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Eyeing a prize.
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Author: Limbacher, Patricia B.
Section: Week in healthcare
Profitable city-owned hospital fits MissionHealth profile
Just as a drop of
blood can signal sharks miles away, the chance that a profitable
hospital may go on the block has at least one for-profit predator
circling.
The prey is 340-bed
Memorial Hospital, Colorado Springs, Colo., and the predator is
Nashville-based MissionHealth, a limited-liability company that forms
partnerships with not-for-profit hospitals that need cash.
By the end of the
month, Colorado Springs Mayor Mary Lou Makepeace is expected to name a
blue-ribbon commission to study the hospital's future. The facility has
been owned by the city for about 55 years and is one of two hospitals
in Colorado Springs.
It's also quite
profitable. Last year, the facility reported net income of $27.6
million on revenues of $194 million-and the city has not needed to lend
financial support for eight years.
The commission is expected to study issues such as whether the hospital should keep its ownership status.
The ownership question would ultimately go before Colorado Springs voters.
Last month,
MissionHealth, owned by healthcare consultant Joshua Nemzoff, sent the
mayor an introductory letter that laid out the company's objectives.
Nemzoff said the company issues about three such letters each week to
prospective hospital clients. MissionHealth has several pending deals
that may close by year-end, Nemzoff said, but the company has no
hospitals in its stable.
"We have not talked to the mayor and are not in negotiations," Nemzoff said.
The hospital is
planning a $160 million expansion including a new women and children's
pavilion. Randy Purvis, who serves on the City Council and the hospital
board, said the hospital would need to issue only about $40 million in
bonds for the project because of its financial strength. The hospital
holds an A-2 bond rating from Standard & Poor's.
Purvis and other local observers said they are unaware of other offers by for-profit healthcare companies.
In a previous
interview, Nemzoff said MissionHealth targets hospitals that are unable
to issue debt at competitive rates. Typically it looks at
not-for-profits with Baa bond ratings. MissionHealth would provide $30
million to $250 million in financing, and in exchange would get a
percentage of the hospital's cash flow (Sept. 7, p. 40). Local
management would continue.
Nemzoff said Memorial
Hospital fits MissionHealth's profile "perfectly," particularly if
local officials want to maintain management control over the hospital.
But Purvis said the
city can get competitive rates without help. "The amount we need is
relatively small in comparison to what's being offered," he said.
PHOTO (COLOR): Memorial Hospital, Colorado Springs, Colo.
~~~~~~~~ By Patricia B. Limbacher
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