As St. Francis Hospital struggled with severe financial issues since late October, Board of Trustees Chairman Richard “Bo” Bradley said it ultimately became clear “the right choice” was to strike a deal with a large Tennessee-based hospital corporation.
St. Francis announced last week that it was entering “exclusive discussions” with a subsidiary of Community Health Systems, a deal that became necessary when the Columbus hospital disclosed late last year that it had a nearly $30 million accounting error.
“We have every confidence as part of the Community Health Systems, St. Francis will continue to deliver excellence in health care that it has epitomized in the past,” Bradley said in an exclusive interview Tuesday with the Ledger-Enquirer. “In addition to that, Community Health Systems will bring substantial financial strength, if needed. They have made commitments, if this deal is consummated, to make substantial capital contributions to the hospital to attempt to broaden this hospital into a system that can reach out and provide services that we may not provide now.”
The potential sale of St. Francis comes in its 65th year of operation. It has been a non-profit facility since its inception. Community Health Systems is a publicly traded company on the New York Stock Exchange that operates 200 hospitals in 29 states.
“We believe that will not change the culture of St. Francis Hospital,” Bradley said. “Our opinion is that Community is anxious to close this acquisition on their part (because) they like the culture.”
In January, St. Francis announced it was in exclusive discussions with Atlanta-based Piedmont Healthcare, a non-profit organization like St. Francis. By early March, St. Francis and Piedmont had mutually agreed to open the search process back up.
When the Piedmont exclusivity agreement ended, Bradley said St. Francis reached out to Community Health and others. Community Health representatives had visited St. Francis prior to the Piedmont agreement, he said.After reconnecting, a group of St. Francis board members and physicians recently visited Lutheran Hospital of Indiana, a Fort Wayne facility owned by Community Health Systems. They also went to Community Health’s headquarters in Franklin, Tenn.
Before the exclusivity agreement was announced with Community Health Systems last week, the St. Francis board brought in Kirk Wilson, previously the president and CEO of St. Joseph’s Health Systems in Atlanta, to take over as interim chief executive officer.
Wilson’s role at St. Francis is not permanent, he said on Tuesday.
“My role is clearly interim,” he said. “I am here to get the hospital delivered into that new family of hospitals. Then I will exit stage left and the let the board and CHS determine who the next CEO should be.”
A team from Community Health Systems will come in and do due diligence, touring the facilities and speaking with people working at the hospital, Wilson said.
“They want to visit with the physicians, see for themselves the physical facility and walk the halls and talk to the nurses,” Wilson said. “It’s not too different if you acquire a house, you go in and do a visual inspection. Is everything as it was represented to be on the real estate prospectus? They are kicking the tires and making sure the organization is what they thought it would be.”
It was last November that St. Francis Hospital — coming off a $150 million expansion of its Manchester Expressway campus — said that its management could not account for nearly $30 million on its books. Calling it an accounting error, the company a few weeks later announced it was looking for a strategic partner to help put the organization back on stable footing. At that time, it reported having about 2,800 full- and part-time employees and an annual budget of $295.7 million.
Wilson said over the last six months, St. Francis has positioned itself for the acquisition.
“St. Francis — before my time — did a good job righting the ship financially; and has done what they need to do to get this organization in good shape to enter into a transaction with a party like Community Health Systems,” he said.
Currently, St. Francis has 2,721 employees and has been filling vacant positions.
The hospital is operating on sound financial footing now, Wilson said.
“They are able to meet all of their obligations and they are able to operate in a quality manner for the patients that are here,” Wilson said. “All the projections show we will continue to meet those obligations.”
The hospital’s largest creditor is the U.S. Department of Housing and Urban Development, which has a hospital financing arm. St. Francis borrowed money from HUD for the expansion and to consolidate other debt. The hospital currently owes HUD about $220 million. St. Francis representatives are in regular communication with HUD, Bradley said.
“We have every indication that HUD has confidence in this transaction,” Bradley said.
As it has looked for a way out of the crisis, filing for bankruptcy protection has been the least of the options, Bradley said.
“We have continued to meet our obligations,” Bradley said. “Fortunately, that has not had to have been a step St. Francis was required to take. It is in the community’s interest to consummate this deal outside of any kind of bankruptcy or debtor relief program.”