Health Care

CommonSpirit still in talks with Essentia, others over Midwest hospital deal

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CommonSpirit Health said Tuesday it continues to discuss a potential deal with Essentia Health over its Midwest hospitals, even after the parties scrapped a buyout plan earlier this year.

Chicago-based CommonSpirit is trying to offload 14 hospitals in Minnesota and North Dakota, all but one of which are critical access hospitals. It was poised to sell them to Essentia, a 14-hospital system based in Duluth, Minnesota, until the systems called off the deal in May.

Since then, CommonSpirit, which has about 140 hospitals in total, has continued to work toward an agreement with Essentia and other potential partners over the facilities, Dan Morissette, CommonSpirit’s chief financial officer, said on an investor call Tuesday.

“We are still not at a point that we have a transaction,” he said. “So at this point, we are not pursuing a specific transaction, and therefore I’d just like to let you know that we support our operations and we support our ministry in the Fargo area.”

An Essentia spokesperson did not respond to a request for comment.

Those hospitals plus their associated clinics and home health operations represented $387 million in total assets and $62 million in total liabilities as of Sept. 30, CommonSpirit disclosed in its first quarter 2022 financial results, which cover the period ended Sept. 30.

CommonSpirit’s Midwest division represented 8.7% of its total revenue as of Sept. 30, or $742 million. The division includes hospitals in Nebraska, Iowa and Wisconsin in addition to North Dakota and Minnesota.

It’s unclear why CommonSpirit and Essentia abandoned their original plans, but employee opposition may have played a role. Nearly 700 unionized nurses and other healthcare workers from both systems sent a petition to Essentia’s management in early May noting their concerns that the deal would mean less access to patient care, not more, as the systems touted. Essentia and CommonSpirit called off the deal two weeks later.

CommonSpirit posted a razor-thin operating margin in the quarter ended Sept. 30: just 0.4%. The system made $34 million on $8.5 billion in operating revenue in the quarter. That’s smaller than the 2.2% margin CommonSpirit had generated in the prior-year period, when it made $167 million on $7.7 billion in revenue.


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