Health Management Associates will pay $162 million to purchase Bayfront Medical Center, part of a $302-million deal expected to close by April 1.
The deal gives HMA ownership of 80 percent of Bayfront, which was valued at $202 million, and also requires the company to invest $100 million in the hospital over five years. Details of the deal were announced to HMA shareholders Thursday.
Bayfront will pay $40 million to a new joint company for its 20 percent share and to guarantee local control of the hospital that serves as Pinellas County’s major trauma center. The sale will allow the hospital to retire $80 million of debt and ensures the survival of the hospital that has struggled financially in recent years, hospital officials said.
HMA plans to make the 106-year-old hospital the flagship of its West Florida operation and is considering adding Bayfront to the names of its other local hospitals, said Alan Levine, HMA Florida division president.
"We are committed to the success of this hospital. We want to see it grow and expand," Levine said.
The deal is still contingent on the City Council approving a new 50-year lease because the hospital sits on city land downtown. HMA executives reassured council members at a meeting Thursday that the hospital will still operate an emergency room and continue to care for poor and uninsured residents.
Bayfront has gotten by with tiny profit margins in recent years, and hospital officials estimate they will have a 5 percent operating loss for 2012. The hospital provided $34.7 million worth of care for poor, uninsured and underinsured residents in 2011.
City Council members reviewed the proposed new lease Thursday and requested several amendments.
They asked that HMA produce statistics to back up their pledge to continue providing indigent care. HMA officials agreed, although it was not specified how that will be measured.
Council Member Wengay Newton questioned whether the hospital’s charity numbers would be padded with patients whose bills are paid through Medicare and Medicaid.
Levine said the state requires hospitals to report those numbers as part of their charitable contributions.
"We were doing what the law tells us to report," Levine said.
HMA officials also agreed to provide regular updates on hospital matters to a city staffer. The lease also requires HMA to give the City Council a comprehensive annual report on the hospital. Additionally, the company is required to advise the city if the hospital is fined or sued for $1 million or more.
A proposal to have a City Council member serve on the hospital’s board of trustees was nixed after attorneys warned it would mean hospital meetings and records would be open to the public. That would give competing companies an unfair advantage, Levine said.
The valuation of Bayfront was based on 70 percent of the hospital’s net revenue, an industry standard for calculating a sales price, Levine said.
The deal also includes a partnership with Shands Healthcare, the medical center for the University of Florida, that will boost Bayfront’s education and training efforts, hospital officials said.
City Council members are scheduled to review the lease at a meeting Thursday.