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Sale of ProMedica Coldwater Hospital (transaction cancelled November 2023)

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Sale of ProMedica Coldwater Hospital (transaction cancelled November 2023)

Sale of ProMedica Coldwater Hospital

On April 1, 2023, ProMedica Health System, Inc., and an affiliate of American Healthcare Services, Inc., AHS Coldwater LLC, entered into an Asset Purchase Agreement for the sale of substantially all of the assets of Coldwater Regional Hospital for $8,500,000.

The closing of this transaction is conditioned upon, and subject to review and approval by, the State of Michigan Department of Attorney General.

The Department of Attorney General will continue to post documents to this page as it continues its review of the transaction.

Transaction Update

On November 3, 2023, ProMedica Health System, Inc. exercised its option to terminate the proposed sale.

Frequently Asked Questions

  • To promote transparency and inform the public, documents are available on the Attorney General’s website.
  • Promedica has represented to the Attorney General that it is selling substantially all assets of the Coldwater Regional Hospital due to the challenges of operating the facility. As part of the review, the Attorney General will review the reasons for the sale.

  • The Attorney General will review these questions to ensure a fair process and to verify that the Coldwater Regional Hospital receives fair market value for its charitable assets.

  • American Healthcare Systems is a nationwide healthcare system based in Los Angeles, California. It is a for-profit entity that operates dozens of facilities across the United States; this would be its first hospital in Michigan.

  • Michigan law requires that charitable assets be used for charitable purposes. The Attorney General will review to ensure that the hospital receives fair market value for its assets and that any proceeds are used appropriately for charitable purposes.

  • The Coldwater Regional Hospital will continue to serve the medical needs of the local community, albeit with a new owner—AHS Coldwater, LLC. Under the definitive agreement, AHS has agreed to various post-closing covenants, which the Attorney General will consider during the course of her review.

  • 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.

  • 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 her objection would stop the sale.

  • 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? 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? In recent transactions, the Attorney General has required the buyer to sign a corporate monitoring agreement whereby an independent monitor reviews the buyer’s compliance with the post-closing covenants and annually reports on that compliance.
  • Yes. When the Attorney General’s review is complete, she will publish a report on this website.

  • Yes. The Attorney General is hosting a public forum so that the public can comment and submit questions regarding the sale. The Attorney General plans on holding the public forum in November and will publish notice of the forum in a local paper.