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Missouri hospitals join consolidation trend in $3.9B deal
Community Health Systems Inc. plans to buy Health Management Associates Inc. for nearly $4 billion in a deal that would make it one of the nation’s largest hospital operators and double its stake in Missouri’s rural hospitals.
The proposed purchase would include newly built Poplar BluffRegionalMedicalCenter, a key provider of health services to the poor in several rural counties of southeast Missouri.
But the acquisition is still subject to the approval of Health Management Associates’ shareholders and also must pass the antitrust review of the Federal Trade Commission, which has cracked down in recent years on hospital monopolies in smaller cities and communities.
The deal also comes at a time when the hospital industry is topsy-turvy with changes brought by the Obama administration’s health reform law. Under the Affordable Care Act, hospitals can expect millions of newly insured customers nationwide, but they also face heightened federal scrutiny to improve quality of care and patient safety, along with reduced government reimbursement rates for Medicare and Medicaid services provided
“We look forward to working with the physicians and employees of HMA to advance the commitment shared across both organizations to pursue clinical excellence and to deliver quality care for patients,” Wayne T. Smith, chairman of Franklin, Tenn.-based Community Health Systems, said in a statement.
Community Health said its deal — a combination of cash and stock valued at $13.78 for each share of HMA — totals $3.9 billion, or $7.6 billion including assumed debt. But Wall Street appeared cool to the proposal. Shares of HMA fell $1.62, or nearly 11 percent, to close Tuesday at $13.30. Community Health fell 1.65, or 3.5 percent, to close at $45.58.
If approved, the deal would create a for-profit chain with 206 hospitals in 29 states. That would make it the largest hospital operator based on locations, although Nashville-based HCA Holdings Inc. would still bring in more revenue.
Community Health currently operates two hospitals in Missouri: MoberlyRegionalMedicalCenter in Moberly and NortheastRegionalMedicalCenter in Kirksville. It also has a strong presence in Illinois, operating nine hospitals there including GatewayRegionalMedicalCenter in Granite City, and RedBudRegionalHospital in Red Bud.
According to the federal Hospital Compare website, Gateway Regional’s mortality and readmission rates, as well as its rate of serious complications and also infections, are “no different” than the U.S. national rates and benchmarks.
But the website indicates that Gateway Regional patients rate the hospital’s performance as substantially below average. A patient satisfaction survey conducted by an independent third party reveals that 58 percent of its patients would “definitely recommend” the hospital. The Illinois average is 69 percent; the national average is 71 percent.
The Poplar Bluff hospital, which opened earlier this year, was built at a cost of $173 million. The hospital also operates seven family clinics in four, poverty-stricken counties of southeast Missouri.
Charles Stewart, Poplar Bluff’s chief executive, was unavailable for comment about the planned acquisition.
According to state and regional studies, residents of southeast Missouri face huge health obstacles, including some of the state’s highest rates of obesity, diabetes, heart failure and smoking. Many of these residents have multiple chronic conditions.
In addition to Poplar Bluff, HMA also operates TwinRiversRegionalMedicalCenter in Kennett, Mo.
The companies expect the deal to close in the first quarter of 2014, if it gets antitrust clearance and 70 percent of HMA shares are voted in favor.
Separately Tuesday, HMA disclosed Tuesday it expects second-quarter earnings to fall significantly below Wall Street analysts’ expectations, and also that has received new subpoenas from the Department of Health and Human Services regarding physician relationships and emergency room operations at some of its hospitals.
The Associated Press contributed to this report.