Regional News/Midwest: LifePoint acquires third hospital in Michigan's Upper Peninsula, and other news

ISHPEMING, Mich.—LifePoint Hospitals, Brentwood, Tenn., forged its second deal in Michigan in less than a week as the company seeks to build a presence in the state's Upper Peninsula. The publicly traded system made its first purchase in Michigan last year when it acquired Marquette (Mich.) General Hospital in a $483 million deal through its Duke LifePoint Healthcare joint venture with Duke University Health System, Durham, N.C. On March 5, 25-bed Bell Hospital, located about 15 miles away from Marquette General in Ishpeming, signed a letter of intent to be acquired by LifePoint. The agreement with Bell came days after Portage Health said it plans to form a joint venture with LifePoint that will own and operate the 36-bed medical center. Portage Health is located in Hancock, about 100 miles northwest of Marquette. Financial terms were not disclosed for either deal, but in separate releases, the hospitals said joining LifePoint would bring in additional financial and clinical resources. The due diligence and negotiation process is expected to take 60 to 90 days, and the transactions will require approval from Michigan's attorney general. In an interview last year, LifePoint CEO William Carpenter said more deals were likely to follow in the region, in order to build a regional network of hospitals that would refer more-complex patients to Marquette. While Duke LifePoint looks for acquisitions of tertiary-care centers such as Marquette that need an academic partner, the investor-owned chain will continue to focus on community hospitals, which have been its typical target.

—Beth Kutscher

MEXICO, Mo.—St. Louis-based SSM Health Care will soon own and operate Audrain Medical Center in Mexico, Mo., along with its nine MedChoice rural clinics. The Catholic not-for-profit health system signed an agreement to acquire the 49-bed acute-care hospital April 1. “Bringing Audrain Medical Center and MedChoice into the SSM Health Care system will allow us to enhance our healthcare ministry to better serve the people of mid-Missouri,” William Thompson, president and CEO of SSM Health Care, said in a release. SSM, which has hospitals in four states—Wisconsin, Oklahoma, Missouri and Illinois—also announced the formation of a mid-Missouri region. The region is to include Audrain Medical Center, its rural clinics and St. Mary's Health Center in nearby Jefferson City, Mo. Brent VanConia, president of SSM's St. Mary's Health Center, will serve as interim president of the region. Further details of the agreement, including financial terms, were not shared. Audrain Medical Center lost money in the five most recent years for which results have been reported to bondholders. The hospital recorded an operating loss of $3.8 million in 2011 on $56 million in operating revenue. SSM plans to rename Audrain in order to reflect the medical center's new affiliation with the health network.

—Rachel Landen

LANSING, Mich.—The Michigan Nurses Association is campaigning for state legislation mandating minimum nurse-patient ratios at hospitals, though similar legislation has failed three times. The Michigan Safe Patient Care Act calls for hospitals to develop nurse staffing plans and to implement those plans within two years. By the third year, hospitals would have to adhere to specific nurse-patient ratios by department or service. That includes a 1-to-1 ratio for the operating room, adult and pediatric critical care, and trauma or critical care. Hospitals would have to maintain 1-4 ratios in medical/surgical, pediatric and behavioral-health settings. The ratios would mean hospitals ultimately would have to hire more nurses, Michigan State Rep. Jon Switalski, the bill's sponsor in the House, acknowledged on a conference call organized by the nurses. Union officials, though, said hospitals ultimately would save money because the ratios would yield better care, fewer readmissions and less turnover in their nursing staffs. The Michigan Health & Hospital Association opposes the legislation. “Michigan hospitals have demonstrated their commitment to patient safety and quality through a decade of voluntary, collaborative, large-scale patient safety and quality improvement initiatives that have saved thousands of lives and hundreds of millions of healthcare dollars,” Chris Mitchell, the association's senior director of advocacy, said in a statement. The MNA's fellow National Nurses United affiliates in Washington, D.C., Massachusetts and Minnesota are likewise pushing legislation that would set minimum staffing ratios. California is the only state that has adopted the approach.

—Ashok Selvam

ROCHESTER, Minn.—The Mayo Clinic loosened a tight grip on expenses last year with spending on technology and expansion efforts that markedly eroded its profit margin. Executives said the outlays would position the health system to thrive amid changing markets and health policy. Mayo ended last year with a margin of 4.5% with operating income of $395.4 million on revenue of $8.8 billion. That's a drop of roughly one-third compared with the health system's operating income of $610.2 million on revenue of $8.3 billion the prior year, or a margin of 7.5%. Mayo's investments come at a time when hospitals and health systems are squeezing operating expenses in response to a weak economy, sluggish growth in demand for hospital care and payment cuts from private and public insurers. Dr. John Noseworthy, Mayo Clinic president and CEO, said the spending would better prepare Mayo for changes under healthcare reform. But the system has also halted roughly one-fifth of its planned projects in response to projections that show the system will be paid roughly 20% to 40% less for services in the next five years, he said. Shirley Weis, Mayo Clinic vice president and chief administrative officer, said last year's strategic investments were in information technology and startup costs for its Mayo Clinic Care Network and research centers in healthcare delivery, genetics and regenerative medicine. Weis said continued investments will keep expenses growing faster than revenue through this year. Noseworthy said the health system has signed 14 organizations and expects to sign another 10 in 2013 that may seek consultations with Mayo Clinic specialists and refer patients under its care network. He described the network as an alternative to consolidation.

—Melanie Evans

AKRON, Ohio—Summa Health System and Catholic Health Partners, Cincinnati, are planning a “strategic partnership.” Summa, which owns five hospitals in Ohio, had been looking for a not-for-profit partner since July to bolster its financial strength. CHP, which owns 23 hospitals, with two and Kentucky and 21 in Ohio, would receive a minority interest in Summa. No further financial details about the deal were disclosed. Officials said they expect the partnership to be complete by mid-year. “We have had the unique opportunity to get to know several leading national healthcare organizations throughout this process,” said Summa board chair Norman Wells Jr. in the news release. “When looking specifically at what is most important to us, I am confident that Catholic Health Partners is the right group to join us on our journey to transform the delivery of healthcare.” Officials said on a call with reporters that the relationship will give the combined group the largest market share in Ohio—CHP holds about 12% and Summa has 4% to 5%, they said. The move will give Summa leverage and flexibility to control costs, as well as the chance to take advantage of cost-cutting practices already employed by CHP, Summa President and CEO Thomas Strauss said. “Our belief is that we will move aggressively, and have moved aggressively, to population health and population health management,” Strauss said. Summa earned $33.4 million in operating income on operating revenue of $843.1 million in 2012, according to unaudited results reported to bondholders.

—Ashok Selvam