There can come a time for a nonprofit that going it alone is just not possible. Options like closing the whole operation down, finding a partner that will carry the "best" of what's left, or selling-out to another organization that will build over or up are possibilities.
Towards this end, the Mercy Suburban Hospital in Pennsylvania has just been bought by a for-profit California organization. The corporation already owns two other hospitals in the area. I'm guessing these were once nonprofits as well.
As the article below suggests, the former nonprofit hospital was just not keeping-up. I would pose the decision to sell was good governance on the part of the nonprofit's board. The mission, to ensure there is health care available to the community will continue (perhaps not exactly as was originally desired) but continue nonetheless. And, an extra bonus will occur. When a nonprofit is purchased by a for-profit, usually one of the settlement agreements is to create what is called a "conversion" foundation where some cash is put into a new nonprofit who's job it will be to make grants or at least invest in the community's health. Given the state of the hospital before its sale, such a conversion foundation will provide better prospects that the founding legacy will continue.
The community should be appreciative that the nonprofit hospital board understood it was time to move-on and that it is leaving behind resources that can at least provide some opportunity.
Nonprofit governance can be really hard.
Mercy Suburban Hospital sold to Prime Healthcare
Mercy Health System has agreed to sell Mercy Suburban Hospital in Montgomery County to Prime Healthcare Services Inc., a California-based for-profit company that owns Roxborough Memorial Hospital in Philadelphia and Lower Bucks Hospital in Bristol Township.
Mercy, part of one of the nation's largest tax-exempt health systems, Trinity Health, of Livonia, Mich., and Prime did not disclose the value of the deal, announced Monday.
Trinity said the 126-bed hospital in East Norriton lost $5.4 million on $54.6 million in revenue in the six months ended Dec. 31.
An expert in health-care finance who is familiar with Prime estimated that the Ontario, Calif., company would value a place like Mercy Suburban at 25 percent to 40 percent of annual revenue.
That would equal about $25 million to $40 million, said Joshua A. Nemzoff, president of Nemzoff & Co., in New Hope, a mergers and acquisitions adviser to nonprofit health-care organizations.
Mercy Suburban has 680 employees.
Prime officials could not be reached for comment on the deal, which requires regulatory approval and is expected to close in four to six months.
Prime has agreed to invest $30 million in Mercy Suburban in the five years after completion of the deal, the organizations said in a joint statement.
A lack of investment at the facility has been evident for some time, said Bill Cruice, executive director of the Pennsylvania Association of Staff Nurses and Allied Professionals, a union that represents 155 nurses there.
"They have not been nearly as aggressive in recruiting physicians or maintaining capital plant and capital equipment for four years now," Cruice said. "We've been concerned about that for some time."
Trinity, and before that Catholic Healthcare East, which merged with Trinity in 2013, has sold or has agreed to sell five of its financially weakest hospitals in recent years.
Mercy Suburban is Trinity's third deal with Prime.
As part of the deal with Prime, Mercy Suburban will lose its Catholic identity and change its name. Prime has agreed to maintain charity care that is "no less favorable" than the current policy.
Mercy Suburban was founded in 1944 as Riverview Hospital in Norristown and moved to its current site in 1972.