August 12, 2008 in City

Attorney general clears sale of Empire

Approval one of two needed for Community Health deal
By The Spokesman-Review
 

The proposed sale of Empire Health Services has received a necessary green light by the Washington attorney general’s office – one of two key state approvals needed to turn ownership of Deaconess Medical Center and Valley Hospital & Medical Center over to a national hospital company.

The state’s legal officials concluded that Community Health Systems’ $144 million offer complied with the law.

The 82-page legal opinion released Monday helps clear the way for the sale to occur this autumn.

Community Health officials were reviewing the report. Company spokeswoman Rosemary Plourin said executives were pleased the deal remains on a timeline to close as soon as next month. The state Department of Health also needs to weigh in on the sale.

Public hearings six weeks ago drew dozens of comments, mostly in favor of the deal. Speakers at those events said they saw the sale as the only hope of maintaining the viability of Deaconess and Valley hospitals.

The hospitals’ leadership team has warned of reduced services or possible closure if the sale falls apart.

Deep financial losses, worsening credit markets, and postponed building and equipment upgrades have endangered ongoing operation of the hospitals.

Community Health, with its broad purchasing power and deep pockets, has pledged to spend $100 million more during the next five years on construction, technology and medical equipment.

The expenditures are expected to help the hospitals compete with Providence Health Care, which operates Sacred Heart Medical Center and Holy Family Hospital.

Empire’s board chose Community Health from 10 suitors that included eight companies, one nonprofit organization and one private equity group. Initially the board culled four finalists from the group. Soon, however, the only nonprofit to show interest, Adventist Health, dropped out because of other financial demands. Then another possible buyer, Capella HealthCare, withdrew.

Left were two companies – Community Health and Triad Hospitals.

Community Health then purchased Triad for about $6.8 billion, making it the largest hospital owner in the country with about 120 medical centers in 28 states.

Deaconess has said Community Health was the preferred buyer in any case.

Despite the reduced interest in buying Empire, the attorney general wrote that the process was complete and fair.

The report appears to raise few, if any, obstacles for Community Health.

“This is a significant milestone for the finalization of the sale,” said Empire spokeswoman Christine Varela.

Providence Health officials had raised concerns about the fate of Inland Northwest Health Services, the joint venture operated by Providence and Empire. INHS activities include MedStar helicopters, electronic medical records and the operation of St. Luke’s Rehabilitation Hospital. It’s governed by a board of directors now made up of representatives of Empire Health and Providence Health Care.

The attorney general’s office found that although Community Health will have indirect control over three board members of Inland Northwest Health Services, such interest does not equate to an ownership stake.

The atorney general’s office also determined that the establishment of a new charitable foundation had some unusual rules, but concerns raised by community groups were not serious enough to merit changes.

The foundation would absorb millions of dollars in debts and liabilities generated by Empire Health.

Contact John Stucke at (509) 459-5419 or johnst@spokesman.com.


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