It’s an understatement to say there’s some concern about Floyd Medical Center’s recent announcement of a “merger” with a large North Carolina-based health system.
Here are a few things up front ...
1. This is the way that industry is going. Already-massive health care systems looking to compete on an even larger scale and reap the benefits of bigger buying power are, in essence, building their empires. Similar-sized hospitals in Athens and Columbus have joined larger health care systems recently.
2. Floyd Healthcare Management — the entity over Floyd Medical Center as well as hospitals in Polk and Cherokee — is a profitable not-for-profit entity. That makes it attractive to buyers. Let’s say Floyd Medical Center conservatively profits $30 million a year (annual reports say that’s on the low end of reality). That means after the 11-year period this deal covers, Atrium will have cleared over half its investment.
3. Floyd County gets some benefits from this deal. Only time will tell if the deal is good for us in terms of health care services, etc., but the county government is being relieved from guaranteeing a sizable debt. Once the deal is done, the county would no longer be under the gun for an approximately $120 million loan in the very unlikely event that FMC couldn’t pay its part.
What’s in it for Floyd Healthcare Management?
Well, there’s $650,000,000 over an 11-year period for starters. As part of that large sum, Atrium will invest $80 million with the Floyd Health Care Foundation at closing — although it will likely be some months before that occurs.
On top of that, Atrium has agreed to refinance or pay off $184,500,000 in debt that Floyd Medical Center has. Just for informational purposes, that debt total breaks down to approximately $120 million backed by the county, $30 million for Polk Medical Center and the remaining $30 million-ish to various property and operating expenses.
That’s right, we used the word “million-ish” — there’s A LOT of money involved in this deal and it impacts A LOT of people.
Let’s not forget that FMC is the largest employer in Floyd County. The entire hospital system employs more than 3,300 people overall in Floyd, Polk and Cherokee counties. Digest that for a minute.
OK, minute’s up. For the employed, worries always start when a business begins talking about “efficiencies.” Most of us common folk interpret that as job cuts.
That might happen, it might not. Looking at it from the outside, it really looks like this is two organizations seeking to grow. One, a larger organization (Atrium) that wants to expand its footprint. Then two, the smaller organization (Floyd) that not only benefits from a LARGE cash infusion but also from the buying power a larger company can garner.
What’s in it for Atrium?
Let’s bounce back to that LARGE cash infusion and consider why a health care group with the buying power Atrium appears to have wants to buy our local hospital.
Atrium’s been on a “merger” tear for a bit now.
Floyd will be the group’s second healthcare system purchase in Georgia. Atrium purchased Navicent in Macon last year, with the boards signing off on the merger in December 2018. For some scope, that deal took approximately 11 months from the announcement to what appears to be the close. There’s no reason to expect our deal will be any different or take any less time.
Then in April the Charlotte, North Carolina-based Atrium moved on to merge with (or purchase) Wake Forest Baptist Health and Wake Forest University — adding seven more hospitals to the system’s current total of somewhere around 50 facilities. As part of the deal, Atrium will also establish a second campus at Wake Forest’s medical school.
Among other big announcements coming from the healthcare conglomerate this week, Atrium also announced they’d be building a multifaceted tower and an eye institute at Wake Forest Baptist Medical Center in Winston-Salem, North Carolina. The proposed tower will house the emergency department, operating rooms and intensive care unit.
Just an FYI, Wake Forest Baptist didn’t disclose a start date or estimated cost for either project. Something we can expect in the future? We hope not.
Kaufman Hall, a consulting firm whose expertise includes healthcare facilities, said merger and acquisition activity in the industry overall has been on the rise for a number of years. On top of that, the trend toward what they term as “mega mergers” has shown significant growth over the past 10 years.
This year, while the number of mergers leveled out or even decreased, the size of those deals grew. On a side note, compared to the other examples given in the report, the “strategic partnership” between Atrium and Floyd would qualify as a mega-merger.
But what about local control?
Here’s the real crux — will we be losing local control of our county’s major employer?
Short answer: It’s complicated.
Atrium Health is the Charlotte-Mecklenburg Hospital Authority. They just do business under the title of Atrium. When the deal’s done, that authority will essentially be the owner of Floyd Healthcare Management.
That’s an oversimplification of a complex issue, but it’s the gist of the deal.
The Hospital Authority of Floyd County is the owner of Floyd Medical Center — meaning the facility and property. That property is leased to Floyd Healthcare Management. There’s a lot more but we’re not going to get into all that yet. There are also hospital authorities in Polk County and Cherokee County, Alabama, that lease the hospitals to Floyd Healthcare Management in those respective counties.
Once the final agreement is hashed out it will also be subject to regulatory approval by the state. Expect the entire deal to be finalized sometime around the end of 2020.
As part of this deal, the Floyd County Commission loses one seat on Floyd Healthcare Management’s 18-member board. Atrium will gain two seats on that board.
However, Floyd County retains one seat on the hospital authority’s 7 person board. Also part of the deal, Floyd Healthcare Management will gain one seat on the Atrium board.
So the answer concerning local control is, it will remain here for the foreseeable future.
After that, it’s complicated.