Frequently Asked Questions (FAQ) regarding Proposed Joint Venture of Metro Health with CHS
This page answers frequently asked questions regarding the Attorney General’s review of Metro Health’s proposed joint venture with a subsidiary of Community Health Systems (CHS). Metro Health and CHS signed a definitive agreement in January 2015. The Attorney General is reviewing the transaction, which is expected to take 4 to 6 months from the signing of the definitive agreement.
- Where can I find documents related to this transaction?
To promote transparency and inform the public, documents are available on the Attorney General website.
- Why is Metro Health seeking a joint venture with CHS?
Metro Health has represented to the Attorney General that, with this joint venture, it is proactively adapting to the changes of federal health care reform from a position of strength. This will allow it to improve facilities, to access capital, and to preserve services. The Attorney General will review these representations.
- How was CHS chosen?
The Attorney General will be reviewing Metro Health’s process in choosing CHS.
- Who is CHS?
Community Health Systems (CHS) is one of the nation’s largest hospital operators. It is a publicly-traded company from Tennessee. CHS owns or operates 135 hospitals in 29 states. This would be CHS’s first hospital in Michigan.
- What is the joint venture between Metro Health and CHS?
Under the proposed joint venture, Metro Health will contribute its assets to the joint venture; CHS will contribute cash; and Metro Health and CHS will jointly govern the hospital. More details will be available once the parties have reached a definitive agreement.
- What happens to the proceeds from the sale of Metro Health’s ownership interest to CHS?
Michigan law requires that charitable assets be used for charitable purposes. Consistent with this, Metro Health represents that proceeds from the transaction will remain with Metro Health Corporation and be used for charitable purposes. The Attorney General will be closely reviewing the preservation of charitable assets so that both donor intent and charitable assets are preserved. Typically, the Attorney General also requires the parties to agree to a Charitable Asset Transfer Agreement to offer further protection to transaction proceeds. As more information is available, the Attorney General will update the website.
- What happens to Metro Health’s hospital after the sale?
Metro 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 Metro Health and CHS. Metro Health has represented that, under the joint venture, core services will continue and that current employees in good standing will be offered similar employment contracts by the new owner. As part of his review, the Attorney General will consider these representations.
- The parties entered a Letter of Intent in November. What is a Letter of Intent?
A Letter of Intent, or LOI, is a tentative agreement between the parties to cooperate toward certain ends. In general, the parties agree to work in good faith towards completing a transaction. In January 2015, the parties signed a definitive agreement. With this agreement, the parties have reached definitive terms of agreement regarding the transaction and are working towards closing—anticipated by the end of June or July 2015. As the proposed joint venture progresses, the Attorney General will update the website with additional information regarding the transaction.
- 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.
- 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.
- 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?
- 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.
- Will there be a way for the general public to offer their views regarding the proposed sale?
Yes. The Attorney General is hosting a public forum on Thursday, April 23, so that the public can comment and submit questions regarding the sale.
Date & Time: April 23, 2015, 5:00 - 7:00 p.m.
Location:Metro Health Conference Center
2225 Main Street SW
Wyoming, MI 49519
The public can also comment on the proposed sale by email or by mail to:Michigan Department of Attorney General
Attn: Metro Health Review
Corporate Oversight Division
Charitable Trust Attorney
6th Floor, G. Mennen Williams Building
525 W. Ottawa St.
Lansing, MI 48913
Last updated: April 8, 2015