Will news that Health Management Associates Inc. shareholders have voted to remove and replace the company's entire board of directors cast uncertainty on recently announced plans to be acquired by Community Health Systems Inc.?
"I think that vote is probably going to throw a big wrench into the acquisition proceedings," says Dennis Hursh, principal of the Middletown-based Hursh & Hursh PC legal practice that focuses on physicians' professional needs. "I know that investment company (Glenview) has been saying all along that HMA wasn't being run very well, and I think that's why they were in play."
HMA is a Florida-based for-profit chain that owns three hospitals in Central Pennsylvania. The move comes two weeks after news that another for-profit hospital chain, Tennessee-based Community Health Systems Inc., had a definitive merger agreement to acquire HMA in a deal valued at approximately $7.6 billion. HMA's board of directors unanimously approved the agreement and recommended that stockholders approve; getting 70 percent of HMA's stockholders is one hurdle the deal still must clear.
The board takeover was led by Glenview Capital Management LLC, which owns 14.5 percent of HMA's outstanding common stock.
Hursh says that in his view HMA's management of its hospitals has been "the epitome of everything that's bad about publicly traded companies," by focusing on short-term profit. Even things like joint ventures with physicians, which Hursh generally thinks hold promise, were structured so physicians really didn't have control, he says.
"It's like HMA thought it was all about dollars for doctors, and I just don't think most people go to medical school to get rich," Hursh says. "They go to help people."
Hursh says he thinks Glenview is focusing on value for shareholders, and that it may well prefer letting HMA's new management have a crack at turning things around instead of seeing the CHS acquisition go through.
No matter what happens, he says, "I would suspect it will take quite a bit of time to work out."
HMA has not issued a comment on the development other than a notice to investors that "an independent inspector of election will promptly review and certify the validity of the written consents delivered to the company."
In response to a request for comment from the local hospitals, Heart of Lancaster Regional Medical Center spokeswoman Amanda Brunish said there will be no impact on local operations.
Glenview issued a news release, including the following statement:
"First, it is incumbent on Management, Boards and shareholders to work constructively and methodically to improve shareholder value over time to ensure an appropriate risk adjusted return on capital for owners. This includes the Board's responsibility to review financial and strategic alternatives and operational and human resource performance in an intellectually honest manner, prioritizing shareholder returns over social or legacy issues.
"Second, it is imperative that Management and Boards treat shareholders as true partners rather than adversaries in the journey to build sustainable value and quality enterprises.
"Finally, it is the responsibility of shareholders to embrace and support change when neither of these conditions are satisfied.
"We believe that these key principles brought together investors across every category — mutual funds, pension funds, hedge funds, individual investors and current and former employees and retirees — to defend and promote shareholders' rights through their consents to Revitalize HMA. We at Glenview are proud of our efforts to improve quality, compliance, accountability and shareholder value at HMA, and we are happy to have contributed to the broader discourse by challenging all shareholders to think and act like owners to promote financial and corporate success. Several months from now, with greater Board and Management engagement and greater transparency, Glenview and other shareholders will consider the Community Proposal with an eye towards maximizing shareholder value and positioning HMA to best serve the healthcare needs of its local communities."
HMA currently operates 71 hospitals in 15 states with approximately 11,000 licensed beds, including three for-profit hospitals in Cumberland and Lancaster counties: Carlisle Regional Medical Center, Lancaster Regional Medical Center and Heart of Lancaster Regional Medical Center. Shares of HMA are traded on the New York Stock Exchange under the ticker symbol HMA.
CHS currently owns, leases or operates 135 hospitals in 29 states with an aggregate of approximately 20,000 licensed beds through its subsidiaries. One of them is Memorial Hospital in York, which CHS acquired last year. Shares of CHS are traded on the New York Stock Exchange under the ticker symbol CYH.
Editor's Note: This item was modified from its previous version to include comments from Dennis Hursh, principal of the Middletown-based Hursh & Hursh PC.