Bell Hospital, a 25-bed critical access hospital in Ishpeming, Mich., got a lifeline last week when it was acquired by LifePoint Hospitals.
LifePoint, a hospital company with approximately 60 hospital campuses in 20 states, did not disclose the purchase price of Bell, but in a press release said that as part of the acquisition agreement, it will pay off Bell’s construction debt and will make $5 million in capital investments in Bell over the next 10 years.
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According to Michigan’s Attorney General Bill Schuette’s approval of the sale, in 2008, Bell took on over $30 million in construction debt when it constructed its new hospital and had been struggling to pay that debt. The sale, Schuette wrote in his sale approval letter, will pay off that construction debt and fund Bell’s unfunded pension liabilities, which collectively total almost $40 million.
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Approximately $4 million in excess proceeds from the transaction is expected to be available, said Leif Murphy, executive vice president and CFO of LifePoint. Bell plans to use these funds to support charitable activities in the community.
At the same time the Bell acquisition was finalized, Michigan also approved a joint venture between LifePoint and Portage Health in Hancock, Mich. Portage Health owns and operates a 36-bed acute care hospital and a 60-bed skilled nursing unit, along with a number of other healthcare services throughout Copper County in Michigan.
Murphy also said the joint venture between LifePoint and Portage will bring $60 million in capital improvements to Portage Health and approximately $40 million to fund a charitable foundation to support critical needs in the community.
“Because the hospital has been so well-managed and operated, the result was $40 million leftover after any debt the hospital had was taken care of,” he said. “The proceeds go to the community in the form of a foundation.”
Murphy explained that as part of the final joint venture agreement, LifePoint and Portage Health will jointly own and operate Portage Health. LifePoint will own 80 percent of the joint venture and Portage Health will have a 20 percent ownership stake. Governance will be equally shared, and an eight-member board with equal representation from Portage Health and LifePoint will be established.
“Both Bell and Portage wanted to be able to maintain autonomy in this change, along with still providing the highest quality level of healthcare,” said Murphy. “The benefit of these agreements is that these organizations still have their operations strength but also have the capital base of LifePoint. They get capital commitments from LifePoint and the commitment to make these hospitals everything they can be in the community, but still have local oversight and their boards.”