BY ERIN L. NISSLEY
A Lackawanna County judge has approved the sale of Mercy Hospital in Scranton and its affiliated facilities – including Mercy Tyler is Tunkhannock – to for-profit Community Health Systems Inc. for $150 million.
The sale could be finalized by May 1, officials said.
“I believe (Mercy Health Partners) sold it in the most responsible way possible,” Judge Carmen Minora said after hearing about an hour of testimony Monday.
Judge Minora’s decision is the last formal step in the process to sell Mercy Health Partners’ hospitals in Scranton, Nanticoke and Tunkhannock and a number of outpatient clinics to CHS. In February, Mercy Health Partners CEO and President Kevin Cook announced that it had settled on CHS as a buyer, four months after he announced that the health system was for sale.
CHS is based in Franklin, Tenn., and owns or leases 130 hospitals around the country, including Wilkes-Barre General and Pottstown Memorial Medical Center.
Deputy Attorney General Michael T. Foerster told Judge Minora that after a lengthy review, the state attorney general’s office is “comfortable with the sale.”
Cook said the $150 million sale price will offset $214 million in liabilities that will be assumed by parent company Catholic Health Partners, including about $50 million to fund pensions.
In addition, Catholic Health Partners plans to donate about $19.5 million to two foundations created as a part of the sales agreement with CHS, he said.
Cook said the decision to sell was made when it became clear that the hospitals could not generate the money necessary to make capital improvements and recruit medical staff. Over the past decade, the hospitals have struggled with negative net income, he said.
Under the sales agreement, CHS has promised to invest at least $68 million in capital improvements at the facilities over the next five years.
Before settling on CHS, Mercy Health Partners and parent company Catholic Health Partners identified 14 potential buyers. Cook said they received four proposals, only three of which met the health system’s minimum goals.
They settled on CHS – the highest bidder – in December because the for-profit firm was “interested in a strategy of investment and growth” and “seemed to have a deep understanding of our mission and our role in the community,” Cook said.
The main point of Monday’s hearing was for Judge Minora to decide whether the sale will jeopardize the hospital’s charitable assets.
Cook and Smith said the sales agreement includes assurances that Mercy’s charity care policy will remain intact. The sale will also create two new charitable foundations that will act independently from the hospitals.
One will be funded through the $3.5 million held by the current foundation, as well as a $2 million donation from CHS and a $9.5 million donation from Catholic Health Partners, Mr. Cook said. The second foundation, which will be run by the Sisters of Mercy Mid-Atlantic Community Inc., will be funded through a $10 million donation from Catholic Health Partners, Cook said.
After the testimony, Judge Minora said the decision to sell Mercy’s facilities was difficult because of the role the hospitals and clinics have played in the community.
“You have to change in order to survive,” Judge Minora said. “The owner … has come to the conclusion that they cannot maintain this asset.”