Frequently Asked Questions (FAQ) Regarding Proposed Joint Venture of Portage Health with Lifepoint

This page answers frequently asked questions regarding the Attorney General’s review of Portage Health’s proposed joint venture with Lifepoint.  Portage Health and Lifepoint signed a definitive agreement on August 2, 2013. The Attorney General approved the transaction on November 27, 2013.  Please see the Attorney General’s final report at www.michigan.gov/portage

 

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/Portage.

2.          Why is Portage Health seeking a joint venture with Lifepoint?

           Portage Health has represented to the Attorney General that it desires to improve facilities, enhance access to capital, improve quality of care, and to preserve and expand services.  The Attorney General will review these representations.

3.         How was Lifepoint chosen?

            The Attorney General will be reviewing Portage Health's process in choosing Lifepoint.

4.         Why was Lifepoint chosen?

            Portage Health has represented to the Attorney General that Lifepoint's business model of stewardship and growth of rural hospitals is compatible with Portage Health's mission and values.

5.         Who is Lifepoint?

            Lifepoint Hospitals is a publicly-traded company from Tennessee.  It operates nearly sixty hospitals in 20 different states, most of which are in rural areas.  In August 2012, a joint venture of Lifepoint and Duke University Health System purchased Marquette General Hospital.  This was Lifepoint's first acquisition in Michigan.  For details on that sale, which the Attorney General also reviewed, see www.michigan.gov/mgh.

6.         What is the joint venture between Portage Health and Lifepoint?

            Under the proposed joint venture, Portage Health will sell a majority of its ownership interest to Lifepoint; Portage Health and Lifepoint will jointly govern the hospital.  More details will be available once the parties have reached a definitive agreement.

7.         What happens to the proceeds from the sale of Portage Health's ownership interest to Lifepoint?

            Michigan law requires that charitable assets be used for charitable purposes.  Consistent with this, Portage Health represents that the proceeds from the transaction will be used to create a locally-governed charitable foundation.  As more information is publicly available, the Attorney General will update this page.

8.         What happens to Portage Health's hospital after the sale?

            Portage Health's hospital and other facilities will continue to serve the medical needs of the local community, albeit with a new owner-the joint venture of Portage Health and Lifepoint.  Portage Health has represented that, under the joint venture, core services will continue and that there will be no major changes to either hospital management or employees.  As part of his review, the Attorney General will consider these representations.

9.         The parties signed a Letter of Intent and, a few months later, a contribution agreement.  What does this mean?

            In February, the parties signed a Letter of Intent, or LOI, and began working towards a definitive agreement. In August, the parties reached a definitive agreement by signing a contribution agreement. The contribution agreement provides the terms of the agreement and also includes certain conditions that must be met—including the consent or no objection of the Attorney General—before the sale can be consummated at closing. Closing is expected by November 30, 2013. In the meantime, the parties are preparing for closing and the Attorney General is reviewing the sale.

10.       Why is the Department of Attorney General 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, see here.

11.       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.

12.       What does the Attorney General review?

            The Attorney General's Review Process provides guidelines for 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 buyer receiving sufficient consideration, i.e., money or value, in exchange for the assets being sold?  The Attorney General often 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?

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

            Yes.  The Attorney General completed his review on November 27, 2013.  His final report is available at www.michigan.gov/portage.    

14.       Will there be a way for the general public to offer their views regarding the proposed joint venture?

The Attorney General hosted a public forum on September 23, 2013 in Houghton, Michigan at the Michigan Tech Lakeshore Center.  A transcript of that forum is available here. The Attorney General also accepted written comments from the public through September 30, 2013.

 

 

Last updated: December 2, 2013