Audrain Medical Center, a 49-bed acute care “tweener” hospital struggled to compete with larger hospitals in nearby cities. While AMC developed creative service line solutions, its pension liability proved too costly, and more expensive programs like the Cancer Center were not attracting sufficient patient volume to sustain a profit.
The Issue:
- Hospital had been sized to serve its thriving industrial town, but the two major factories closed 2-4 years earlier.
- Still had specialty programs designed for the good old days; now they were struggling and bleeding cash.
- AMC was too small to fund its pension plan, a legacy of county-ownership
- “Tweener hospital,” both geographically and based on size; too close to two large markets
- Licensed for 88, and operating 49, beds
- Competition put a billboard up right near the hospital to encourage migration away from AMC.
Background:
- RHCs
- Cath Lab
- Cancer Center
- High community affinity
- Aging physicians and difficulty recruiting new physicians
The Solution:
- Eventually developed 8 interested parties, bringing 3 to the final bid contest
- Board selected beneficial alignment with SSM, highly-regarded, large St. Louis Catholic system
- Strong access to capital to invest in AMC programs and facilities, and to fund pension plans
- SSM initially offered a no-investment membership substitution, but Newpoint created bidding pressure:
- By including a well-financed investor-owned system hungry for first few acquisitions
- By suggesting a strategic plan from the bidder’s viewpoint showing value of this acquisition.
- Negotiated a creative solution to continue defined benefit plan on sound footing without termination costs by helping SSM create a special plan separate from its exempt church plan
- SSM eventually made capital commitments worth $60 million for this weak hospital, in addition to several organizational and cultural commitments for a smooth integration with attention to community affinity.
