Community Health Systems acquisition of Health Management Associates moved a step closer Wednesday with an agreement with the Federal Trade Commission.
Under terms of the agreement, Community Health will divest itself of two hospitals owned by HMA — Riverview Regional Medical Center in Gadsden, Alabama, and Carolina Pines Regional Medical Center in Hartsville, S.C.
Franklin, Tenn.-based Community Health said the divestitures would not have a “meaningful impact on the combined company’s financial operations or cost-savings.”
HMA, based in Naples, Fla., owns Tennova Healthcare, which operates six hospitals in the Knoxville region.
Community Health has agreed to buy HMA for $3.9 billion in cash and stock. The sale is expected to close at the end of January.
Click here for Community Health’s news release.
Hospital operator Health Management Associates, parent company of Knoxville-based Tennova Healthcare, said this week it is repaying $31 million in federal and state incentive payments that it should not have received.
The company said it is restating financial reports for the last three years and withdrew its previously issued earnings guidance for 2013.
The restated earnings reports are not expected to effect the proposed sale of HMA to Community Health Systems Inc., HMA said in a news release.
Franklin, Tenn.-based CHS has proposed to buy HMA for $7.4 billion in cash and assumption of debt. Both companies expect the sale to close in early 2014, HMA said.
Naples, Fla.-based HMA said it incorrectly applied the “meaningful use” standard in applying for Medicare and Medicaid incentive payments given to hospitals of their use of electronic health records. Eleven of its 71 hospitals received the payments.
HMA said it has repaid some of the incentive payments and it “is in process of repaying the balance of the funds to the relevant state programs,” according to a news release.
The $31 million in incentives were incorrectly recognized as income between July 1, 2011 and June 30, 2013, which required the company to restate its financial reports for 2010, 2011 and 2012 and the first two quarters of 2013.
The company said error was caused by “a material weakness in internal control relating to the administration and oversight of its EHR (electronic health records) enrollment process.” The problem is being corrected, HMA said.
UPDATED: It’s been more than six weeks since Community Health Systems offered to buy competitor Health Management Associates for $7.4 billion and no other bidders have stepped forward.
HMA’s largest shareholder, Glenview Capital Management, called the takeover proposal a low-ball offer and spearheaded a shareholder vote to replace the HMA board with a slate of
Glenview independent nominees tasked with getting a better price.
But it’s looking like the CHS offer is the best deal HMA can get, according to a Bloomberg report published today.
“No rival bidders have emerged, and analysts are forecasting a 16 percent profit drop when Health Management reports third-quarter results. That will boost the odds of Health Management investors voting for the deal, UBS AG said. Without the takeover, Health Management owners risk seeing the stock plunge as much as 37 percent, Susquehanna International Group LLP estimates. Shareholders should take the money and run because Health Management faces a challenging turnaround, according to CRT Capital Group LLC,” Bloomberg reported.
Naples, Fla.-based HMA is the parent company of Knoxville-based hospital operator Tennova Healthcare.
CHS is based in Franklin, Tenn.
The future of HMA is being closely watched by Tennova officials and could impact Tennova’s plans to build a new hospital on Middlebrook Pike in West Knoxville.
Click here for the Bloomberg report.