Trends, finances drove Providence Hospital sale

Little will change for patients with Providence Hospital’s impending sale to a for-profit company, observers predicted Tuesday. But those observers have long-term concerns about how the sale will play out.

Providence’s sale – to LifePoint Health of Brentwood, Tenn., for an undisclosed price – is the upshot of its failed 1990s business plan, one veteran health-care economist said. Providence gambled then — and lost — that heart surgeries would keep pumping money into the Catholic hospital.

“They made a strategic mistake in presuming that cardiovascular would be the cash cow forever,” said Columbia health-care economist Lynn Bailey. Now, Providence “is desperately searching for a business model that will work for them because they are being squeezed out of the market by Palmetto Health and Lexington Medical.”

Still, Bailey and Frank Knapp, head of the S.C. Small Business Chamber of Commerce, agree the change hardly will be noticed by patients or small businesses.

“All our hospitals act as if they’re for-profit,” Knapp said. “That (nonprofit) does not have the meaning that it did. This doesn’t change the face of our hospital market. It’s just a new owner — whether it’s the Sisters of Charity or some Tennessee company.”

Columbia will be one of the LifePoint’s largest and most competitive markets.

BlueCross BlueShield of South Carolina, the state’s largest insurer, welcomed news of the deal.

“We have been reassured that the change in ownership will not be disruptive to our members and their care will be uninterrupted,” BlueCross spokeswoman Patti Embry-Tautenhan said in a statement. “We look forward to a strong and positive working relationship with LifePoint Health once the transition is complete.”

Told of pledges from LifePoint and Providence officials of better service through state-of-the-art equipment and other changes to come, Knapp replied jokingly, “It’s always roses after consolidation.”

Questions about serving the poor

Sue Berkowitz, director of Appleseed Legal Justice Center, said the lower-income clientele that Appleseed helps will focus on whether LifePoint will maintain the Catholic hospital’s commitment to caring for those who can’t afford to pay.

“For-profit hospitals don’t have any obligation for community care under the Affordable Care Act (Obamacare),” Berkowitz said. “It could have an impact on care for the poor in this community.”

Appleseed will monitor the sale to try to ensure the poor are not losers.

Columbia Mayor Steve Benjamin sounded a similar cautionary theme.

“While I’m not familiar with the specifics of the sale, let me say that Providence Hospital has served as a cornerstone of this community’s health-care infrastructure for generations, and it is my sincere hope that this new institution will continue their tradition, both in the quality of care we’ve come to expect and the spirit with which it is delivered.”

Providence and LifePoint officials stressed the hospital’s mission, its ties to the Catholic church and its commitment to the community will remain strong after the purchase.

Efforts to get responses from Palmetto Health Richland or Lexington Medical Center were unsuccessful.

LifePoint’s growth

The sale is expected to be finalized by year’s end, LifePoint executives told The State newspaper exclusively Tuesday afternoon. A letter of intent, which is not binding, was signed Tuesday at the 77-year-old hospital, located on Forest Drive in a commercial and residential corridor of Columbia.

Providence also operates a satellite hospital in Northeast Richland, which is included in the sale.

The purchase will convert Providence from a tax-exempt entity to a taxpaying one under its new for-profit ownership.

LifePoint Hospitals was founded in 1999, when healthcare company Columbia/HCA, formed by the merger of Columbia Hospital Corp. and HCA Holdings, spun off a number of hospitals.

At the outset, LifePoint Hospitals consisted of 23 hospital campuses in the rural areas of the Southeast. In 2005, the company acquired another hospital company and formed a new publicly traded company, LifePoint Hospitals.

LifePoint today has more than 60 hospitals in 20 states, said chief executive officer William F. Carpenter III. The company operates general acute-care hospitals, mostly in non-urban communities.

Carpenter’s 2014 total compensation package amounted to $12.3 million, up nearly 48 percent from a year earlier, according to published figures. LifePoint’s stock closed at $84.02 a share, up 1.12 percent on as the Nasdaq Tuesday.

While LifePoint declined to disclose how much it will pay for Providence, the company has paid out tens of millions in other recent deals.

In August 2013, for instance, LifePoint signed a joint-venture deal with a Michigan hospital agreeing to make $60 million in capital investments over 10 years and give $40 million to a local charitable foundation. In exchange, LifePoint got 80 percent ownership of the Michigan hospital.

The impending Providence deal still must clear a review by the S.C. attorney general’s office because of the proposed transition from nonprofit status to for-profit.

‘They’re all consolidating’

Healthcare economist Bailey said large companies, such as LifePoint, are coveting small, mostly rural, hospitals. She said hospitals in Kershaw and Fairfield counties in the Midlands, as well as in Allendale, Barnwell, Edgefield, Hampton and Williamsburg counties are in merger talks or being sought for purchase.

“They are engaged in this,” she said. “I call it dating. They’re all consolidating.”

Bailey said the “new mantra” is that larger health-care facilities bring economies of scale that will improve quality of care and lower prices, especially as the Affordable Care Act plays out.

“It has dramatically changed how health care is paid for,” Bailey said of Obamacare. “It’s increasing outpatient activity. But outpatient (care) doesn’t bring in the revenue of inpatient (hospitalizations).

“They’re all scrambling for the money,” Bailey said. “It’s all about the money.”

This story was originally published July 28, 2015 at 9:05 PM with the headline "Trends, finances drove Providence Hospital sale."