Duke LifePoint sale to finalize by July 31
The sale of the MedWest hospital trio in Haywood, Jackson and Swain counties will be finalized by the end of July.
Duke LifePoint HealthCare, a national for-profit hospital network, will take over Aug. 1, ending a long legacy of local, independent ownership of the community hospitals.
The sale has been in the works for nearly a year and comes amid growing financial challenges for small hospitals, which are increasingly fleeing to the safe harbor of larger chains for their expertise, deeper pockets and economies of scale.
“It is very hard for rural community hospitals to sustain themselves and that’s why you are seeing so many consolidations with larger systems,” said Mark Clasby, the chair of the MedWest Hospital Board, an umbrella entity over all three hospitals. “I am confident we will be in good hands and the most important thing to me is to have strong and sustainable community hospitals.”
For Duke LifePoint, the acquisitions will be a positive for its growing portfolio of more than 65 hospitals across the nation.
“The due diligence process that we completed over the last several months has confirmed that these hospitals are a good fit for Duke LifePoint Healthcare,” said Diane Huggins, the vice president of communications with LifePoint Hospitals. “We see great opportunities to work in partnership with these facilities to enhance care throughout Western North Carolina.”
For the local communities, selling off the community hospitals that were built and nurtured for decades is bittersweet, but the sense of pride in a locally-owned hospital ultimately took a back seat to reality.
“The future of local health care in Haywood County is guaranteed for generations and that is a huge step forward,” said Mark Swanger, chair of the Haywood County commissioners.
Lucretia Stargell, a spokesperson for WestCare, said Duke Lifepoint’s human resource team has already been conducting employee background checks and drug screenings and meeting with them about employment benefits.
“Employees appear to be excited about these activities and moving forward with Duke LifePoint,” Stargell said.
Here’s a walk through some of the top Frequently Asked Questions as the hospital sale date closes in.
What’s the sale price?
Duke LifePoint will pay Haywood Regional $26 million. Any outstanding debts, accounts payable and loans will be deducted from that. Also, Duke LifePoint wants $1.5 million in operating cash on hand when it assumes ownership. If the hospital’s balance sheet is less than that, the difference will be deducted from the sale proceeds.
In an interesting twist, Haywood Regional Medical Center will hand over $1 million from its own sale proceeds to the surviving foundation of WestCare, a stipulation that Haywood agreed to to appease WestCare in negotiations.
Haywood will likely clear several million dollars after all is said and done.
The sale price for WestCare has not been made public.
In both sales, the proceeds left over will be designated for community health care initiatives, likely under the umbrella of a foundation endowment. What those might look like — how the foundations may be structured and the specific health and wellness initiatives — are still in the works.
What else will the hospitals get?
As part of the deal, Duke LifePoint has pledged $36 million in capital improvements at Haywood Regional over the next decade.
Duke LifePoint has pledged $43 million in capital improvements over the next decade at Harris Regional Hospital and Swain County Hospital.
The capital investments were an important part of the deal, since the hospitals must grow to survive and remain strong in the competitive health care landscape.
“Unfortunately, Haywood has been in such a bind over the past few years it has not been able to spend a lot on capital. It has spent more on urgent needs but we weren’t able to spend money on new service lines,” said Glenn White, a long-time hospital board member in Haywood.
What happens to MedWest?
MedWest will dissolve when the sale to Duke LifePoint goes through. The MedWest partnership forged in 2010 brought together Haywood Regional Medical Center and WestCare, which includes Harris Regional in Sylva and Swain County Medical Center. The union was strained from the start, however, and WestCare ultimately declared that it wanted out.
While Haywood Regional and WestCare will both be bought by Duke LifePoint, they will be managed as independent hospitals — at least initially.
“They will operate them as separate hospitals for some period of time but it doesn’t mean they will always do that. They will continue down that path for right now but several years from now they could do something differently,” said Kirk Kirkpatrick, an attorney on the Haywood Regional hospital board and county commissioner.
White said the two sides of MedWest were always kept separate from a financial standpoint.
“It was just a strategy to try to work together and establish some synergy between the two. It is up to Duke LifePoint to treat it however they want to now. It will be on their watch to handle that,” White said.
Who is Duke LifePoint?
LifePoint, a for-profit hospital network, has 65 hospitals in 20 states, $3.4 billion in annual revenue and 29,000 employees. It’s got a track record of turning around struggling small hospitals and making them profitable again, primarily by capturing a greater share of patients that had drifted away to larger hospitals in nearby urban centers. They increase market share by investing tens of millions of dollars to make the hospitals bigger and better, expanding medical service lines, adding new equipment, bringing in more specialists and improving clinical expertise.
“I am glad for the community to have a quality entity with such a strong health care reputation. I don’t think we could ask for a better purchaser,” said Kirkpatrick.
The “Duke” part of Duke LifePoint comes from Duke University Medical Center. Duke is a small part of the equation, with a less than 5 percent ownership stake, but brings its clinical expertise and best practices to the table in exchange for the name recognition it gives LifePoint. The two-year-old joint venture owns a handful of hospitals together.
What’s included in the sale?
The sale not only includes the hospitals, but any medical office complexes, urgent care centers and doctors practices owned by the respective hospitals. In Haywood, it also includes the health and fitness center.
Why did it take this long?
The initial target date for the sale was the end of March. But working out the legal, logistical and financial details took a while.
“Imagine everything you have to do when closing on a house — it is magnified by about 1,000 times. There are so many hurdles you have to get over that you get over one and get over the next one and finally you get an agreement,” Clasby said.
Swanger applauded the effort put in by so many.
“Innumerable hours have gone into this and they are owed a debt of gratitude for all they’ve done,” Swanger said.
Who has to sign off for Haywood?
Haywood Regional Medical Center is a public hospital authority, with any sale contingent on approval by Haywood County commissioners. State statutes stipulate a series of public hearings must be held at certain junctures in the process. The last of those is scheduled before the commissioners July 21.
“This will be the fourth public hearing on the same subject matter now,” said Swanger.
The final hearing before the Haywood Regional hospital board will be July 24, paving the way for the sale to go through on July 31.
Who has to sign off for WestCare?
WestCare is a nonprofit, and the sale or liquidation of a nonprofit has to pass muster with the N.C. Attorney General’s Office. A review by the Attorney General’s consumer protection division is still in process, but likely to be signed off on soon. It has to review the proposed sale of any nonprofit to ensure its assets are going to a new entity with a similar mission. The review also ensures that proceeds from the sale are a fair value and will be put toward charitable causes in line with the original mission of the nonprofit that’s being dissolved.
How have the hospitals been performing financially?
Below is operating cash flow posted for each fiscal year, with data provided by the respective hospitals.
2009: $2.8 million
2010: $1.04 million
2012: minus $1.18 million
2013: $2.93 million
2009: $4.5 million
2010: $3.1 million
2012: minus $5 million
2013: $4.9 million
“Both hospitals really improved last year over the previous year in terms of the bottom line,” Clasby said.