Jackson Health System, the financially struggling public health system in Miami, has received word that private-equity backed Steward Health Care System is interested in acquiring the 1,765-bed system.
Steward looks at acquisition of Jackson Health
Steward, which is owned by New York private-equity firm Cerberus Capital Management, made national headlines in November when it agreed to acquire Boston's large Catholic system, Caritas Christi Health Care, and convert it into for-profit Steward in an $895 million deal.
John Copeland III, president of Jackson Health's governing board, the Public Health Trust, said in an interview Tuesday morning that he received a letter from Steward officials late Monday night confirming the for-profit system's interest in undertaking a 60-day period of due diligence on potential terms for an acquisition or equity partnership.
“We would hope to remain public, but we also have capital needs to address,” Copeland said.
Bruce Rubin, a public-relations contractor in Miami hired by Steward, confirmed Steward's nonbinding interest in integration and said information-gathering with Jackson officials “will command our full attention.”
“Intensive discussions with elected and appointed officials are just getting under way, and at the same time we are preparing for a thorough due diligence period,” Rubin said in an e-mail, declining to comment on specific details like a potential purchase price.
Executives at Jackson and Steward appeared to offer differing views of Jackson's financial position.
The Feb. 21 letter to Copeland from Steward Chairman and CEO Ralph de la Torre says Steward's “general concept” of the potential deal involves an investment of $600 million for short-term capital needs and the assumption of more than $500 million in existing debt, for a total deal of more than $1.1 billion.
Copeland estimates Jackson's capital needs alone are closer to $1 billion, and the debt comprises another “$300 million-plus.”
Jackon's total cash-on-hand—a key measure of hospital fiscal health—has continued to dwindle in 2010 despite several budget-cutting maneuvers.
De la Torre's letter said that based on research of public records, Steward officials estimate that Jackson will completely run out of operating cash in July, requiring an immediate infusion of taxpayer cash just to meet payroll.
Copeland said he was first introduced to Steward executives via Jackson's labor union, the Service Employees International Union. “Certainly, our union leaders and partners are interested in it, as a major stakeholder in the system,” Copeland said. “They are much more familiar with Steward Health than I was.”
In Boston last November, officials with the then-Caritas Christi Health Care approved a sweeping five-year contract with SEIU affiliates at four Caritas hospitals just one day before the purchase by Cerberus received final regulatory approval. The contract revamped the union's defined-benefit pension plans, granted 6% pay increases through 2013, and enriched the salary scale to take into account clinical experience.
Jackson health is the fourth-largest public health system in the country, according to the latest results from Modern Healthcare's annual Hospital Systems Survey. The system has been beset with financial woes, finishing its most recent fiscal year with more than $100 million in losses.
The Securities and Exchange Commission is investigating Jackson Health to determine whether it accurately disclosed the system's financial health before selling $83 million in bonds in August 2009.
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