CHS PLANS TO ACQUIRE TENNOVA

Jefferson Memorial Hospital may be in for another name change, as Community Health Systems has announced plans to purchase Tennova’s parent company Health Management Associates for nearly $4 billion dollars. Both Tennova and Community Health Systems are for profit businesses that are beholden to stock holders. Should the proposed buyout go through, it will be the second time that Jefferson Memorial Hospital has undergone a change since Tennova acquired Mercy Health Partners in October of 2011.

The July 30, 2013 announcement that the Franklin, Tn based Community Health Systems will be making a bid to purchase Health Management Associates came on the heels of a mid July decision by the U.S. Justice Department to extend their investigation into admission practices by Community Health Systems. There are questions, however, regarding the legality of the purchase due to monopoly concerns and Health Management Associates has had some opposition regarding the purchase from its own stakeholders. One stakeholder in particular, Glenview Capitol Partners which holds a 14.6% stake in HMA, is calling for a complete overhaul of HMA’s Board and cites dissatisfaction with the buyout. It is reported that HMA will also pass a considerable amount of debt along to Community Health Systems as a part of the acquisition deal and that has some industry experts perplexed at the aggressive move by Community Health Systems to close the deal which will ultimately cost around $7.6 billion in costs, stocks and debt assumption. Community Health Systems posted a less than stellar earning performance in the second quarter of 2013, dropping their net income 53% for the quarter.

Jefferson County Mayor Palmieri stated that he was informed of the proposed buyout via the local Tennova administrator, however specifics were sketchy. Jefferson County partners with Jefferson City in ownership of the Jefferson Memorial facility and both will have to be on board for a lease assumption from Tennova to Community Health Systems. The Mayor stated that any definitive information on the acquisition is most likely 9-12 months away and that it could come at an unfortunate time because of local elections. Palmieri stated that he has made the transition from a County run facility to a non profit and finally a for profit facility and that careful negotiations are necessary to ensure that Jefferson County residents have viable health care and a solid contract. According to the Mayor, should the buyout go through, there are several possibilities for the hospital. Community Health Systems could decline to continue the lease of the facility, Jefferson County and Jefferson City could determine that Community Health Systems is not a good fit for the County and decline to approve the lease change or Community Health Systems could assume the Tennova lease. Mayor Palmieri is concerned that the County’s bargaining position will not be as strong as it was with the Tennova/Mercy acquisition and that could impact the bottom line for both the City and County, however he is committed to a community hospital for Jefferson County residents. Jefferson County and Jefferson City will largely be in a holding pattern, awaiting approval for the acquisition and information regarding the Community Health Systems’ plans for the local facility.