotiations to buy Mercy Health Partners-Tennessee. Mercy Health Partners’ seven hospitals have annual net revenue of $600 million, according to HMA. The Tennessee hospitals are: 473-bed Mercy Medical Center St. Mary’s, Knoxville; 108-bed Mercy Medical Center North, Powell; 101bed Mercy Medical Center West, Knoxville; 66-bed St. Mary’s Medical Center of Campbell County, LaFollette; 56-bed St. Mary’s Medical Center of Scott County, Oneida; 54bed St. Mary’s Jefferson Memorial Hospital, Jefferson City; and 47-bed Baptist Hospital of Cocke County, Newport.
An investor note from Deutsche Bank viewed the deal positively for HMA, which is gaining entry to the strong Knoxville market via a system that has an estimated 20% to 30% market share.
Jeffrey Ashin, president and CEO of Mercy Health Partners-Tennessee, praised the deal with HMA, calling it a “perfect match.”
“Through Health Management, our hospitals will be able to invest in their facilities and new technologies, and provide the training needed to ensure Mercy continues to provide the best, most current care available in our communities,” Ashin said in a July 1 news release from HMA.
Under the terms of the deal, an HMA subsidiary will acquire all of the assets of Mercy Health Partners. In addition to the seven hospitals, HMA will also control the system’s Knoxville-based ancillary operations. The deal, which is still subject to review and approval by appropriate authorities that include the Vatican, is expected to close by Oct. 1.
In the Trinity deal, the Novi, Mich.-based system has taken over ownership of Loyola University Health System, which includes Loyola University Hospital, a 535-bed facility.
Along with the $100 million price, Trinity Health has agreed to spend $300 million for capital improvements and $75 million toward a new $150 million health sciences research facility. The deal also includes $22.5 million in annual payments to the Stritch School of Medicine, which will remain part of the university.
The two parties filed a letter of intent to merge in March, and since then all regulatory and board approvals have been finalized.
—with Rebecca Vesely