While it was negotiating a possible merger with one of Wisconsin's largest not-for-profit hospital systems, a small county hospital in the northeastern part of the state quietly cut a deal to be sold to an out-of-state for-profit hospital chain.
Following the hospital's alleged flip-flop on its future owner, there's been a lot of finger-pointing and confusion.
"I would like to hear all proposals," said one county board member who requested anonymity. "We have a fiduciary responsibility -- mostly to the taxpayer -- to get the best deal possible. But we're not even sure that we want to sell."
Bay Area Medical Center in Marinette consists of two facilities: a 99-bed acute-care hospital in Marinette and a 16-bed psychiatric hospital in nearby Menominee, Mich. Marinette County, Wis., and Menominee County, Mich., co-own the Bay Area facilities and lease them to not-for-profit Bay Area Medical Center.
Consequently, Bay Area must get approval from two county boards in different states before selling or merging.
Last December Bay Area announced it had signed a letter of intent to be acquired by for-profit Quorum Health Group of Brentwood, Tenn.
Bay Area was managed by Health Management Professionals beginning in 1981. In 1992 Quorum bought HMP and managed Bay Area through 1994. In May 1994, Rick Ament was hired by Quorum to be the hospital's chief executive officer. When the hospital board dropped the management contract with Quorum, Ament was retained as its president and CEO.
The deal with Quorum was news to not-for-profit Aurora Health Care, a 12-hospital system based in Milwaukee.
Aurora and Bay Area had been working on an affiliation agreement since last October. Aurora owns the 21-physician Marinette Menominee Clinic, whose doctors admit most of the patients to Bay Area's two facilities.
In mid-November, Bay Area asked Aurora for fair market value for the hospital. Aurora responded within a week by saying it would come up with a price for the hospital when performing its own due diligence. Several weeks later, Bay Area announced its pending sale to Quorum. Ament said, "(Aurora and Quorum) were aware that we had many options out there."
In a Jan. 12 letter to Aurora, Bay Area said the not-for-profit system was "given ample opportunity to make a formal proposal for acquisition of Bay Area."
Aurora's attorney disagreed.
"They said they would be interested in a purchase price, but we never did any due diligence," said Fred Geilfuss, an attorney with Foley & Lardner, Milwaukee. "We didn't have any financial information. It would have been silly to do at that point."
Meanwhile, several members of Bay Area's two county boards said they are outraged that Bay Area would negotiate a sale to Quorum without consulting the two counties.
As part of its lease agreement with the counties, Bay Area must operate the hospital as a not-for-profit, said Menominee County board member Mark Anderson, who is also chairman of the joint county task force studying Bay Area's options.
One county board member who asked not to be named said Bay Area should have come to the county boards before starting negotiations.
On March 12 Quorum and Bay Area presented their case to the task force, which will make a recommendation to the county boards.
A Quorum spokeswoman said the company has a policy of not discussing pending deals.
Anderson said the entire deal with Quorum would be worth about $37 million. Each county would get about $7.4 million while $17 million would go to a foundation and Bay Area would get the remaining $5.2 million. According to HCIA, a Baltimore-based healthcare information company, Bay Area reported $2 million in net income and $35 million in net patient revenues for 1996.