Frequently Asked Questions (FAQ) Regarding Proposed Sale of Marquette General Hospital to Duke Lifepoint

This FAQ provides summary information regarding the Attorney General's review of the proposed sale of Marquette General Hospital to Duke Lifepoint. The buyer and seller signed a purchase agreement on June 28, 2012.  The Attorney General approved the sale on August 29, 2012.  Please see the Attorney General's final report at www.michigan.gov/mgh.

1.      Where can I find documents related to this transaction?

To promote transparency and inform the public, the Attorney General will post documents at www.michigan.gov/mgh.  

2.       Why is Marquette General Hospital being sold? 

Marquette General Hospital has represented to the Attorney General that it is selling the hospital to gain access to capital and to expand services.  This new capital will permit it to update its aging facilities and meet its pension liabilities.  As part of his review, the Attorney General will review these representations.

3.       How was a buyer chosen? 

Marquette General Hospital has represented to the Attorney General that there was an extensive and competitive bidding process that considered in-state and out-of-state buyers and nonprofit and for-profit buyers.  Marquette narrowed the field to five finalists, and ultimately chose Duke Lifepoint as the winning bidder.  The Attorney General will review the bidding process for fairness and to ensure that Marquette received fair market value for its charitable assets.

4.       What is Duke Lifepoint?

Duke Lifepoint, LLC is a joint venture between Duke University Health System and the for-profit Lifepoint Hospitals.  The stated purpose of the roughly two-year old joint venture is to combine "Duke's unparalleled expertise in clinical excellence and quality care with LifePoint's extensive resources and knowledge and experience operating community hospitals."  Duke Lifepoint currently runs three healthcare facilities in North Carolina, and recently acquired a fourth facility in Virginia.  Lifepoint is the primary owner and managing partner of the joint venture.  Duke maintains a 3% ownership interest, describing its main interest as quality oversight.

5.       What happens to the proceeds from the sale?

   Michigan law requires that charitable assets be used for charitable purposes.  The Attorney General's review will verify that the proceeds of the sale will go towards charitable purposes.  On June 28, 2012, the parties signed an Asset Purchase Agreement.  The Purchase Agreement specifies that, after Duke Lifepoint assumes many of Marquette's liabilities, a minimum of $15 million will go to the nonprofit Marquette General Foundation.  The Attorney General has retained valuation expert Stout Risius Ross to ensure that Marquette receives fair market value for its charitable assets.  Once the valuation is complete, the Attorney General will report its expert's findings to the public. 

6.      What happens to Marquette Hospital after the sale?

          Marquette Hospital will continue to serve the medical needs of the local community.  The Asset Purchase Agreement provides for a continuation of indigent care and core services.  Details of these policies are still being finalized.  The Attorney General will work with the contracting parties to ensure appropriate enforcement of Duke Lifepoint's commitments.

7.       The parties entered an Asset Purchase Agreement on June 28, 2012.  What is the Asset Purchase Agreement?

           In March, the parties entered into a Memorandum of Understanding as they worked on the details of the proposed sale.  The parties reached an agreement and signed an Asset Purchase Agreement on June 28, 2012.  The Asset Purchase Agreement is a contract which includes the terms of the sale.  In it, Duke Lifepoint and Marquette agree to do certain things in anticipation of closing the sale on August 31, 2012.  As the Attorney General reviews the Asset Purchase Agreement, he will update this site to include some of its basic provisions.

8.      What transaction documents will be made available to the public?

         The Attorney General recognizes the importance of this sale to the public and believes in transparency and public disclosure.  The Attorney General will work on behalf of the public to disclose substantially all sale details.  Even so, some information may be legally privileged and thus unavailable to the public.  As transaction documents become available, the Attorney General will post them to www.michigan.gov/mgh.

9.      Why is the Attorney General's Office involved?

            In general, the Attorney General protects charitable assets in Michigan under broad common law and statutory authority.  This authority extends over the merger or sale of charitable nonprofit corporations, which includes most of Michigan's hospitals.  Primarily, the Attorney General reviews these transactions to protect the charitable assets and to ensure that they are not diverted for private benefit.  The Attorney General also protects restricted charitable assets, i.e., those assets that were donated for a specific purpose, to prevent these assets from being misused.  For a guideline of the Attorney General's review process, click here.

10.      How is the Attorney General involved in this specific transaction?

            More specifically, the Attorney General is reviewing this transaction because the parties have conditioned the sale on receiving the Attorney General's consent or lack of objection.  In other words, the parties recognize the Attorney General's authority in this area, are cooperating with the Attorney General's review process, and recognize that his objection would stop the sale. 

11.     What does the Attorney General review? 

            The Attorney General's Review Process provides a more thorough guideline of the issues the Attorney General considers, but here are some of the main areas:

  • Valuation - What is the fair market value of the charitable assets?  Is the seller receiving sufficient consideration, i.e., money or value, in exchange for the assets being sold?  In some instances, the Attorney General asks the parties to fund independent experts to assist in answering these questions.
  • Financial evaluation of buyer - Does the buyer have the financial resources to meet its promises?  For example, if the buyer proposes capital improvements or expansion of services, can it meet those promises?
  • Process review - What process and events led the seller to propose a sale?  Was the process fair?  Were there conflicts of interests for board members and/or management?  Did the seller diligently exercise its duties of loyalty and care to the organization?
  • Restricted charitable assets - Do any restricted charitable assets exist, i.e., assets donated for a specific purpose?  Will these assets be adequately protected during the sale?
  • Post-transaction enforcement - How will the buyer be held to its promises?  Will an independent charitable foundation monitor the buyer's post-transaction performance and have enforcement authority?

12.     Will the Attorney General report the results of his review to the public?

Yes.  When the Attorney General's review is complete, he will publish a report on this website.

13.    Will there be a way for the general public to offer their views regarding the proposed sale?

           Yes.  On Tuesday, July 17, 2012, from 5 p.m. to 7 p.m., the Attorney General conducted a public forum in Marquette at the Upfront and Company.  Over 100 community members participated, with roughly 20 commenting on the sale.  The Attorney General will post a transcript of the public forum here as soon as it is available.

           In addition to the public forum, the Attorney General will accept written comments on the sale through August 10, 2012.  Comments may be mailed or e-mailed to:

Attorney General's Office
Attn: Marquette Hospital Review
Charitable Trust Section
P.O. Box 30214
Lansing, MI 48909
517-373-1140
AGMGH@Michigan.gov

 

 

Update: August 30, 2012