Tennessee-based Community Health Systems, one of the largest publicly traded hospital companies in the United States, announced Tuesday the approximately $7.6 billion purchase of Health Management Associates, which owns Stringfellow and nearby Riverview Regional Medical Center in Gadsden. HMA is a Florida-based for-profit company that operates 71 hospitals in 15 states, while CHS owns 135 hospitals in 29 states, including Gadsden Regional Medical Center. The acquisition is part of a growing trend of hospitals merging to lower overhead costs and become more efficient to fall in line with the Affordable Care Act health care reform law, health experts say.
Stringfellow Memorial is a 125-bed, acute-care hospital with a staff of approximately 170 physicians in 30 medical specialties. According to the Calhoun County Chamber of Commerce, the hospital employs 333 workers. Stringfellow recently completed a $7.4 million expansion, adding three new operating rooms and 16 new waiting rooms.
According to a press release from Community Health, boards of directors of both companies unanimously approved the agreement. The transaction is expected to close by the end of the first quarter of 2014 and is subject to approval by a 70 percent vote of HMA’s stockholders, antitrust clearance, receipt of other regulatory approvals, the absence of certain adverse developments and customary closing conditions, the press release states.
The purchase price includes the assumption of approximately $3.7 billion of debt from HMA. Upon completion of the transaction, Community Health will own or operate approximately 206 hospitals in 29 states with a bed count of more than 31,000.
In a press release, Wayne Smith, chairman, president and CEO of Community Health Systems, said the purchase was due in part to better deal with changes in the health care industry.
"This compelling transaction provides a strategic opportunity to form a larger company with a diverse portfolio of hospitals that is well positioned to realize the benefits of health care reform and to address the changing dynamics of our industry,” Smith said.
Dr. Mickey Trimm, associate professor of health care management at the University of Alabama at Birmingham, said hospital mergers have gained steam in the past couple of years.
"It's a direct response to the Affordable Care Act," Trimm said. "Hospitals realize there is going to be growing pressure to reduce costs because of the ACA."
Rosemary Blackmon, vice president of the Alabama Hospital Association, agreed there is a growing trend of hospital mergers across the country.
"A lot of it has to do with the efficiency of scale and the resources that are brought together," Blackmon said. "If you have margins that are very thin, anything you can do to share that burden is helpful."
Trimm said there are several benefits from hospitals merging and pooling their resources.
"When you get more hospitals together you spread out the overhead," Trimm said. "There will be less executives once all this shakes out ... and the cost savings can be pretty substantial."
Trimm said that merging increases market share, which can bring in more revenue. Also, hospitals owned by one company in the same region, such as now those in Gadsden, can further help save money by sharing services, he said.
"If you ran both hospitals, you could run them as a two-building, one hospital system, with cancer patients all in one building and heart patients in another," Trimm said. "Doing that you can achieve a better economy of scale."
Regional Medical Center in Anniston has benefitted from a merger of its own ever since it bought Jacksonville Medical Center for $6 million in December. David McCormack, CEO of RMC, said RMC purchased the Jacksonville hospital in part to increase its patient base to better handle rising costs and provide more services.
"We all have to work toward reductions in costs and capture a little piece of our markets," McCormack said of hospitals.
McCormack added that he was not concerned about competing with three area hospitals all owned by a single company.
"We've been competing with those hospitals for many years and we don't expect any change in the way we work," McCormack said. "We will continue to be the best health care provider in the region."
Trimm noted that before the purchase is made official, CHS must prove to the Federal Trade Commission that owning so many hospitals so close together in the area does not violate antitrust laws.
"That remains to be seen," Trimm said.
Trimm said the FTC might require CHS to sell one of the area hospitals.
"It is unlikely it will require them to shut one of the hospitals down," he said.
Tomi Galin, spokeswoman for CHS, said it is still unknown what, if any changes will happen to Stringfellow or the Gadsden hospitals due to the merger.
"[Tuesday's] announcement is just the first step in a long process to complete our acquisition of HMA," Galin said. "It is too early to discuss any possible changes that could occur after the transaction closes."
Staff writer Patrick McCreless: 256-235-3561. On Twitter @PMcCreless_Star.