Two freestanding hospitals in Massachusetts have attracted purchase offers intended to keep them viable amid rapid consolidation of the state's healthcare industry into regional health networks.
Symmes Hospital, a 109-bed facility in Arlington, agreed last week to be purchased by a joint venture formed by the Lahey Clinic, a Burlington-based multispecialty group practice, and AdvantageHealth, a Woburn-based network of rehabilitation facilities.
Glover Memorial Hospital, a 70-bed hospital owned by the town of Needham, is reviewing a purchase bid by New England Deaconess Hospital of Boston, the first in a series of required steps to divorce the hospital from its municipal status. Legal red tape associated with public ownership had hindered Glover's earlier attempts to become an affiliate of the developing Deaconess "hub-and-spoke" healthcare network, executives said.
The Lahey Clinic, an early advocate of regional physician and hospital networks in Massachusetts, had agreed in principle to acquire Symmes in April 1993. But Symmes executives decided to open up the bidding late in 1993 when regional consolidation caught fire with other prospective purchasers and the negotiating with Lahey "was taking so long," said Burt Perlmutter, M.D., Symmes' medical director and spokesman.
Mount Auburn Hospital, a 297-bed Cambridge facility, made an offer but subsequently withdrew it, Dr. Perlmutter said. Meanwhile, Lahey and AdvantageHealth firmed up their offer.
The cash purchase price is $4 million, which won't cover outstanding debt of $15.5 million. Symmes will have to arrange to pay off that debt by the closing date, said Virginia Banis, the hospital's chief financial officer.
The joint venture will convert Symmes into a facility for outpatient primary and rehabilitation care, emergency services, ambulatory and short-term surgery and inpatient subacute rehabilitation.
The hospital had rebounded from bankruptcy protection in 1989 to a 13% profit margin in 1992, according to HCIA, a Baltimore-based healthcare research company. And Symmes has about $11 million in the bank, said David Speltz, the hospital's president. But "operating losses have appeared" amid declining acute-care census, said Dr. Perlmutter, and the hospital decided that continuing acute care "would eat up the cash on hand."
By contrast, one of the minimum requirements set by Glover Memorial was a promise from the buyer to keep acute care for at least five years, said Glover Administrator John Dalton.
Deaconess met that requirement, along with promises to pay off Glover's $1.5 million capital debt, contribute yearly payments for municipal services in lieu of taxes and honor employment and benefit pacts with current employees.
The two hospitals had agreed to an affiliation in February 1993, but complications over state open-bidding laws soon made it evident that Glover couldn't be part of a network and remain a municipal hospital, Mr. Dalton said.
Any new service involving a joint agreement required competitive bidding. What's more, a provision in the law precluding bidding by any firm that helps establish bid specifications could have kept Deaconess from bidding on any venture it worked out with Glover, Mr. Dalton said.
The hospital sale also required an open bid, but Deaconess ended up the only bidder. After evaluation by hospital and town procurement officers, the proposal will be put to a vote at a town meeting Feb. 22.
Glover's total profit margin was 5% in 1992 on net patient revenues of $18 million, HCIA said.