After struggling in vain to keep their healthcare ministry intact, leaders of the Baptist General Convention of Texas voted last week to sign off on the sale of five-hospital Baptist Health System in San Antonio to Vanguard Health Systems, Nashville.
Church leaders had resisted the sale to Vanguard, a privately held, for-profit company, and pushed to bring the financially ailing Baptist Health under the management of another Baptist affiliate, the parent of 540-bed Valley Baptist Medical Center, Valley Baptist Health System in Harlingen, Texas.
If completed, the sale would mark the first transfer of a Baptist health facility in Texas to a for-profit company, convention spokesman Ken Camp said. The Texas convention has five other affiliated health systems, Camp said.
Religious leaders urged the two Baptist affiliates to come to an agreement, with no success. Baptist Health Chairman Earl Cutler said Valley Baptist pitched three proposals, and each time the Baptist Health board responded by reaffirming its choice of Vanguard.
Cutler said the main sticking point was capital. Vanguard made a "hard commitment" of $200 million over six years, whereas Valley Baptist wanted a "substantial piece" of capital to come from the system's future earnings, he said.
Vanguard appeased Baptist leaders by agreeing to maintain the religious mission, including appointing a vice president of ministries selected by the Baptist convention, maintaining charity care and granting three out of seven local board seats to the convention.
In a written statement, Valley Baptist said it had "just two weeks" to conduct a feasibility study.
During negotiations Valley Baptist hired James Eastham, the respected senior vice president and chief executive officer of Memorial Hermann Hospital in Houston, ostensibly to run Baptist Health if a deal was signed. Cutler said Valley Baptist gave the Baptist Health board a copy of a Memorial Hermann memo announcing Eastham's resignation.
"Had they been successful (in negotiating a deal), I think they would have put him up here," Cutler said.
Valley Baptist spokesman Bill Elliott told Modern Healthcare last week that Eastham "would have had a major part to play" in running Baptist Health had a deal been signed. Now, he said, Eastham will be involved "in a number of major projects" at Valley Baptist. Eastham did not answer a request for comment last week.
The sale still must be approved on the floor of the convention at its annual meeting in November. However, floor votes usually mirror executive board decisions, Camp said.
Vanguard spokesman Trip Pilgrim said the deal could close by year-end. He said the vote "gives us a good indication that the process is moving the way we, meaning Baptist Health System and Vanguard, had hoped."
Expressing disappointment last week was Mike Williams, president and CEO of Community Health Corp., Addison, Texas, a company backed by not-for-profit hospital group VHA. Williams said after the Baptist convention asked Community Health to "provide a not-for-profit alternative," his company asked Valley Baptist to help it negotiate with Baptist Health.
Williams said Vanguard is "inferior financially" to other candidates based on the company's financial ratios. "I guess Vanguard did a good sale job," Williams said.
Baptist Health also received an offer by Tenet Healthcare Corp., Santa Barbara, Calif., and Christus Health, Irving, Texas, which wanted to run the system as a joint venture. Cutler said the deal was rejected because it excluded the Baptist church from governance.
Cutler said Baptist Health and Vanguard expect to sign a definitive agreement by the end of this week. The deal will be subject to a review by the Texas attorney general.