HCA signs letter of intent to acquire Mission Health

Updated March 23, 12:30 ET

HCA Healthcare plans to add North Carolina to its massive, 20-state system by acquiring Mission Health.

Mission, a six-hospital health system based in Asheville, N.C., made the announcement Thursday after its board of directors voted unanimously to sign a letter of intent to enter exclusive discussions to join Nashville-based HCA. Mission is a not-for-profit health system, while HCA is for-profit, a dynamic that will likely draw added scrutiny to the deal.

Mission CEO Dr. Ronald Paulus said in an interview that until this year, he had thought staying independent was the best plan for the health system. But the ongoing pressure from insurers and "chaos in Washington" changed his mind.

"We knew we had the potential and the capacity to go on an independent course for many years, but from my lens, that's exactly when you want to make that decision," he said. "You don't want to be pressured into sort of a bad choice when you don't have any other choices left."

Because Mission is a not-for-profit system, the proceeds of the transaction must go toward not-for-profit purposes consistent with the health system's mission, Paulus said. As such, a foundation would be established using a combination of the money left over after Mission's debt obligations and payables are diffused and the transaction's purchase price, he said. Paulus declined to say what the proposed price would be. Under the proposed deal, HCA and Mission would each contribute $25 million to an Asheville-based healthcare innovation fund to invest in healthcare companies.

An HCA spokesman did not respond to a request for comment.

Paulus said he hopes to sign definitive agreements by late summer, triggering a 90-day review process, including by North Carolina's attorney general. Ultimately, Paulus said, he hopes to finalize the deal by year-end.

It's unclear what the deal's net effect on jobs would be. Mission has eliminated more than 500 jobs in the past five years, although about 45% of those people found other jobs within the health system, Paulus said. Given pressure from payers, he said Mission is likely to continue cutting jobs in the coming years, but certainly not as many as it would have without the leverage it would gain from HCA.

HCA currently operates 177 hospitals. The system took in just under $11.6 billion in revenue in the final quarter of 2017, an 8.6% jump from the same time in 2016, when it took in $10.6 billion. Operating expenses increased 9% year-over-year during that period, according to the Modern Healthcare database.