A final approval by a Massachusetts court and some unfinished business on taxes are the only remaining hurdles to OrNda HealthCorp's purchase of Saint Vincent Healthcare System in Worcester from Fallon Foundation.
OrNda's total financial commitment, spelled out in an agreement with the state attorney general, will approach $400 million. That includes the separate purchase of an equity stake in a 300-physician medical practice-Fallon Clinic-and a $4 million contribution toward community healthcare.
The agreement settles Attorney General Scott Harshbarger's concerns about proper valuation of not-for-profit assets, public access to affordable healthcare and other issues related to assuring the protection of the Worcester community's interests.
It's the second deal in the state involving the purchase of a not-for-profit healthcare facility by an investor-owned company. Proposed in February, the OrNda deal follows on the heels of Columbia/HCA Healthcare Corp.'s purchase of an 80% stake in MetroWest Medical Center (May 6, p. 26).
Nashville, Tenn.-based OrNda will pay about $135 million for the healthcare system by assuming the liabilities and other costs of Saint Vincent Hospital, three nursing homes, a home healthcare agency and a laboratory, Fallon spokeswoman Paula Green said.
In addition, OrNda has assumed responsibility for building a replacement hospital, called Medical City, at an estimated cost of $215 million.
OrNda also will pay $45.5 million for a 45% interest in Fallon Clinic, and the clinic will receive a 10% ownership in Medical City once it's completed in 1999. That ownership stake currently is valued at $13 million.
Besides the Saint Vincent system and the medical practice, the Fallon Foundation includes a 176,000-enrollee HMO called Fallon Community Health Plan. Under terms negotiated by the attorney general's office, the HMO will retain its independence as a not-for-profit organization within the overall Fallon and OrNda healthcare system.
The agreement, released Aug. 21, also calls for community representatives to make up a larger percentage of the HMO board, which is now tilted in favor of Fallon Clinic physicians.
Harshbarger recommended the transaction's approval by the Worcester Probate Court, which could take final action on the deal as early as this week.
OrNda and Fallon also have petitioned for a negotiated 20-year schedule of local tax payments based on the projected assessed value of the Medical City property.
Green said the tax settlement is important to help determine OrNda's total outlay for the project, which the state first approved in 1994 as an urban renewal effort in conjunction with the city of Worcester.
The governments already have spent about $40 million to acquire and prepare the 21-acre site for development.