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May 13 – UPDATED 11:39 a.m. HCA pens letter to Hospital Authority: They’re still interested in Memorial deal

Category: Hospitality & Tourism

May 13 – Hospital Corp. of America pens letter to Hospital Authority: They’re interested in Memorial, too

By Lou Phelps, Savannah Business Journal

May 13, 2016 – On hearing the news that Novant Health, inc. has walked away from a deal being negotiated with Memorial Health, Inc., HCA – Hospital Corporation of America headquartered in Nashville, TN – has sent a letter to Don Waters, Chairman of the Chatham County Hospital Authority, re-stating that company's interest. 

Dated May 12, the letter begins ... “I am writing to you in response to the recent news reports regarding the termination of discussions between Novant and Memorial Health. As you may be aware, HCA Holdings, Inc. and its affilates (“HCA”) previously expressed interest in a transaction with Memorial, even though HCA was not invited to participate in Memorial’s initial process.

“Nevertheless, HCA submitted a proposal for, in the alternative, i.) a long-term year lease of Memorial, ii an acquisition of Memorial, or iii) a joint venture of Memorial.  In each case, HCA’s proposal included attractive financial terms and commitments…”

The letter, signed by Joe Sowell, SVP/Chief Development Officer, then outlines the framework of various approaches that HCA had proposed to enter negotiations in whatever approach the Memorial Health board of directors choose to pursue.

Sowell’s letter, provided to the Savannah Business Journal, makes clear that there is at least one other major U.S. hospital company that is interested in working with Memorial Health, and that a “member replacement” strategy that the Memorial Health board was pursing with Novant Health was not the only option.

Sources tell the SBJ that many other hospital groups will soon be heard from, as well ... publicly. 

The Chatham County Hospital Authority, representing the citizens of Chatham County who own Memorial, had been in negotiations with Novant Health, Inc. when that company’s president abruptly ended negotiations, stating that the CCHA was “interjecting themselves” into the negotiations that had been underway with the Memorial Health administration and legal representatives.

However, Waters has made numerous public statements this week explaining the responsibility of the CCHA which had previously been leasing all of Memorial’s land, building and assets to the Memorial Health, Inc. company for $1.00 a year.  Numerous public officials, including Chatham County Commissioners Chairman Al Scott, in a statement last week to the SBJ, said that he had concerns about leasing all of the assets to Novant without getting guarantees from that company about the protection of services.  Waters has stated that the CCHA was trying to get service protections put in writing when Novant walked away.

One issue about companies with which Memorial Health could partner is about the hospital's Charter - can Memorial only partner with not-for-profit companies?  That's a question that still needs to be answered, as well as, is it time to change Memorial's charter in light of the changing face of the health industry, according to an attorney familiar with the negotiations to date. 

Ashley King in Medical Staff Services at Memorial Health, sent an email to all the other physicians at or affiliated with the hospital this morning that offers opinions on why HCA’s original interest was rejected. It is moving across social media today.  

But, apparently, she was asked to send it out to the physicians “by Corporate Communications because I have all the physicians’ email addresses,” Ms. King stated in an interview this morning.   

Becky Kightley, VP of Corporate Communications at Memorial Health, stated “that’s not entirely accurate,” when asked if she had, in fact, asked Ms. King to send the email, then adding ... “I’ll get back to you.”

The email, apparently penned by the hospital’s administration, and provided to the SBJ states:

“For your background…During the strategic partnership process, HCA sent an unsolicited offer that was evaluated by the negotiating committee and rejected. As you know, the negotiating committee consisted of Memorial Board members, the Memorial Board Chair, and the CCHA Board Chair. The committee adopted a decision criteria that was designed to meet the needs of the organization, the community, and the mission, vision, and values of Memorial. After a lengthy process - interviewing and investigating both non-profits and investor-owned healthcare companies - Novant was selected. Their mission, vision, values, and culture were best aligned. The estimated value of the partnership was over $600 million dollars (total debt support plus capital).  All clinical services would be maintained and medical education supported. The process was fair and inclusive.  We are still hopeful that talks with Novant Health will continue and we will keep you informed of any further information or other indications of interest.”

In Sowell's letter, HCA also writes, "Furthermore, we want to recognize that the core services (Pediatrics and Neonatal Care-Level 3 nursery; Level 1 Trauma program; Residency training program (and the relationship with Mercer Medical School) are necessary services to Chatham County and the region. HCA would commit to continuing these core services and not terminate any of these core services without the consent of the Hospital Authority, provided such consent is not unnecessarily withheld given all the facts and circumstances that might exist at that time, including availability of physicians on the Hospital's medical staff and community needs." 

HCA also committed to extinguish all Memorial debt; make capital expenditures "for growth and maintenance of Memorial; and to "maintenance of charity care and uninsured discount policies." 

Don Waters was not available for immediate comment today on his role in vetting all letters or expressions of interest in working with Memorial Health.

Chairman Al Scott Weighs In

But, at this morning's Chatham County Commission meeting, Chairman Al Scott spoke firmly on the issue, saying, "I have not met anybody with Novant, nor been involved in any negotiation. Our role is not to instruct or direct the Hospital Authority's members. Our role is to appoint the members of the Hospital Authority."  

"There are just so many moving parts in it, so we should not inject ourselves into the process … we don’t have a role in the process,” and said that anyone with questions about the role of the Chatham County Commission should refer to a white paper that the County staff prepared for the Commissioners two months ago. 

But, Scott then added, "In 1952, the charter was for indigent care, trauma and neo-natal. I was not on the Commission when the Commissioners agreed to guarantee Memorial's $163,880,000 in bonds.

"The only thing that I’ve said is that we want in writing the guarantee of indigent care, trauma, neo-natal and unfettered access to Memorial's funded depreciation if they default on the bond. When when you default, you affect the millage rate. I've never seen anything in writing that guarantees these.  I’ve heard it, but I’ve never seen anthing in writing."  

It was these issues that the CCHA was negotiating with Novant when that hospital's CEO informed Waters and Memorial's administration that they were ending negotiations.  

 

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    • Guest - Susan Worthington

      In 1953 there was not such a thing as a trauma or neonatal program. The need for Neonatal Services did not come to national attention until the death of JFK's son who died in 1963 from being born 4 weeks premature. Get your fact straight Mr Scott. Memorial Neonatal unit 1977, Trauma unit 1990s.

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