LifePoint Health executive: Purchase of St. Francis likely to close before end of year

A Tennessee health-care company’s agreement to purchase financially strapped St. Francis Hospital in Columbus is on schedule to close on Dec. 31, a LifePoint Health executive said Wednesday.

The sale of the nonprofit hospital to a for-profit company has to be approved by the Georgia Attorney General’s office, which will hold a public hearing on the matter Tuesday at 5 p.m. at St. Francis. The attorney general will submit a report 30 days after the hearing.

Leif Murphy, LifePoint executive vice president and chief financial officer, said the hearing is the next step in a process that started in late July when LifePoint moved forward with its efforts to purchase St. Francis.

“It gets into evaluating all the different components of the transaction,” Murphy said. “Those are impact on employees, impact on quality, impact on safety, impact on access of health care in the community. So the attorney general will evaluate more than just price in making the determination that it is a fair transaction for the community.”

Financial terms of the deal have not been disclosed.

St. Francis has been dealing with major budget issues for more than a year. A number of things that will relieve that financial pressure will happen quickly when LifePoint assumes control of St. Francis, Murphy said.

“The tangible things that will happen is $240 million in debt on the balance sheet at the hospital goes to zero; all the deferred compensation plans where individuals could be specifically and individually impacted get funded; all of the accounts payable, the payments required to fund vendors for advance services and provided medical and surgical devices and pharmaceuticals to the hospital get paid,” Murphy said. “All of those financial obligations get taken care of from December to January.”

St. Francis’ largest creditor is the U.S. Department of Housing and Urban Development, which has a hospital financing arm. St. Francis borrowed about $220 million from HUD for a major expansion and to consolidate other debt. That debt has been at the center of the hospital’s problems, said Murphy, offering an analogy.

“It is essentially having the best house in a good neighborhood, but the mortgage is so big that the current income can’t meet that debt service,” Murphy said. “What’s happening is we have a remarkable hospital with a committed medical staff that has wonderful patient satisfaction scores, a wonderful reputation. It has had investments in the infrastructure that have positioned it for growth in each one of its service lines, and yet it has created such a burden of debt and thereby associated interest costs that even with all of those strengths, it can’t meet the interest obligations of that indebtedness.”

One of the things that has become clear in the close examination of the hospital by LifePoint is that St. Francis has reached a point where something has to happen.

“If this transaction did not go through, the leadership at the hospital would have to go through a very complex restructuring process to try and get to a place where it could continue to exist,” Murphy said.

LifePoint has had a team on the ground in Columbus for the last four months. LifePoint Eastern Group President Jeff Seraphine said what his people have seen in its operations and personnel departments is impressive.

“We have spent time with physicians, walked the halls and spent time with the employees there,” Seraphine said. “We have somebody from our team there every day. We have spent time with the volunteers. The thing that we consistently hear as we talk to them (is) they love St. Francis. They love the work they do, the mission that brought them there — taking care of patients and making a difference in the community. And they love what St. Francis has meant to the community.”

But they are ready for the financial crisis to end.

“They are ready to move forward,” he said. “… They are a very resilient and proud group. And that is one of the things that makes us excited about being there. This is not an organization that is splintered and falling apart at that level. This is a group that is waiting for the additional support to help them continue to grow.”

As part of the proposed sale, LifePoint has committed to hiring all active St. Francis employees, subject to pre-employment screenings. St. Francis has more than 2,800 employees and 300 physicians.

LifePoint is a publicly traded company, with its shares (Ticker: LPNT) changing hands among investors on the NASDAQ exchange. On Wednesday, the stock closed at $74.16, up $1.47 for the day. That is a little more than midway between its 52-week trading range of $58.61 and $88.18 per share.

The company, with more than 38,000 employees, released its financial data for the first nine months of 2015 at the end of October. The report showed the Tennessee firm posting a profit, or net income, of $137.6 million for the January-September timeframe, up from $108.2 million in the same period a year ago.

The company operates 67 hospitals, along with physician practices, outpatient centers and post-acute facilities in 21 states. Companywide, in its earnings release, it reported 177,255 admissions and 229,604 surgeries from January through September, with nearly 79 percent of those surgeries outpatient and the balance inpatient. There were a combined 1.1 million visits to its emergency rooms.

Continuing with his house analogy, Murphy said the new ownership is prepared to end the financial ordeal at the Columbus hospital.

“When we wake up in the morning on Jan. 1, we will live in a debt-free house,” he said.

This story was originally published November 18, 2015 at 4:47 PM with the headline "LifePoint Health executive: Purchase of St. Francis likely to close before end of year."