Local leaders say hospital purchase good for communities
The trio of MedWest hospitals in Haywood, Jackson and Swain counties could be sold by next spring to Duke LifePoint Healthcare, joining a network of 60 community hospitals nationwide.
The aggressive timeline is contingent on due diligence by both sides and further negotiations to refine exactly what the sale would look like. Persistent financial struggles prompted the hospitals to put themselves up for sale in the spring. They advertised to prospective buyers and last week announced their top pick was Duke LifePoint.
Little information was initially available, but details have trickled out in the past week. Here’s a snapshot of what’s been learned.
What about Mission?
Mission Hospital system based in Asheville had made a bid for WestCare, which includes Harris Regional and Swain. It did not make a formal bid for Haywood.
Mission put out a statement saying it was “obviously disappointed” that WestCare chose Duke LifePoint, but was mum when it came to Haywood.
Mission clarified why later in the week.
“Our analysis identified what we believed to be insurmountable regulatory concerns that would prevent Mission from partnering with Haywood. As a result, Mission made a proposal only to partner with WestCare,” according to a statement by Mission’s attorney and general counsel Ann Young.
Unlike other large hospital networks, which are free to expand at will, Mission operates as a regulated monopoly following the merger of Mission and Saint Joseph’s hospitals — the only major tertiary-care hospitals in Western North Carolina.
Haywood County Commissioner Kirk Kirkpatrick, who also serves on the Haywood Regional hospital board, said it is not clear to him whether the anti-trust hurdles would have been insurmountable.
“Is that the primary reason they didn’t want us? I don’t know if I agree or disagree,” Kirkpatrick said.
It has not stopped Mission from acquiring or signing operating agreements with other community hospitals in the region in recent years, including Angel Medical in Franklin, the Highlands-Cashiers Hospital, and the Transylvania County Hospital in Brevard.
Some Sylva physicians had previously spoken in favor of joining with Mission. A few Sylva doctors are already aligned with Mission as part of its physician network.
But Haywood physicians largely opposed a Mission merger, fearing it would siphon local patients away.
Inside sources say Duke LifePoint ultimately offered WestCare a better deal than Mission did.
What happens to MedWest?
The MedWest partnership forged by the three hospitals three-and-a-half years ago will be dissolved.
That is welcome news to WestCare, which announced last year it wanted out of MedWest. The WestCare medical community complained its interests were not being met and that it was not treated equally.
“WestCare will operate independent of Haywood Regional Medical Center, operating separately with local management executing local strategy with a local governance board,” WestCare CEO Steve Heatherly said.
Heatherly said Duke LifePoint has an impressive track record of helping hospitals in its network “realize their full potential.”
“The focus will be on our community,” Heatherly said. “Local involvement is encouraged at all Duke LifePoint hospitals because healthcare is local. Hospital services must be tailored to meet the needs of the local community.”
What’s a hospital worth?
Duke LifePoint offered $26.25 million cash for Haywood Regional, plus pledged a $36 million investment including capital projects, equipment, expansion of services, and medical staff development during the next eight years.
As for the cash, more than half will be used to pay off all outstanding debt. The hospital owes $8.6 million on a line of credit and another $2 million left over from construction of the fitness center. The purchase cash will also be used to clear accounts payable, which could be a another few million, although hospital officials did not have that number handy this week.
Anything left over would go to the county, since it ultimately owns the property and building. County commissioners are hoping it could be as much as $10 million. Commissioners are talking about putting the money in a trust fund and only using interest. Commissioners said they would like earnings to be earmarked for health-related initiatives.
It’s not known what Duke LifePoint offered for WestCare. It is a private nonprofit entity so does not have to disclose that figure. However, it should eventually show up in the nonprofit tax returns filing. Those are public, but it could be a year before they are filed.
To read a copy of the Duke LifePoint proposal, go to www.smokymountainnews.com and click on this story. Or you can go the Haywood Fitness Center on the hospital campus and pay $1 for your own copy.
A dying breed
Harris and Haywood have long been a source of pride for their respective communities. They grew from humble origins in the 1920s to thriving, impressive medical centers. But locally controlled, independent, small hospitals began a long, slow downward spiral in the late 1990s. Harris and Haywood were among the last of their kind in the state.
But despite the self-determination and autonomy of an independent, locally owned hospital, it was unrealistic for the hospitals to remain as they were.
“We are seeing consolidation in order for local hospitals to survive what looks like a very rocky road going forward,” said Don Dalton with the N.C. Hospital Association. “By consolidating, the hospitals have a better opportunity to fulfill their mission, which is serving their community.”
Kirkpatrick said he understands the emotional aspect of giving up local ownership of the community’s hospital. But the over-riding consideration is whether the hospital is financially viable, something Duke LifePoint can provide.
“The most important thing is to make sure when people need quality health care we have a hospital in our county that can provide that,” Kirkpatrick said. “I want everyone to know how serious this is and how critical it is for our community that this be a successful venture.”
Public input ... kind of
A public hearing on the sale of Haywood Regional Medical Center to Duke LifePoint will be held at 6 p.m. on Tuesday, Nov. 12, at the Haywood Health and Fitness Center.
The hearing is a chance for people to voice their opinions to the HRMC board of trustees and is required under state statutes since Haywood Regional must follow open government rules.
But the hospital board, by all accounts, fully intends to vote “yes” to a sale of the hospital to Duke LifePoint.
“It is going to be very good for the community,” said Frank Powers, chairman of the Haywood Regional hospital board.
For the record, Haywood hospital officials said “no final decision has been made.” But it appears to be a done deal. The hospital board intends to vote promptly after the hearing.
There will be one more public hearing and vote by the hospital board following the due diligence period and final negotiations firming up details of the acquisition.
Public input was not part of the process for WestCare because it is a private nonprofit and the same rules don’t apply.
Haywood commissioners get in the game
Haywood County has an ownership stake in the Haywood Regional Medical Center building. This means the county must go through a similar public hearing process and hold its own vote on the sale.
“We do own a legal interest in the hospital facilities, so we have to follow a parallel but separate track as Haywood Regional,” County Attorney Chip Killian said.
But county commissioners, like the hospital board, have already signaled their intention to approve the Duke LifePoint deal.
“This could be, is going to be, a very good situation,” said Commissioner Mike Sorrells.
“I am very pleased with the offer we are getting,” added Commis-sioner Mark Swanger.
Nonetheless, county commissioners said they take the decision before them very seriously.
“There is no question we are at a crossroads,” said Swanger. “The decisions made in the next quarter are decisions that will impact our community for generations.”
County commissioners intend to hold the first of two public hearings on their end on Dec. 16, with a final hearing and vote in February.
Haywood retirement benefits
One concern for employees of Haywood Regional Medical Center is they would no longer remain in the state retirement system after Duke LifePoint buys the hospital.
Since Haywood Regional is technically a public entity, its 914 employees currently participate in the state retirement system. Some employees have launched an orchestrated campaign against the sale because they could no longer remain in the state retirement plan.
But Haywood Regional CEO Janie Sinacore-Jaberg said employees would keep the benefits they have accrued to date.
“Those folks in the state retirement plan would continue having what they have. It is theirs. But that plan would stop at that point,” Sinacore-Jaberg said. “Provided they are vested, they would keep what they have.”
Officials said the fall-out over state retirement benefits is simply unavoidable and that the long-term viability of the hospital trumped those concerns.