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LifePoint Bolsters Presence in Michigan's Upper Peninsula

 |  By John Commins  
   December 09, 2013

Nearly two years after its entry into the Michigan market, for-profit LifePoint expands its footprint with deals in two rural communities.

LifePoint Hospitals has finalized affiliations with two rural hospitals in Michigan's Upper Peninsula, and the for-profit hospital company says it will continue to look for other provider partners as it builds a network in the remote region.

 

Leif Murphy, CFO and executive vice president at Brentwood, TN-based LifePoint

"We are actively working to build the network of providers in that market," says Leif Murphy, CFO and executive vice president at Brentwood, TN-based LifePoint. "Our strategy is to own and operate community hospitals, and most of our hospitals you will find in rural markets that look just like the Upper Peninsula. It is where we bring great value in terms of our operating model and the delivery of services that those communities really need."

Last week LifePoint announced that it would purchase Bell Hospital, a 25-bed critical access hospital in Ishpeming, MI, about 14 miles west of Marquette. In a separate deal, LifePoint said it would enter a "joint venture" with Portage Health, which includes a 36-bed community hospital and a 60-bed skilled nursing unit in Hancock, MI, about 100 miles northwest of Marquette.

The negotiations were announced earlier this year and both deals must be approved by Michigan's attorney general.

In 2012, Duke LifePoint, a joint venture between LifePoint and Duke University Health System, purchased the 315-bed Marquette General Hospital, which serves as a tertiary care hospital for the region.

"Our goal will be to make sure that Marquette is delivering a level of service that will ensure that Portage and Bell will send all of their referral business to Marquette, but Marquette will have to earn this," Murphy says. "Marquette is our tertiary hospital that provides those complex clinical services: heart, cancer, orthopedics. Portage and Bell are secondary hospitals that are not maintaining today some of those more tertiary service lines."

Murphy says Duke will not have a direct ownership interest at Bell and Portage, "but they will be involved in the quality and patient safety programs and the coordination and building of the network throughout the Upper Peninsula."

LifePoint's affiliation with Duke at Marquette General Hospital was an attractive selling point when negotiating with trustees at Bell and Portage. "They want to provide the absolute best care for their patients in their market," he says. "With the clinical expertise that Duke will bring to the tertiary hospital at Marquette when they are referring their patients into Marquette as a tertiary hospital, they will know they'll have Duke services and quality and safety programs all in play."

As part of the final acquisition agreement with Bell Hospital, LifePoint will make $5 million in capital investments to the critical access hospital over the next decade, including an improved IT infrastructure and equipment and facility upgrades. Bell also will have access to support and resources to help it recruit and retain physicians, enhance its clinical services to meet the changing needs of its community, and improve its operations.

In addition, proceeds from the sale will eliminate Bell's debt, leaving an additional $4 million that Bell plans to use to support community charities, LifePoint and Bell said in a joint media release.

"Bell Hospital looks forward to beginning this next chapter in the rich legacy of our hospital," Floyd Bounds, Bell Hospital CEO, said in prepared remarks. "We are excited for the months ahead and for the opportunities we will have to be a part of creating healthier communities across the U.P. with LifePoint. This is truly an exciting day for our hospital, physicians, employees, and patients."

Murphy says LifePoint is not overly concerned about suggestions that the federal government may reconsider or revoke the status of hundreds of critical access hospitals across the United States.

"It is one more analytical part of every puzzle," he says. "Whether or not the exceptions will continue will have no bearing on our commitments to the hospital."

In the deal with Portage, LifePoint will own 80% of the joint venture and Portage Health will retain a 20% ownership stake. Governance will be equally shared, and an eight-member board with equal representation from Portage and LifePoint will be established to ensure that the community has an active voice in Portage Health's future.

Over the next decade, LifePoint will invest $60 million in capital improvements at Portage, including upgrades for technology and equipment and improved facilities. The $40 million in proceeds from the deal and retained assets from Portage Health will support the retained businesses and create a locally governed charitable foundation, according to a joint media release.

"As we considered Portage Health's future, our board vetted a number of strategic partner options," Portage Board Chairman Steve Zutter said in prepared remarks. "This joint venture with LifePoint offered us a unique opportunity to share ownership of Portage Health and gain access to significant resources to grow and expand our services. We are excited for the future."

Allan Baumgarten, an analyst who writes regularly about the healthcare sector in Michigan and other states, provided a snapshot of the Upper Peninsula hospital market in an email exchange with HealthLeaders Media.

"There are about 12 hospitals in the UP, including several that are small, critical access hospitals. The Duke/LifePoint joint venture acquired Marquette General last year, which is by far the biggest hospital in the UP. The deals with Portage and Bell were first announced in February and March. I don't think there is much difference between describing the deals as full acquisitions or joint ventures. I suspect the JV converts to full LP ownership in a few years. Not sure who they see as competitors—some of the other small hospitals are owned by Aspirus, a Catholic system with its largest hospitals in Wausau, WI. The next closest large hospitals would be either in Petoskey, where the McLaren system from Flint has acquired the hospital, Munson in Traverse City, or maybe one of the Trinity/Mercy hospitals in Cadillac."

John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.

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