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Bayfront to be bought, again

ST. PETERSBURG — Back in April, Bayfront Medical Center got its first for-profit owner in its century-long history. Less than four months later, it could have a new one — and that's raising questions about how much charity care will continue there.

Tennessee-based Community Health Systems Inc. announced Tuesday that it had agreed to purchase Naples-based Health Management Associates for $7.6 billion, which includes $3.7 billion in debt.

The purchase of HMA, which owns Bayfront and three other Tampa Bay area hospitals, would make Community Health the nation's largest hospital chain.

As St. Petersburg officials learned more about the deal Tuesday, they began to wrestle with fresh questions.

It's unclear whether the deal would require city approval because Bayfront sits on publicly owned land.

"We can't really determine whether City Council approval would be needed," city attorney John Wolfe said. "We are looking at different scenarios."

But the terms of the hospital's 50-year lease with the city would not change, which reassured some that charity care would continue.

When the City Council approved the lease in February that allowed HMA to buy Bayfront, 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 in the deal when HMA paid $202 million for an 80 percent controlling interest in Bayfront.

On Tuesday, HMA senior vice president Alan Levine said the new parent company would have to honor all of HMA's obligations, including its promises to maintain similar levels of charity care.

Mayor Bill Foster said he talked to Levine on Tuesday and was assured the deal would be good for Bayfront. At this point, Foster said he isn't concerned but would "reserve judgment" until the final details are known.

Council member Steve Kornell is worried.

He fears that Community Health will put profits ahead of charity care after hearing reports that the chain thinks Bayfront is an underperforming hospital.

"It is very concerning to me," Kornell said. "The level of charity care needs to increase, not go down."

The purchase, which would be completed in the first quarter of 2014, is subject to approval by a 70 percent vote of Health Management's stockholders.

If the deal goes through, Community Health would be the largest for-profit hospital system in the country with more than 200 facilities in 29 states. The deal reflects the continuing pressure toward consolidation in the health care industry as millions of Americans are expected to gain medical coverage under the federal health care law.

HMA runs 71 hospitals, with about two dozen in Florida, including Bayfront, Pasco Regional Medical Center in Dade City, Brooksville Regional Hospital and Spring Hill Regional Hospital.

The Naples-based company has been beset by problems in recent months, including poor earnings reports, ongoing inquiries by federal investigators into improper admissions and physician referrals and pressure from an activist stockholder group that has been trying to oust the board and management.

It's easy to understand why HMA directors had to sell, said Sheryl Skolnick, an analyst with CRT Capital Group. "If I'm on the board of directors . . . I really have no choice," she said.

She said HMA's problems were at least two years in the making and questioned why the company was still acquiring hospitals as recently as this year.

Meanwhile, Community Health owns or leases 135 hospitals nationwide, including two in Florida, the 110-bed North Okaloosa Medical Center in Crestview and the 160-bed Lake Wales Medical Center.

Community Health has snatched up more than a dozen facilities since 2010. But it made a misstep in 2011 when it tried to buy another health care giant, Texas-based Tenet.

To thwart the takeover, Tenet officials accused Community Health of deliberately misclassifying patient admissions so that insurers, including the federal Medicare program, would pay a higher rate. That accusation prompted the federal government to open an investigation that continues today.

It's one of the very issues that federal officials are investigating at HMA.

City Council Chairman Karl Nurse said he didn't know enough about Community Health to comment on the deal.

"We have an agreement that spells out lots and lots of things they have to do," Nurse said. "We should still be in good shape."

Times researcher Carolyn Edd and staff writer Tony Marrero contributed to this report. Mark Puente can be reached at mpuente@tampabay.com or (727) 893-8459. Follow him on Twitter @markpuente.

.FAST FACTS

About Community Health Systems

Community Health Systems Inc., which is based in Franklin, Tenn., owns or leases 135 hospitals around the country, making it the second largest U.S. hospital chain. After the purchase of Health Management Associates' 71 facilities, it will be the largest chain. A Fortune 500 company, Community reported $13 billion in net operating revenues last year.

About Bayfront Health System

. The hospital traces its history to 1906, when local doctors opened the 15-bed St. Petersburg Sanitarium.

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

. In 1968, it became the private, nonprofit Bayfront Medical Center.

. In October 2012, Bayfront announced intention to join the for-profit Health Management Associates system

. In February 2013, the St. Petersburg City Council approved a lease that allows HMA buy the hospital

. In April 2013, Bayfront officially became part of HMA and is now known as Bayfront Health System

Bayfront to be bought, again 07/30/13 [Last modified: Wednesday, July 31, 2013 4:53pm]
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