CHS submits $100M bid for Forum

August 4, 2010 at 12:08a.m.

By William K. Alcorn|Grace Wyler

By WILLIAM K. ALCORN

and GRACE WYLER

YOUNGSTOWN

Community Health Systems has upped the ante by bidding $100 million for bankrupt Forum Health.

With CHS’ bid determined a “qualifying bid” by Forum Health on Tuesday, an auction for Forum’s assets between CHS and Ardent Health Services has been set for Thursday in Cleveland.

Ardent became the first bidder in June by offering $69.8 million for Forum after negotiating memorandums of agreement with Forum’s unions. No other bidders had surfaced by the 5 p.m. Tuesday deadline.

The private auction will be conducted in the offices of the McDonald Hopkins law firm in Cleveland, which represents Forum Health, with only a select group of interested parties invited.

However the CHS bid, if it turns out to be the highest and best, would still have to be reviewed by Ohio Attorney General Richard Cordray, which could delay the purchase process for several weeks. Cordray is required to review the proposed sale of any nonprofit entity. The final decision on a successful bidder lies with Bankruptcy Judge Kay Woods, who will conduct a hearing on the sale Aug. 10.

Cordray has already reviewed and approved Ardent’s proposal.

According to a U.S. Bankruptcy Court order, only Forum Health, Forum’s major secured creditors known as the Consent Parties, the Committee of Unsecured Creditors, Ardent and any other qualifying bidders, and the professionals for each of those will be permitted to attend and be heard at the auction.

Included in its offer, Ardent pledged to keep Forum’s three hospitals open and to spend $50 million to $70 million on upgrades over five years.

Community Health has made similar pledges, saying it would keep Forum’s hospitals open and spend at least $80 million to fund facility improvements and upgrades, information technology, physician recruitment and other enhancements and service expansions over the five years immediately following the closing of the sale, according to spokeswoman Tomi Galin.

The CHS bid was submitted by Youngstown Ohio Hospital Company, a subsidiary of CHS.

Community Health Services came late into the game, submitting a formal offer Monday, just one day before Tuesday’s bid deadline.

Youngstown Mayor Jay Williams and U.S. Rep. Tim Ryan of Niles, D-17th, are taking a wait-and-see attitude toward the CHS bid.

Ryan said he had a 10-minute conversation with a vice president of CHS on Friday afternoon in which the company expressed its interest in Forum Health.

He said that though he has no say in the process, he has some concerns about CHS, particularly regarding its history of labor disputes and a Department of Justice case against the company.

“But ultimately my concerns don’t amount to a hill of beans ... and whoever ends up running Forum Health, we will be beside them 100 percent,” said Ryan, D-17th.

The “upside” of CHS coming in at the last minute indicates that “everyone is seeing some real value in the hospital system,” he said.

Williams said Forum’s organized labor groups have been very vocal in their concerns about CHS, an issue he said must be addressed. Also, he said he does not know any details about CHS’ bid for Forum and that he and the other parties involved have not had the opportunity to do due diligence on the company or its plans.

He contrasted this with Ardent: “I am comfortable with the position that Ardent expressed, but that came after two or three meetings and due diligence by many parties. I think we all got comfortable together.”

“Maybe that will happen with CHS, and maybe it won’t, but I don’t know that there has been time for that to happen.”

“I think that all of this [CHS’ bid] happened too fast.”

Williams said he has spoken to executives from CHS and voiced his concerns about the importance of keeping all Forum hospitals open.

When CHS signed the letter of intent to purchase Forum in 2006, Williams questioned then how the hospital system fit into CHS’ stated acquisition strategy.

In his most recent conversation with CHS, Williams said the company said it was “well-capitalized and had experience” in markets similar to Youngstown and was committed to the ongoing operations at Northside.

“We want what is in the best interest of the community,” which is access to health care and access to employment, Williams said.

However, he said if there is validity to the claim that CHS was brought in by Forum’s creditors, “that would be cause for grave concern.”

“I don’t know that at this point the creditors have any interest in the ongoing operations at Northside. If any bidder had a connection with them or with that agenda, I would be adamantly opposed,” Williams said.