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St. Pete's Bayfront Medical Center to join for-profit hospital chain and affiliate with Shands

ST. PETERSBURG — Bayfront Medical Center, one of the Tampa Bay region's last independent hospitals, said Wednesday it plans to join a for-profit hospital chain that operates 70 hospitals in 15 states.

Bayfront, a private not-for-profit that has long prided itself on serving the poor and uninsured, is teaming up with Naples-based Health Management Associates. The partnership will include an affiliation with Shands HealthCare, the medical center at the University of Florida, for clinical care and research. HMA has a history of working with Shands.

HMA would acquire an 80 percent controlling interest in Bayfront, officials said. However, hospital officials said Wednesday it is too soon in the process to make the acquisition price public; if all goes according to plan, the deal would close in the first quarter of 2013.

HMA stock closed up 4 cents at $7.23 on Wednesday.

Bayfront would become a for-profit enterprise, but its remaining 20 percent stake would be controlled by a new, not-for-profit group called Bayfront Health, Education and Research Organization, or Bayfront HERO. The nonprofit, to be seeded with about $150 million from the transaction, will support initiatives such as community education and wellness programs.

The deal must be approved by the St. Petersburg City Council, which owns the land the hospital sits on. The council most likely will be asked to vote in mid-December.

Bayfront employees will become employees of the joint venture controlled by HMA. No layoffs are expected, said Kanika Tomalin, Bayfront's vice president of strategic planning. Hospital leadership will be jointly determined by the new ownership and existing officers.

The transaction would allow Bayfront to retire about $80 million in debt, officials said.

HMA, Bayfront and Shands officials will brief the public at 10 a.m. today at Bayfront.

Despite HMA's majority interest, the joint partnership would be governed by an eight-member board with equal representation from HMA and Bayfront HERO, hospital officials said. A 12-member hospital board would be entirely local in its membership.

"The local governance is such an important part of this model," said Bayfront CEO and president Sue Brody. "That to us is really how we continue that ongoing deep connection to this community."

"This organization has been here more than 100 years. I believe the best way to respect the rich traditions of Bayfront is number one to ensure its local success," said Alan Levine, HMA senior vice president and head of its Florida group.

"You can't be successful as a local enterprise if you don't have real local involvement."

• • •

Once known as Mound Park Hospital, Bayfront has a century-long history of service. It offers the only Level 2 trauma center in Pinellas County, a high-risk perinatal referral center and other medical services that are costly to run and not available elsewhere in the county.

But Bayfront has struggled as an independent organization at a time of consolidation in the health care industry. In recent years, Bayfront's operating margins, a key indicator of its core patient-care business, have been razor thin — less than 1 percent. It has been exploring "strategic" partnership for two years; discussions with HMA have been intensifying over the last year, hospital officials said.

Bayfront would become the flagship hospital for six HMA hospitals to the north and south of St. Petersburg.

"It's an infusion of patients from surrounding communities in a way that gives them access to the very best care in the area and gives us volume," Tomalin said.

HMA has pledged to invest $100 million in capital over five years to the joint venture. The partnership is expected to give Bayfront greater clout to negotiate higher payments from insurers.

"If we do our job well, you won't see us," said HMA's Levine, noting Bayfront's name won't change, in keeping with the chain's low-profile approach. "You'll see the resources that we commit."

Bayfront leaders stressed that Bayfront's charity care policies would continue, despite the hospital's change to for-profit status. Last year, Tomalin noted, Bayfront provided $35 million in uncompensated care for patients unable to pay their bills.

"What we do for our patients today, we will continue to do," she said, saying the charity care policies are being written into their formal contracts. "That remains untouched by this partnership."

• • •

Founded in 1977, HMA has 22 hospitals in Florida. In the Tampa Bay area, it has three non-urban hospitals that each is far smaller and less comprehensive than Bayfront: 120-bed Brooksville Regional Hospital and 124-bed Spring Hill Regional Hospital in Hernando County and 120-bed Pasco Regional Medical Center in Dade City.

HMA reported a net income of $41.3 million in the third quarter of 2012, down from the $43.7 million it posted over that same quarter a year ago. The company cited admission declines and the effects of Hurricane Isaac on its hospitals in Florida and Mississippi.

The earnings fell short of Wall Street's expectations, but HMA executives were upbeat in a conference call with analysts Tuesday.

"Let me be clear, we are aggressively making up the difference by adding outpatient services, and maintaining effective cost controls," said president and CEO Gary Newsome, according to a transcript of the call, promising "pleasing" news about new acquisitions.

HMA has been working with the University of Florida and its private, not-for-profit affiliated health care system, Shands. In 2010, HMA paid $21.5 million to acquire a majority interest in three small rural Shands hospitals in Central Florida, which are now operated in a joint partnership.

Through their new clinical alliance, Bayfront and Shands would share best practices and collaborate on research. Doctors and patients would have access to specialists at Shands.

Tim Goldfarb, CEO of Shands HealthCare, said the new venture with Bayfront and HMA will mirror similar arrangements with the chain's other hospitals. The company and Gainesville-based university have teamed up to improve cardiac and stroke emergency care at HMA hospitals in Pasco and Hernando.

Shands would become the referral hub for Bayfront's most complex cases.

He said the proposed deal is an extension of the relationship Shands has with HMA. Even so, he said, ties with a large Tampa Bay-area hospital is hardly something he would have predicted a few years ago.

"I never in my wildest dreams thought we'd have a relationship with Bayfront," he said.

• • •

This isn't the first time Bayfront has tried to shore up its future by joining a larger health care organization. In the 1990s, Bayfront was one of the founding members of a regional network of not-for-profit hospitals, BayCare Health System, which today includes St. Anthony's Hospital in St. Petersburg, St. Joseph's in Tampa and the Morton Plant Mease system in mid-Pinellas.

But Bayfront had to leave the organization after St. Petersburg city officials learned that it had revised its abortion policy in deference to BayCare's ties to the Catholic Church. After the city sued, Bayfront agreed to remain free from religious influence.

Mayor Bill Foster said the partnership further cements St. Petersburg's reputation as a destination for health care, while bringing Bayfront the support it needs. Having Shands on board adds to the partnerships with John Hopkins Medicine and USF Health already in the city.

The hospital quietly started bringing City Council members in on the process this week.

Council member Karl Nurse, who represents the area of the city that includes Bayfront, said he is optimistic that the poor and uninsured will continue to be served.

"It will be good for the community," Nurse said. "A stand-alone hospital is not in a strong position in this environment."

Times staff writers Mark Puente and Jodie Tillman contributed to this report. Letitia Stein can be reached at lstein@tampabay.com.

About Bayfront Medical Center

• Traces its history to 1906, when local doctors opened the 15-bed St. Petersburg Sanitarium.

• By 1923, evolved into city-owned Mound Park Hospital.

• In 1968, became private, not-for-profit Bayfront Medical Center.

• Now a 480-bed teaching hospital, which along with outpatient facilities employs 2,500.

• Uncompensated charity care in 2011: $35 million.

• Has family practice and OB/GYN residency programs and a sports medicine fellowship.

• Has Pinellas County's only trauma center; Bayflite emergency helicopter service covers 15 counties.

• Areas of expertise include high-risk obstetrics, cardiology, neurological sciences, orthopedic and general surgery.

SOURCE: Times files, Bayfront.org

St. Pete's Bayfront Medical Center to join for-profit hospital chain and affiliate with Shands 10/24/12 [Last modified: Wednesday, October 24, 2012 10:54pm]

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