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Bayfront sale to HMA sealed with city vote amid charity concerns

Bayfront Medical Center is Pinellas County’s last independent hospital.


Bayfront Medical Center is Pinellas County’s last independent hospital.

ST. PETERSBURG — Bayfront Medical Center, Pinellas County's last independent hospital and home to its only trauma center, on Thursday cleared its final hurdle to joining a for-profit hospital chain.

St. Petersburg City Council members approved, 7-1, a lease that will allow Health Management Associates to buy the hospital, which has served the community for more than a century and sits on publicly owned land.

The Naples-based chain, which operates in 15 states, will acquire an 80 percent controlling interest in Bayfront. A newly formed nonprofit foundation, Bayfront Health Education & Research Organization (Bayfront HERO) will control the remaining 20 percent. The total sale price is $202 million, with the deal expected to close April 1.

"What really came through is that people in the community have an affection for this hospital. People care deeply about Bayfront, and that is not lost on me," HMA senior vice president Alan Levine said after the vote. "We are going to move ahead to do things that we need to do to make sure that Bayfront continues to be an innovative, regional asset."

The move comes as standalone hospitals are dwindling nationally, lacking the clout to negotiate with suppliers and insurers as pressure mounts to invest in new medical services. Bayfront has struggled financially in recent years, finding it difficult to position itself competitively without the help of a deep-pocketed partner.

"Bayfront cannot continue to exist as a standalone hospital and be what we expect it to be and want it to be 10 and 20 years down the line,'' council member Jim Kennedy said, calling the distinction between for-profit and not-for-profit hospitals increasingly blurred.

With the sale of Bayfront, which must still pass regulatory muster, only two independent hospitals remain in the Tampa Bay area — both highly unique institutions. Tampa General Hospital is the major teaching center for the University of South Florida medical school, housing the region's only Level I trauma center. The other standalone is Moffitt Cancer Center.

In considering Bayfront's ownership change, City Council members were particularly concerned about protecting the poor and uninsured Pinellas residents who long have regarded Bayfront as their best option.

Bayfront has pledged to keep its existing charity care policy, written into the 50-year lease. But the document details only who qualifies for charity care, not how much will be provided.

City Council members insisted on adding a provision requiring that charity care measurements be included in an annual report describing the hospital's performance. But no specific benchmarks were identified.

The vagueness concerned council member Steve Kornell, the lone vote against the deal.

"Very little charity care could happen and still be meeting the lease and meeting the definition of charity care, and I'm very uncomfortable with that," he said before the meeting. "I don't know that I feel 100 percent comfortable with just, 'Trust me, take my word for it.' "

Kornell and council member Wengay Newton asked Bayfront to set a minimum charity care requirement. But Bayfront and HMA leaders stressed the difficulty of doing so in a rapidly changing health care landscape.

"My hope would be that 40 years from now you would have no charity care, because everybody would have health insurance," council member Karl Nurse said, drawing applause from a room filled with Bayfront employees and board members.

Another key issue for several council members was securing in writing HMA's promises to invest $100 million in capital improvements to Bayfront over the next five years. That commitment — added to the city lease — is among many details spelled out in private agreements between HMA and Bayfront that are unavailable for public review.

Bayfront and HMA officials said releasing them would put them at a competitive disadvantage by publicly broadcasting their business strategy.

Yet knowing that HMA had been vetted and found acceptable by the hospital's 13-member board — a volunteer group of lawyers, doctors, business owners and financial experts — helped to cement the support of several council members.

"I will take them at their word that this is best for St. Petersburg, knowing that some things have to stay private," council member Charlie Gerdes said. "That credibility works for me."

HMA has said it plans to make Bayfront the referral hub for a network of six smaller hospitals from Port Charlotte to Spring Hill. It also plans to promote lucrative services in the neurosciences and robotics and upgrade Bayfront to a comprehensive stroke center.

Hospital employees will not face layoffs, officials say, but Bayfront president and CEO Sue Brody announced Wednesday that she will retire after nearly two decades as its leader.

"I really see this as positioning Bayfront for the next century of service in the community," she said of the HMA deal.

HMA's Levine said the company has begun talking to candidates for her replacement, who will be chosen in consultation with the current hospital board. A decision could come in weeks.

Letitia Stein can be reached at [email protected] or (727) 893-8330.


Details of the sale

Why is the sale of Bayfront Medical Center important?

The 480-bed hospital in downtown St. Petersburg is Pinellas County's last independent hospital, home to its only trauma center and referral center for high-risk newborn deliveries. Bayfront has served St. Petersburg for more than a century, originally as the public Mound Park Hospital, with a reputation for welcoming the poor and the uninsured.

Who is buying Bayfront?

Health Management Associates, a publicly traded company based in Naples. It operates 70 hospitals in 15 states, including one in Pasco County and two in Hernando County.

What are the terms?

The purchase price for Bayfront Health System is $202 million. HMA will hold an 80 percent share in a joint venture that will operate the hospital system. A nonprofit foundation, Bayfront Health Education & Research Organization (Bayfront HERO) will control the rest.

The partnership includes an affiliation with Shands HealthCare, the medical center at the University of Florida, for clinical care and research. Shands has an option to purchase a 20 percent interest in Bayfront from HMA.

Why did Bayfront seek a buyer?

After several years of barely breaking even, Bayfront expects an operating loss of 6 percent for 2012, CFO Bob Thornton said. Size brings clout to negotiations and enables hospitals to offer a fuller range of services.

What changes when Bayfront becomes for-profit?

Bayfront will pay an estimated $600,000 in taxes to the city from which it had been exempt, according to HMA's estimates. Eighty percent of profits belong to HMA. The rest will support the nonprofit Bayfront HERO.

Bayfront sale to HMA sealed with city vote amid charity concerns 02/21/13 [Last modified: Thursday, February 21, 2013 11:13pm]
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