Blount Memorial Hospital could become part of South Carolina health system in $364M proposal

Blount Memorial Hospital could soon become part of South Carolina’s largest hospital system, Prisma Health.

The move would mark the culmination of months of talks with hospital systems on affiliation and is meant to bolster the hospital’s prospects going forward. It could also lead to a $364 million boon for the hospital. A signed contract would mean Prisma becomes Blount Memorial’s first health system partner or affiliate in its almost 80-year history. Eleven potential partners participated in a wide-ranging search for such affiliates. The search began with 30 health systems and slimmed down to three finalists.

A letter of intent approved unanimously by the hospital’s board Tuesday, July 18, and later Tuesday by the Blount County Board of Commissioners, will trigger a months-long due diligence period before the transaction might close. The letter represents a note that the number of potential partners have narrowed to one: Prisma. But it is not, itself, a binding agreement.

The choice for Blount Memorial’s leaders in recent months has been simple on its face but complex in reality: stay independent or find a system partner. Decades as a single-system hospital weighed heavily on not only hospital leaders, but also county representatives.

Hospital leaders expressed some wistfulness at the possible change. Blount Memorial Director Chrisit Sayles said Tuesday, “I wish we lived in a world where medical economics would allow independent community hospitals to thrive financially, but that’s not the world we live in, and it’s not coming back.”

But there was optimism in public officials’ remarks as well. Sayles added, “So, if we’re going to grow, we have to have a partner. And through this process, I’ve become very grateful that we have the opportunity before us (to work with Prisma).”

Hours later, in a separate meeting, county Commissioner Steve Mikels echoed Sayles. “Blount Countians are an independent-minded people,” Mikels said. But the choice to work with Prisma going forward means “taking a step into 21st century medicine,” Mikels said.

“I’m looking forward to the future of health care in this county,” he continued.

Events will move relatively quickly from now on: The arrangement with Prisma could close by the end of November.

Terms and the search

For now, the terms under discussion would make Prisma or its affiliate the hospital’s sole member. Staff contracts — the pay and benefits agreements currently in place for Blount Memorial employees — are not expected to shift significantly in the near future, according to counsel for the hospital and county. The seniority that hospital staff have attained will also be honored, interim hospital CEO Jonathan Smith told The Daily Times after the commission’s vote Tuesday.

Employees in good standing would stay on staff. And much of the hospital’s current leadership will also be retained. The proposal, if ultimately taken up, would also mean Prisma enters a long-term, 50-year lease of hospital land.

Prisma now is proposing $275 million in investment, along with the assumption of about $90 million in Blount Memorial’s liabilities. Covenant, the University of Tennessee Medical Center and Prisma were the three finalists under consideration. Covenant’s final proposal also sat at a total of $364 million, while UT’s proposal totaled $289 million.

The possible future with Prisma, said Dr. W. Kendall Mays, of East Tennessee Medical Group, could be a more efficient one; it could offer the hospital the benefits of intra-hospital communication. “We can provide a higher level of care and if you make me more efficient, I can deliver more care to citizens in our county,” Mays told commissioners Tuesday.

Culture

The decision in Prisma’s favor came down to culture, advisors to the hospital and county said.

“Our objective was to get the proposals as high as possible and as uniform as possible so that you all can make the decision based on cultural grounds, not because of any deficiency in anyone’s candidacy,” said Rex Burgdorfer, managing director at Juniper Advisory, the firm that facilitated the affiliate search process.

Clinical and commercial strength and staff retention were priorities for Blount Memorial board members and county commissioners, he commented. He noted that Prisma is “interested in growing into a market like (Blount Memorial’s) that has a lot of economic tailwinds, a lot of growth forecasted, and they were interested in what could take place between the two of them.”

Member substitution

A final contract, if Prisma, the Blount County government and Blount Memorial arrive at that point, would take the form of a member substitution agreement. Two partners and a vice president of Juniper Advisory describe in commentary published in The Bond Buyer and to the firm’s website as: “analogous to a stock sale in corporate finance.”

Throughout the piece, the writers refer to the parties of a member substitution transaction as a ‘buyer’ and ‘seller.’ County Chief Administrative Officer Randy Vineyard clarified that the sale is not the correct term for the transaction; while, among other things, the member substitution agreement would be a means of simplifying the transaction, it does not represent a sale of assets, he told the newspaper.

And the contract, if approved, will represent Prisma Health’s first foray into Tennessee. The nonprofit currently maintains 18 hospitals and hundreds of practice sites, according to information from its website.

The future

In a statement provided to the newspaper, Smith wrote: “Prisma Health has a remarkable track record of transforming care and making a meaningful difference in the communities they serve.”

He continued, “From our earliest meetings to their final proposal, Prisma has demonstrated a keen interest in helping us build on our recent success and reach our full potential as a regional referral center. We are confident their support will elevate our services, benefit our physicians and staff, and ensure high quality care for our patients long into the future.”

Prisma CEO Mark O’Halla told county commissioners Tuesday: “We have the best mortality rates in South Carolina. We are a top decile performer across the country.”

“We have (a) consistency of approach that allows us to continue year over year improve those quality outcomes, improve our patient satisfaction scores, improve our employee engagement scores,” O’Halla said.