Prime Healthcare to buy two Kansas hospitals

Prime Healthcare Services has reached an agreement to buy two Catholic hospitals in Kansas from SCL Health System, according to an SCL release.

Providence Medical Center, a 196-bed facility in Kansas City, and St. John Hospital, a 56-bed facility in Leavenworth, are the two hospitals involved. Under the agreement's terms, for-profit Prime, Ontario, Calif., would invest at least $10 million toward capital and other projects over the next five years. Prime agreed to maintain current acute-care and emergency department services at both hospitals for at least the next five years. The deal is expected to close in the spring, an SCL spokesman said. The two systems continue to work out the details on how the hospitals will transition from not-for-profit to investor-owned and how the facilities would retain their religious identities.

“We are confident we have found the best organization to ensure a successful future for both Providence Medical Center and St. John Hospital,” SCL President & CEO Michael Slubowski said in the release. “The clinicians and associates at these facilities are dedicated professionals who are committed to providing the highest level of person-centered care. With this transaction, they are best positioned to ensure continuation of that care, including to those who are poor and vulnerable.”

The latest Internal Revenue Service filings from the hospitals paint a struggling financial picture. Providence posted (PDF) a $16.8 million loss on $171.1 million in total revenues and $187.9 million in total expenses in fiscal 2010. The hospital posted a $5.2 million loss in fiscal 2009 on $143.7 million in total revenues and $149 million in total expenses.

Papers filed by Saint John (PDF) showed a $3.7 million loss on $34.9 million in total revenues and $38.6 million in total expenses in fiscal 2010. The hospital posted a $491,905 in profit in fiscal 2009 on $32 million in total expenses and $31.5 million in total expenses.

SCL officials said that the hospitals' boards found that “the challenging economics of today's healthcare environment, the ongoing operating model was deemed unsustainable,” which necessitated the sale. The hospitals' have a joint foundation which will remain with SCL. Leavenworth was home to SCL's corporate headquarters before officials moved last year to Denver. SCL has made more than $96 million in capital investments at the hospitals over the past decade, according to the release. They've also provided more than $212 million in charity care and spent an additional $215 million in bad debt expenses over those same 10 years.

Prime has been busy adding to its 19 hospitals, as the system just announced an asset purchase agreement to acquire 221-bed St. Mary's Hospital in Passaic, N.J.

“Prime Healthcare intends to reaffirm these hospitals as top providers of quality health care in the state and country,” said Prime Chairman, President and CEO Dr. Prem Reddy in the release. “We understand how important these acute care facilities are to the people in Wyandotte and Leavenworth counties and intend to ensure they remain in vital service to these communities for years to come.”