Weigh goals carefully before seeking a deal, execs say

Hospitals contemplating a deal should carefully consider their strategic goals and their potential value to prospective partners or risk losing out on gaining fully from the deal, said officials who have navigated their own hospital transactions.

“You always have more options than you think you do,” said Mark Leitner, CEO of a Henderson, Texas, hospital that entered a long-term lease with Tyler-based East Texas Medical Center Regional Health System in 2007. Leitner spoke on Tuesday to attendees of the American College of Healthcare Executives' Congress on Healthcare Leadership in Chicago.

The deal came two years after the hospital abruptly broke off talks with two other prospective partners as it struggled with chronic operating losses, he said. Leitner said the board took time to turn around operations and consider whether the hospital should remain independent before again seeking a partner.

“It didn't take much discussion to get past that again,” said Leitner of the hospital's decision not to remain independent. With no major capital investments since 1982 and need for a new emergency room, the now-profitable hospital still lacked enough cash to make needed capital investments.

Ultimately the hospital, known as East Texas Medical Center Henderson since the 2007 deal, gained access to much-needed capital and help recruiting physicians in the arrangement. Meanwhile, the East Texas Medical Center system gained access to an entirely new market, he said, and the chance to ultimately acquire the hospital, contingent on continued capital investment.

“So many organizations jump when there's a crisis,” said Dr. Dave Gunderson, former board chairman of St. Vincent Regional Medical Center in Santa Fe, N.M. The hospital's governing board in 2008 divested half the hospital to Christus Health and entered into a management agreement with the larger health system after a national hospital chain announced plans to enter St. Vincent's market.

Gunderson said the board took more than two years to determine its strategic goals and community priorities before entering into the deal with Christus, which gave the hospital access to capital to remain competitive. St. Vincent continues to face competitive pressures, he said. “The story isn't over.”

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