Voters in Shelby County, Ala., approved a referendum that allows Baptist Health System, Alabama's largest healthcare system, to acquire 228-bed Shelby Medical Center in Alabaster.
The approval culminated a three-year process that included dueling bids and attack advertisements between not-for-profit Baptist and Alabama Health Services, a for-profit joint venture composed of 515-bed Brookwood Medical Center and 371-bed Medical Center East, two Birmingham, Ala., hospitals. Brookwood is owned by Tenet Healthcare Corp., and Medical Center East is a not-for-profit community hospital.
Under the deal, which is expected to close in September, Baptist will pay
$45 million and assume Shelby Medical's $9.8 million in debt. Baptist also will commit a minimum $37.5 million over five years for capital improvements.
"We are elated with the outcome," said Dennis Hall, Baptist's president and chief executive officer. "The people sent us a message that there are tremendous benefits to becoming part of a voluntary system."
For days leading up to the election, newspapers and radio stations carried negative ads placed by Baptist and AHS. For example, one AHS newspaper ad warned readers that Baptist was ripping off the public.
"The sale of Shelby Medical is not a Baptist...vs. Brookwood...issue," the AHS ad said. "It's about Shelby...being sold for less than it's worth. If this referendum passes, Baptist will get a great deal in the sale. And you'll get sold out. Don't let that happen," it warned.
In response, Baptist pointed out to readers that Brookwood is owned by Tenet and distributes its profits to Tenet shareholders. Baptist reinvests its profits in the community, the Baptist ad said.
"(Brookwood) said they pay taxes and that the community is better off with them, but the vote was nearly two-to-one in favor of selling to us," Hall said. "The public was able to sift through the negative ads and determine what the facts were."
Scott Regan, Brookwood's spokesman, said plans are in the works to add more clinics and physicians in Shelby County to protect Brookwood's 30% market share. Brookwood already owns seven clinics with 18 employed physicians in the county, including an outpatient surgical center and primary-care centers.
"We are not going to close the doors," Regan said. "We are going to go out there and compete."
Baptist also plans to help its physicians open satellite offices in Shelby County and increase the numbers of subspecialists, Hall said. But he said referral patterns probably won't change for several years.
Shelby Medical is a tax-supported hospital operated by the Shelby County Health Care Authority and located in the state's fastest-growing county. With Shelby Medical, Baptist would operate 11 hospitals in Alabama.
Under the deal, Shelby Medical's share of the local property tax bill, or $3.1 million a year, will be eliminated. Baptist also will receive Shelby's $14 million reserve fund.
After paying its debt, the Hospital Authority will have an estimated $50 million in proceeds from the sale, which it will use in three ways.
During the first five years, 25% of the interest-estimated at $5 million to $10 million a year-will be allocated to Shelby Medical to care for the care of indigents and county prisoners and for community health services.
Also, 50% of the interest will be earmarked for local community service agencies. And the remaining 25% will be reinvested for future use.