Before Community Health Systems drives Empire Health Services off the lot, KPMG International is going to have a look under the hood to ensure the for-profit chain is paying enough for the Spokane, Wash., not-for-profit.
The Washington State Health Department hired the accounting firm to review the sale of the two-hospital Empire system to Community. The sale price on the deal was $172 million when it was announced last year, but after the systems financial results deteriorated, that has been adjusted down to $156 million, a 9.3% decrease.
Right now, the sale is expected to endow a new healthcare foundation with about $83 million, so its no surprise that there is sensitivity about the purchase price. With respect to the price, there are a lot of questions about why its lower and being adjusted, said Nick Straley, a staff attorney with Columbia Legal Services. Columbia is a Seattle-based not-for-profit law firm that works with low-income clients. It has pushed the health department for a more thorough examination of the deal, and while Straley would prefer a study of the deals full impact on healthcare in the region, the KPMG review will help.
One concern is whether the deal properly values Empires stake in a local provider cooperative that operates an air ambulance service, a rehabilitation hospital and an electronic medical-records service, and whether Community will maintain that cooperative. Community has not considered breaking up the cooperative because its simply not in Communitys interest to break it up, said company spokeswoman Rosemary Plorin.
Besides the fair-value analysis, Straley said, the review should make clearer how Community plans to meet the financial projections the company listed in its approval application with the health department. Columbia Legal Services also wants to see more guarantees on community benefit and charity care and to ensure that there arent too many loopholes, Straley said.
There seems to be a lot of holes in the application, Straley said.
Both the health department and the state attorney generals office are reviewing the sale. Earlier this month, the health department said that Communitys application was substantially complete after requesting additional information from the company in March. The health department scheduled public hearings for late June. The attorney generals office requested more information earlier this month and is tentatively scheduled to issue an opinion on the sale in August; the health department is tentatively scheduled to issue its approval or denial of the sale in September.
In a conference call last month about the deal, Community executives sounded dismayed at the delay in the approval process, and Plorin reiterated that. Its certainly in the best interests of the seller for this deal to move forward, Plorin said. We hope theres no additional delay.