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For sale? The latest hospital chain that owns St. Peters­burg's Bayfront Health needs a bailout

 
Published Sept. 23, 2016

Imagine a major downtown hospital aiding the sick and injured but owned by a series of health care corporations that are themselves seriously wounded.

It makes no sense.

Such is the plight of Bayfront Health St. Petersburg, the city's historic hospital, which has been a key health care provider for more than a century.

Independent several years ago, the nonprofit and financially pressed Bayfront in 2012 sought greater security by selling most of itself to a for-profit Naples hospital company called Health Management Associates.

Bayfront board members, its CEO at the time and Health Management executives swore that this was a swell and well-vetted corporate marriage. One sure to last.

Less than a year later, a weakened Health Management was in turn gobbled up by an even larger hospital chain: Community Health Systems.

Now that chain is on the ropes and likely to be bought out soon by yet another round of players jockeying for position in the fluid health care industry.

This constant turnover of owners is not what Bayfront anticipated for its future. Now a small cog in a big company, Bayfront is about to be dragged along on another bumpy ride.

Community Health Systems is a publicly traded, for-profit corporation based in Tennessee. It's one of the nation's largest hospital chains, which owns, operates or leases 158 hospitals in 22 states with approximately 27,000 licensed beds.

You might think a huge health care business would be thriving these days. Instead, a perilously weakened Community Health is being shopped to potential buyers that news reports say include the private equity firm Apollo Global Management.

Community Health Systems this past week acknowledged it was exploring various options with "financial sponsors" it did not name, as well as other unspecified alternatives.

Disruption and consolidation are the two big trends in the hospital business.

Community Health's shares trade just over $10 these days, a slim slice of the $54 stock price it enjoyed just two years ago. That decline means billions of dollars lost — the company's market value hovers at a mere $1.2 billion — while it struggles with $15 billion in debt.

That financial pickle includes Bayfront Health St. Petersburg, along with a network of six cobranded hospitals using the Bayfront Health name in Brooksville, Dade City, Spring Hill, Punta Gorda, Venice and Charlotte.

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The roots of Bayfront's current woes go back at least 16 years. That's when it was forced to drop its ties to the BayCare Health System consortium of area hospitals and become a more vulnerable independent.

Bayfront was caught between religious and secular demands. As reported in 2000 by the Times, the city of St. Petersburg sued Bayfront because it had stopped providing most abortions and made other changes in deference to the Catholic Ethical and Religious Directives for health care as part of its participation in BayCare, which had two Catholic members.

Bayfront was a private hospital but leased much of its property from the city, which in turn expected the facility to provide a certain level of indigent care. As a result, some council members and city attorneys argued Bayfront could not adopt Catholic directives.

In the end, Bayfront exited the BayCare organization to end the dispute. Even then, there were worries that Bayfront would face financial trouble trying to go it alone.

David Fischer, then mayor of St. Petersburg, had pushed for a settlement that would keep Bayfront in BayCare's network because he feared the financial consequences. "It was an economic alliance," he argued then, "and this certainly puts an economic burden on Bayfront that I tried to avoid."

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In the early days of Community Health Systems' 2013 acquisition that included Bayfront Health, things were looking up for the St. Petersburg hospital. New surgical equipment appeared and improvements were made to the hospital's facilities.

In exchange, as part of a larger hospital chain Bayfront Health began trimming costs, reducing its full-time staff and more persistently demanding payments of overdue patient bills. Charity care also dropped, at least according to state records, though hospital officials argue that data did not capture all that the hospital does to help those in need.

While Bayfront may appear financially stronger, its rebound may not matter as long as its parent company struggles. Last month, a new investor emerged with the biggest stake in Community Health Systems. His name: Tianqiao Chen, a Chinese billionaire who made his initial fortune in online gambling.

Community Health also raised $1.2 billion to pay down debt this year by spinning off 38 rural hospitals — none of them in Florida — into a separate company called Quorum Health Corp. It also wants to sell 12 more hospitals this year to raise $850 million.

None of this looks meaty enough to boost the company's shares or stem the need for a buyer for Community Health. The trick is that the hospital company is so big that analysts are not sure what buyer is both capable and willing to take on such an acquisition. Hospital Corp. of America, one of the major hospital companies in the country, would be an unlikely player because Community Health has purchased 43 hospitals already spun off by HCA. Why buy them back?

The solution may end up being a breakup of Community Health with various assets sold off to multiple buyers. And for Bayfront Health, that means another period of limbo as it awaits what might be its third owner since 2012.

Perhaps the third time's a charm.

Contact Robert Trigaux at rtrigaux@tampabay.com. Follow @venturetampabay.