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June 10, 2014

Conemaugh sale details made public: Foundation will get $100M from sale to Duke LifePoint

— Conemaugh Health Foundation will get more than $100 million from the sale of Conemaugh Health System and take on the role as overseer of new owners Duke LifePoint Healthcare if the acquisition is approved later this summer.

Details for the Conemaugh’s proposed sale to Duke LifePoint were made public for the first time this week in court documents filed in Ebensburg.

The “Petition for Approval of Transaction” terms of the tentative agreement hammered out earlier this year in a memorandum of understanding. A hearing is scheduled July 2 in Cambria County Orphans Court.

Here is a link to the court paper.

Conemaugh petition

The petition for court approval is one of several steps still required before the sale goes through. The charitable trust section of the state attorney general’s office also is reviewing the proposal and held a public hearing last week.

Conemaugh Health Foundation is the only affiliated organization that is not being sold under the acquisition announced in April.

Instead, it will be able to use the windfall to further its charitable mission and “support the health care needs of the Cambria County community and other communities” in the Conemaugh service area, the court papers say.

Terms of the sale require Duke LifePoint to pay $105 million, adjusted for the change in “net working capital” between June 30, 2013, and the closing date. In other words, if there is more “net working capital” when the sale closes, Duke LifePoint will pay more than $105 million. If there is less capital, it pays less.

In addition, the foundation gets $10 million in LifePoint stock.

Terms of the sale require Duke LifePoint spend at least $425 million over 10 years, including $150 million in the first two years, on capital improvements. Areas listed include new and expanded medical services, investments in new information systems, new equipment and facility renovations.

Construction of outpatient centers and a medical education conference center are listed for the first two years, along with a new electronic health record system.

Duke LifePoint agrees to hire all qualified employees and physicians and adopt the existing workforce management policy.

The new owners will appoint advisory boards for Memorial, Miners and Meyersdale medical centers and continue the existing policies for treatment of indigent patients. The advisory boards’ approval would be required for any change in charity care.

All current programs must be maintained, including heart services, vascular care, level one trauma center, neuroscience, cancer care center, radiology, women’s health and maternity care, family medicine and neurosurgery.

Graduate medical education residencies including general surgery, family medicine and emergency medicine. Conemaugh Valley Memorial Hospital School of Nursing, Conemaugh Surgical Technology Program, and the Conemaugh Emergency Medical Services School are required to continue.

Duke LifePoint must establish a physician advisory council and patient safety and quality oversight committees for each hospital.

Conemaugh Health Foundation will serve as the third-party observer to see the terms are carried out, the court petition says.

The petition also repeats Conemaugh leaders’ position that the acquisition was negotiated from a position of financial strength to ensure the continuation of quality care in the region. Duke LifePoint is ideally suited to provide medical expertise with strong financial support, the papers note.

“The transaction will serve the best interests of Johnstown and the community and public at large,” the petition says. “It is unlikely that the current level of high quality healthcare services could be maintained (without the sale).”

Orphans Court approval is required under nonprofit corporation law to protect the community’s interest in sale of charitable entities such as hospitals. The attorney general’s office reviews financial, corporate, and transactional information to determine if it will object to the sale in orphan’s court, a spokesman said.

Members of the community in support of the sale or with concerns about the sale have been invited to submit their comments to the attorney general’s office. To date, none has been received, a spokesman said.

“Public comments can be submitted until June 27, 2014,” spokesman J.J. Abbott said. “Comments are usually confidential.”

Randy Griffith covers health care for The Tribune-Democrat. Follow him on Twitter at twitter.com/photogriffer57.

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