The board of 13-hospital Health Midwest, Kansas City, Mo., in a unanimous vote earlier this week agreed to explore offers from parties interested in purchasing the not-for-profit health system.
Health Midwest has received "expressions of interest" from several hospital companies, including Tenet Healthcare Corp., since January when a report in a local newspaper speculated that the health system might be an attractive acquisition target. The system didn't initiate any of the discussions and those that occur are "exploratory," President and CEO Richard Brown said in a written statement.
"The fact that they approached us is a reflection, we believe, of our improving financial condition, and a recognition of our efforts to build a successful, integrated healthcare delivery system," Brown said.
Tenet spokesman Harry Anderson told Modern Healthcare's Daily Dose, "We are very interested and we intend to pursue conversations with Health Midwest about this opportunity."
Tenet, Santa Barbara, Calif., operates no facilities in Kansas City but has five hospitals in the St. Louis area. It is the sole provider in Poplar Bluff, Mo.
Health Midwest, meanwhile, operates 13 general acute-care hospitals in Kansas and Missouri. Officials declined to disclose the system's recent financial performance. Responding to Modern Healthcare's 2002 hospital systems survey, Health Midwest reported net patient revenue of $840.7 million in 2001 and $863.8 million in 2000.
Brown said access to capital is a major issue for Health Midwest, and its board would consider "the broadest range of options, from maintaining the status quo to using the proceeds of a sale to create what could be among the largest private foundations in the Kansas City area."
Prospective buyers have been asked to submit formal proposals to the board and the review process will take several months, Health Midwest said. "Other than the decision to listen, the board has made no determination regarding any aspect of this opportunity," Joseph Hiersteiner, Health Midwest's executive vice president and general counsel, said in the written statement.
Last July Health Midwest said it had hired Cap Gemini Ernst and Young to reorganize the system, which then had 15 hospitals, in an effort to reduce a projected 2002 operating loss of $40 million. The system later laid off six vice presidents and in December eliminated 143 positions, mostly in management.
Nearly half of the cuts affected employees at 334-bed Trinity Lutheran Hospital, which Health Midwest closed late last year, shifting most of its services to 265-bed Baptist Medical Center, also in Kansas City. On its Medicare cost reports, Trinity Lutheran stated that it lost $20.7 million on operations from 1997 to 1999, the most recent year information was available, according to Health Forum.
And last month, the Rehabilitation Institute broke away from Health Midwest after an 11-year affiliation, the Business Journal of Kansas City reported.
Health Midwest was formed in 1991, when Baptist Medical Center and Research Medical Center merged. At its inception, the new organization also included Lee's Summit Hospital, Medical Center of Independence and Trinity Lutheran.