Woods Memorial Hospital was a community hospital owned by Woods Memorial Hospital and Nursing Home District (Woods Memorial) located in Etowah, TN. Woods Memorial served McMinn County, TN, a county with a growing population of 50 thousand.
Restoration Healthcare is a company that invests in and manages hospitals in partnership with local physicians.
Woods Memorial had struggled financially for several years, with a significant loss the previous year. The County had guaranteed a Line of Credit to the Hospital with the condition that it be sold. Woods Memorial was facing significant competition from a for-profit hospital, in addition to a surgeon owned ambulatory surgery center. Woods’ nursing units were out-dated, as they had semi-private rooms with hall bathrooms, and much of its equipment needed to be replaced. Woods was also in the fifth year (of five years) of a corporate integrity agreement for acts committed under prior administrations during the 1990s. The County was experiencing population growth, and desired to find a strong operator for the Hospital. In addition, a local community faction objected to the proposed sale of the Hospital.
We began by defining the specific improvements that management was currently undertaking and that a strong operating partner would implement. These improvements included staff reductions, closing the clinics with negative cash flow, improving the operations of the new geriatric psychology unity, the impact of the 2008 Medicare reimbursement changes, and conversion away from the state sponsored retirement plan. We then quantified these improvements using our in-depth knowledge of healthcare operations.
Next, we researched the universe of potential buyers, and contacted a targeted group of the most-likely 20 buyers. We presented the buyers with an option to purchase Woods’ home health and dialysis centers with the Hospital or separately, as we knew that various buyers might see different values to these three different businesses.
We coordinated visits with eight interested parties, which resulted in four formal proposals. We aided the due diligence process including obtaining Tennessee Attorney General and County Commission Approval for the purchasers and resolving the County’s use of proceeds. One proposal from a joint-venture between a hospital management company and local physicians met the County’s goals and netted the community a significant positive amount.