One of the nation’s largest for-profit hospital chains has reached a tentative deal to buy Akron General Health System in partnership with the Cleveland Clinic.
The Akron General board of directors on Thursday unanimously approved a nonbinding letter of intent to sell the health system’s assets to a new joint venture between the Cleveland Clinic and Tennessee-based hospital operator Community Health Systems.
Akron General has been seeking a larger partner in recent months to boost its financial health while contending with massive changes in the industry both locally and nationally.
Akron General Health System President and Chief Executive Dr. Thomas “Tim” Stover said the proposal from Community Health Systems and the Cleveland Clinic stood out from several other bids because of the combined financial resources and medical expertise the partners bring to the deal.
“This is an absolute home run for Akron General,” he said. “The thing that put this over the top, as far as I’m concerned, is not only do we get the financial backing that we need, we also get the resources of the Cleveland Clinic.”
Akron General officials said the pact will include “significant capital investments to improve facilities, technology and hospital services.”
Community Health Systems would be the majority owner, according to a company spokeswoman.
Financial terms and other details still are being finalized and weren’t disclosed.
If all goes as planned, Stover said, the deal could be completed before the end of the year.
A community foundation would be formed as part of the sale, which would convert Akron General from nonprofit to for-profit status, Stover said.
The joint venture would continue Akron General’s commitment to charity care and medical education, he said. A local governing board of trustees with community leaders and medical staff would be appointed.
National health-care giant Community Health Systems owns, operates or leases 135 hospitals in 29 states, including Affinity Medical Center in Massillon.
In 2012, the publicly traded hospital chain reported revenues of $13 billion.
Previous talks with Clinic
Akron General previously had negotiations with the Cleveland Clinic in 2007 about an affiliation, but those plans didn’t move forward.
The latest bid to acquire Akron General comes several months after the Cleveland Clinic formed a strategic alliance with Community Health Systems.
Under that five-year agreement, the organizations remain independent but have agreed to work together to share data, improve quality and improve efficiency.
Initial areas of focus include “clinical integration” programs that allow doctors to share data and best practices to improve care while reducing costs, and other initiatives such as telemedicine and second-opinion services. The top-ranked Cleveland Clinic Heart and Vascular Institute also is helping select CHS-affiliated hospitals apply the institute’s expertise.
The joint venture to acquire Akron General “is a compelling collaboration that can bring together clinical expertise, capital resources, operational experience and innovation for the benefit of the Akron community,” Community Health Systems President and Chief Executive Wayne T. Smith said in a prepared statement on Thursday.
The proposal is “a creative way to leverage the resources that each of us brings to the table,” said Ann Huston, the Cleveland Clinic’s chief strategy officer. The Cleveland Clinic brings its medical and patient care expertise to the deal, while Community Health Systems provides business and operational leadership.
When the deal is complete, Akron General will become an affiliate of the Cleveland Clinic and potentially gain new medical services, she said.
“We’ve always served patients from Akron-Summit County area,” she said. “This is a natural opportunity to collaborate with them to extend our reach.”
Major employer
Akron General Health System includes Akron General Medical Center, physician practices, Visiting Nurse Service and Affiliates, Hospice of VNS, Lodi Community Hospital, Edwin Shaw Rehabilitation Institute, three health and wellness centers and other outpatient locations.
The health system is among the region’s largest employers, with more than 5,000 workers.
Earlier this year, Akron General laid off 132 employees — about 2.5 percent of its total workforce — as it faced a $4.8 million loss in 2012 on revenues of $588 million. (Akron-based Summa Health System also laid off employees as it contends with lower-than-expected revenues.)
Hospitals nationwide increasingly are forging partnerships with looming changes from federal health-care reform and payments that don’t cover costs, particularly from Medicare, the federal health insurer for people ages 65 and older and some younger disabled Americans.
Akron General’s larger cross-town rival, Summa, is completing its own deal that will give Cincinnati-based Catholic Health Partners a 30 percent ownership stake in exchange for $250 million. The 10-year agreement still is awaiting final approval from Bishop Richard Lennon from the Catholic Diocese of Cleveland.
The nonprofit Catholic Health Partners is Ohio’s largest hospital system, with 24 hospitals in Ohio and Kentucky and $5.6 billion in assets.
Cheryl Powell can be reached at 330-996-3902 or cpowell@thebeaconjournal.com. Follow Powell on Twitter at twitter.com/abjcherylpowell.