Although just 11 months old, Principal Hospital Co. is bursting onto the rural healthcare acquisition scene after signing a letter of intent last week to acquire the hospital business of Brim.
Portland, Ore.-based Brim, with $115.3 million in net revenues last year, intends to split its healthcare and assisted-living businesses and sell off the healthcare piece to Brentwood, Tenn.-based Principal. Brim's healthcare division includes five hospitals and management contracts with 53 hospitals.
The assisted-living business will be merged into a new company called Encore Senior Living, which is being formed by former Brim executives and Chicago's Pritzker family, which owns the Hyatt Hotels chain.
"Our focus is and will remain really simple: We operate nonurban hospitals and look to those communities' needs," said Martin Rash, Principal's president and chief executive officer. "From a philosophical standpoint, this is a continuation of Brim's philosophy and ours."
Brim Healthcare will become a division of Principal but will remain headquartered in Portland. The unit will retain its full identity as a hospital management organization, executives said. Financial terms of the acquisition agreement weren't disclosed.
While many rural and nonurban hospital companies are satisfied with two to four acquisitions a year, Principal is off to an impressive start. The company acquired its first two hospitals earlier this year and has exceeded its goal of acquiring four hospitals in its first year.
Rash, who had been chief operating officer of Community Health Systems in Nashville, Tenn., formed Principal in February in a partnership with the Chicago-based venture capital firm Golder, Thoma, Cressey, Rauner.
Brim is in negotiations for lease agreements with two of its managed hospitals. Once those close, Principal would operate nine facilities, and the company anticipates additional acquisitions from Brim's pool of managed hospitals, which are located in 22 states.
"It would be a great way to grow," Rash said.
Rash will remain CEO of Principal. Long-time Brim CEO and Chairman A.E. "Gene" Brim, 66, will remain on Brim's board and become an adviser to Principal.
"Brim's purpose in pursuing these new partnerships has always been to enhance resources for our client communities," Brim said.
Brim has been looking for merger partners for two years. A year ago, the company broke off merger talks with Paracelsus Healthcare Corp., a decision that may have been a blessing.
Houston-based Paracelsus later merged with Champion Healthcare Corp. and has gotten off to a rocky start as a publicly traded company. It reported an $80 million loss in its first quarter as a public company and has been hit with shareholder suits charging that it didn't disclose its true financial condition prior to its merger with Champion.