Wednesday, April 7, 2010

Jumping the gun for Memorial

Posted by on Wed, Apr 7, 2010 at 11:57 AM

The nation's largest publicly traded general acute care hospital company, Community Health Systems based in Franklin, Tenn., has its eye on city-owned Memorial Health System.

MHS_logo_jpeg.jpg

In a March 16 letter to Steve Hyde, chairman of the Citizens' Commission on Ownership and Governance of Memorial, CHS vice president of acquisitions Ken King says he wants to talk about "a future relationship between our respective organizations."

The letter, which came with a 15-page overview of the company, might indicate that for-profit hospital companies are ready to pounce at the chance of snatching up Memorial, which posted more than $500 million in revenue last year.

The citizens commission (whose members include Independent vice president/development Jay Patel) is supposed to recommend to the City Council in December whether to sell Memorial, sell part of Memorial, keep it, or set it up as an independent nonprofit. The timing is geared toward placing something on the April 2011 city ballot. Memorial's ownership can't change without voter approval. Or, the commission could simply recommend that the City Charter be changed to remove an obligation to issue a property tax revenue to make up any deficit in spending. No tax has been levied for Memorial for more than 30 years, but the clause still pertains.

One of CHSs hospitals.
  • One of CHS's hospitals.

Back to CHS' pitch. King's letter notes that the 25-year-old company, which has no presence in Colorado at the moment, owns or leases 122 hospitals in 29 states with more than 18,000 beds. He also notes CHS spent more than $575 million on capital expenditures at those hospitals in 2009. Doing the math, that equates to $4.7 million each. For some reason, that doesn't sound like much.

To compare, consider this from Memorial's 2008 audited financial statements, the most recent available:

Capital Assets

The Health System acquired $25 million of capital assets during 2008, consisting of the following.

Construction and remodeling 53%
Information services 11%
Equipment, technology and furniture 36%
Total 100%

Major acquisitions included cardiac cath lab equipment and various remodeling projects.

Additional information on Memorial Health System’s capital assets can be found in Note 3 to the
accompanying financial statements.

Nothing has come of CHS's letter — yet — except that it triggered the commission's passage of a policy outlining how commissioners are to deal with contacts from prospective buyers and others who might have a dog in the fight. That policy, adopted Tuesday, calls for:

"no substantive MHS-related contact between MHS Commission members and potential acquirers, joint-venturers, hospital management companies, sale-leaseback firms, investment bankers, deal consultants, or other organizations having a direct interest in acquiring, effecting the acquisition of, or managing Memorial Health System...."

Here's the whole letter:

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