Nashville, Tenn.-based Principal Hospital Co. may be halfway to its acquisitions target after seven months in the rural hospital business.
Principal cleared a major hurdle last week after a 20-year lease agreement with 35-bed Starke Memorial Hospital in Knox, Ind., earned preliminary approval from the hospital's board and the Starke County Board of Commissioners. Starke Memorial would be the second hospital to become part of Principal, which formed in February.
Terms of the deal call for Principal to pay Starke County, the hospital's owner, $10.1 million upfront and about $75,000 annually to use the hospital.
The company had hoped to acquire three or four hospitals in its first year. Principal was formed by Martin Rash, who had been chief operating officer of Community Health Systems, and a partnership with the Chicago-based venture capital firm of Golder, Thoma, Cressey, Rauner.
"Not bad, since February, and we have seven letters of intent out right now," said Richard Gore, Principal's chief financial officer. "Rural hospitals are still an extremely good business with a lot of growth potential."
The county and hospital boards also approved an affiliation agreement with Memorial Hospital Systems of South Bend, Ind., that would allow for managed-care contracting.
The Starke County deal will face a public hearing Sept. 30 before the hospital and county boards. Once final approval is given, Principal would take over operations Oct. 1.
Last month, Principal acquired 93-bed Memorial Hospital in Palestine, Texas. The purchase price wasn't disclosed. Executives said the deal is a joint venture calling for Principal to serve as the general partner. Trinity Mother Francis Healthcare System, a Roman Catholic provider based in Tyler, Texas, is a minority partner in the deal.