Columbia/HCA Healthcare Corp. got the nod from the Massachusetts attorney general's office last week to acquire an 80% interest in MetroWest Medical Center, but not before agreeing to numerous conditions aimed at protecting local interests.
A number of those conditions attempted to nail down commitments on emergency care, free care and capital investment that were more detailed in public pronouncements than they were in the actual contract, said Richard Allen, assistant attorney general and chief of the public charities division.
Allen said the attorney general's office also added provisions of its own to strengthen the level of local say-so on financial and strategic matters involving MetroWest's primary facilities: Union Hospital in Framingham, Mass., and Leonard Morse Hospital in Natick, Mass.
And in a twist on the familiar debate over Columbia's appetite for return on investment, the state took pains to contractually improve MetroWest's odds of getting a fair cut of the profits for its 20% stake in the business.
Approval of the joint venture, which was first proposed in June 1995, "follows rigorous scrutiny and analysis, and intense negotiations with Columbia and MetroWest," said Attorney General Scott Harshbarger.
The scrutiny included public hearings to debate provisions of the agreement as well as the general notion of investor ownership in community healthcare facilities (Dec. 11, 1995, p. 4).
If approved by the state Supreme Judicial Court-a hearing is expected next week-the transaction would mark the first time a Massachusetts acute-care hospital is owned and operated by a for-profit company.
The joint venture was set up to keep a 50% local representation on its board, but certain powers were reserved for Columbia as general partner, such as budget approval.
The negotiations increased Columbia's responsibilities to share decisionmaking or at least consult with its limited partner on a number of issues, such as borrowing, making capital expenditures out of cash flow or changing policy on indigent care.
A closing price of $84.5 million also was established, setting MetroWest's stake at $17 million and protecting it from post-deal erosion of value, Allen said.
The size of the MetroWest stake will be important in deciding how much the community gets back in cash distributions to the charitable foundation. That's in addition to the $30 million in proceeds of the sale expected to be forwarded to the foundation after the venture pays off MetroWest's debt.
Specifics of the foundation's operation are yet to be determined, but the joint venture did agree to make an annual payment to the foundation out of cash flow, said Elizabeth Reinhardt, an assistant attorney general on the negotiating team. The payment should line up with the return the foundation could anticipate if the $17 million were invested on the open market, she said.
If MetroWest can't meet the obligation, it would have limited discretion to reinvest profits from operations in the partnership and would have to review continued participation in the venture. Those protections would make Columbia less likely to divert cash outside the partnership at the expense of local interests, Reinhardt said.