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Sharon Regional Health System Plans Sale to CHS
SHARON, Pa. -- Sharon Regional Health System announced late Tuesday that it plans to affiliate with Community Health Systems Inc., owner of ValleyCare Health System of Ohio, in what it calls a “strategic transaction” that will result in capital investments and other resources to help position Sharon Regional for “future long-term success.”
The decision by Sharon Regional’s board of directors to unanimously approve and execute a non-binding letter of intent to sell its assets to a CHS subsidiary follows a “year-long process and review of strategic options,” Sharon Regional said in a news release.
Sharon Regional will now move into “a period of due diligence and exclusive negotiations” over terms of the proposed transaction. A definitive agreement is expected later this year, and the transaction will be subject to customary closing conditions and regulatory approvals, according to the release.
Sharon Regional employs 1,800, making the nonprofit health system Mercer County's largest employer. Sharon Regional’s assets include a 251-bed accredited hospital along with 23 satellite centers located in Sharon, Hermitage, Mercer, New Castle, Brookfield and Hubbard.
CHS is a for-profit company whose shares are traded on the New York Stock Exchange. Through its affiliates, CHS operates 135 hospitals in 29 states, including 17 in Pennsylvania and Northside Medical Center, Trumbull Memorial Hospital and Hillside Rehabitation Hospital in the Mahoning Valley.
“We engaged in a thorough and thoughtful process to ensure the best possible future for Sharon Regional and determined that affiliating with Community Health Systems, a highly regarded national health-care organization, provides the greatest opportunity for building our future success,” said William Strimbu, chairman of Sharon Regional’s board. “We will also benefit from the strategic alliance announced earlier this year between CHS and the Cleveland Clinic. The Cleveland Clinic will collaborate to advance quality and clinical programs, creating a true advantage for our medical staff, employees and, most importantly, our patients.”
The announcement comes just over three years after CHS purchased the chief operating assets of the bankrupt Forum Health system in Mahoning and Trumbull counties, which it later rebranded as ValleyCare. CHS recently began work on a $20 million expansion and renovation project at its Northside Medical Center in Youngstown.
In March, Nashville-based CHS announced it had entered into a strategic alliance with the Cleveland Clinic, and last week the two health-care organizations said they would enter into negotiations for assets of Akron General Health System.
CHS reported net operating revenues for the three months ended June 30 totaled $3.236 billion, a 0.2% decrease compared with $3.243 billion for the same period in 2012. Income from continuing operations decreased to $47.1 million for the three months ended June 30, compared with $102.2 million for the same period in 2012.
“Many hospitals and health-care systems are aligning with partners that can support their operations with the significant resources and management expertise required to be successful in this dynamic period of change across our industry, especially as health care reform takes effect,” said John R. “Jack” Janoso, Jr., president and CEO of Sharon Regional. “In CHS and the Cleveland Clinic we believe we’ve found partners that will support both our guiding principles and our values of integrity, caring, accountability, respect and excellence, and that this affiliation can advance our mission of providing comprehensive, convenient, high-quality health services close to home for the communities we serve.”
The Cleveland Clinic will also participate in clinical program development, quality improvement, and branding of Sharon Regional’s assets through its alliance with CHS, according to the announcement.
In its annoucement, Sharon Regional listed the benefits of the proposed transaction. They include:
- An infusion of capital for investments in facilities, services and medical technology;
- Continuation and growth of the Health System’s essential services (including medical/surgical, critical care, open heart and vascular surgery, emergency services, and obstetrics);
- Hiring of employees in good standing at the time Sharon Regional closes on the transaction at the same rate of compensation with years of seniority recognized;
- Maintaining Sharon Regional’s current medical staff and strong efforts to recruit new physicians to the community;
- Access to charity and indigent care; and,
- A local board of trustees comprised of members of Sharon Regional’s medical staff and local community leaders.
In June the Sharon Herald quoted the health system's CEO, Janoso, as stating the health system was not actively seeking a buyer. According to the newspaper, which quoted Fitch ratings, "In the fiscal year ending June 30, 2012, Sharon Regional lost nearly 4.5 cents on every dollar of revenue from providing core medical services."
Also in its announcement, Sharon Regional outlined "five guiding principles" that it used in its "comprehensive planning and selection process ... to evaluate potential partners." These included:
As part of the comprehensive planning and selection process, Sharon Regional’s board of directors identified five Guiding Principles by which to evaluate potential partners. These included:
- Community Choice in a Health care Provider. Patients, physicians, employers and their employees should have the right to choose the healthcare provider that best meets their needs.
- Local Control of Health care Decisions.Decisions affecting the region’s healthcare should be made locally by those who live, work, and raise their families in the area.
- Perpetuation of Advanced Care within the Community. Patients and their families benefit by having tertiary or advanced-level services available in the local community.
- Commitment to Improve, not Maintain Quality and Service to the Community. Recognition of the need to better the healthcare of the community by adopting innovative methods, modes, and models of medical services, best practice standards, and quality of care.
- Economic Stability for the Community. A vibrant, growth-oriented and successful health system provides economic stability and opportunities to our region.
Copyright 2013 The Business Journal, Youngstown, Ohio.
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