Forum CEO: Sales likely to for-profit companies

Forum’s board continues to look at
proposals from potential buyers.

By WILLIAM K. ALCORN

VINDICATOR STAFF WRITER

YOUNGSTOWN — The head of Forum Health has told employees that all the health-care system’s facilities are on the sale block and most likely will be sold to a for-profit outfit.

In the Wednesday edition of Forum Flash, the hospital system’s newsletter, Dr. Keith T. Ghezzi, president and chief executive officer, provided additional information on the sale process.

“It is likely that Forum’s facilities will be sold to for-profit companies,” he said.

“While the sales process has been open to all bidders, at this point the potential purchasers are all for-profit companies,” Dr. Ghezzi added.

“We are working to reach an agreement with qualified purchasers that have demonstrated a commitment to community health care and positive employee and physician relations at other hospitals,” he said in the newsletter.

Forum Health facilities are nonprofit.

Any sale of a nonprofit facility to a for-profit company must be approved by the Ohio attorney general, who determines whether the agreement complies with state laws and meets community health needs, Dr. Ghezzi said in the newsletter.

Meanwhile, a New York City-based bond rating firm report said Forum Health was “progressing through due diligence with various parties” for the sale of parts or all of its hospital system.

The report was issued June 20 by Moody’s Investors Service.

Moody’s report does not provide specifics about any sale. It does say that “given the complexity of this process and other factors, the terms and outcome of the process are uncertain at this time.”

More on sale process

Regarding a potential sale, Dr. Ghezzi said, “The Forum Health Board of Trustees continues to consider its options with regard to a number of potential purchasers for its hospitals, facilities and service lines.”

Dr. Ghezzi also said the sale process usually begins with a potential purchaser offering a nonbinding letter of intent or a more formal asset purchase agreement outlining the proposed terms of a sale. These documents and agreements are usually bound by confidentiality agreements pending legal review and due diligence, he said.

Due diligence is the process of evaluating information to identify risks and issues relating to a proposed transaction.

If the Forum board approves the sale of a Forum facility or business, then both sides pursue due diligence, a period of several months during which the potential purchaser has exclusive rights to buy the facility or asset, Dr. Ghezzi said.

Community Health Systems, based in Tennessee, pulled out of a plan last year to acquire Forum Health.

Moody’s report stated that achieving a contract with registered nurses at Forum Health Northside Medical Center and Beeghly Medical Park should improve Forum’s credit rating and make it salable.

Before the recent ratification of a one-year contract by the Northside and Beeghly nurses, other Forum employees, including registered nurses and service employees at other Forum facilities, had approved concessionary contracts that included wage freezes, conversion from fixed benefits retirement to 401(k) plans, and employee contributions to health-care costs.

The June Moody’s report, issued before approval of the new pact with the nurses, placed Forum Health’s B1 bond rating on the watch list for potential downgrade.

There was some good news in the Moody’s report, however.

It said that for the four months ending in April 2007, Forum continued to show progress on improving operations and that savings from the new union contracts will help provide further improvement. Also, Moody’s said Forum has $120 million in unrestricted cash, representing 92 days of cash on hand, and has generally remained financially stable in 2006 and 2007.

The bad news is that the system has experienced further volume declines and other challenges that “support our significant concern about the system’s long-term viability,” the Moody’s report stated.