Metro Health Hospital in Wyoming was one of seven hospitals in West Michigan that fully meet standards for maternity care. Photo via fb.com
The discussion of a strategic alliance between a health care system and a publicly traded operator of hospitals is moving toward a majority-stake acquisition.
Metro Health provided an update yesterday at a Metro Council meeting on its strategic partnership negotiations with Franklin, Tenn.-based Community Health Systems, or CHS, which is affiliated with 206 hospitals in 29 states.
Metro Health is still in the thick of due diligence with CHS (NYSE: CYH), said Mike Faas, president and chief executive officer at Metro Health.
“We’re moving forward with an increasing amount of enthusiasm as we start check marking off things,” Faas said. “The more people that we meet, or vice versa, the better we feel about the impending relationship.”
Metro Health began negotiations with CHS in 2013, after actively searching for a strategic partner since 2012.
There is roughly 60 to 90 days of due diligence remaining, Faas said. Upon completion, the partnership proposal will be handed over to the attorney general for final approval, which is anticipated to take three to six months.
The strategic partnership between CHS and Metro Health would allow for a balanced board, made up of 50 percent of existing Metro Health board members and 50 percent of board members from CHS. However, in terms of equity ownership, CHS would own 70 to 80 percent of Metro Health.
The balanced board would “give the community, ongoing, tremendous say so of future direction” and make sure the community will receive benefits from Metro Health, Faas said.
With CHS, Metro Health would be able to scale.
The deal would allow the “financial handcuffs to come off,” and Metro Health would not be limited to $10 to $15 million in capital, but, rather, larger sums of $50 to $60 million, according to Faas.
The amount of the population assigned to Metro Health and the operations of the hospital would increase as well, in terms of market share and economies of scale.
“In today’s world, if you are really trying to get ready for how health care is going to go, you have to start now to position yourself,” Faas said.
As the Affordable Care Act is implemented and changes continue to impact the health care industry, the issue of scale is going to take on a new importance.
Faas said the partnership is a “matter of strategy.”
“We’re not pressured to do this,” Faas said. “We’re not in financial distress. We just had our best year Metro Health Hospital has had in its history.”
Metro Health serves more than 250,000 patients annually and has a 208 bed general acute care hospital in Wyoming.
The health care system also has 12 neighborhood physician offices throughout the region.