Hardin Memorial Health and Baptist Health Enter Into 3614 Million Asset Purchase Agreement
May 01, 2018
Baptist Health to Commit $235 Million to HMH, $126.4 Million to Hardin County
Elizabethtown, KY., May 1, 2018 --- Hardin Memorial Hospital (HMH) and Baptist Health announced today they are entering into a $361.4 million asset purchase agreement through which Baptist Health would acquire HMH, subject to a vote of the HMH Board of Trustees and appropriate regulatory approvals.
The HMH Board will vote on the asset purchase agreement at its May 22 Fiscal Court meeting. The Baptist Health Board of Directors approved the agreement at a special-called meeting on Tuesday, May 1. The final step in the process will be finalizing the sale, expected to occur Dec. 1, 2018.
Hardin County is the hospital’s owner. Baptist Health has managed the 300-bed facility and system for the past 20 years.
After the acquisition is finalized on Dec. 1, the hospital system will be known as Baptist Health Hardin, in keeping with Baptist Health’s tradition of linking the hospital name with its geographic location.
Under the terms of the asset purchase agreement, which follows a two-year long HMH process of exploring potential affiliations, Baptist Health would acquire all assets of HMH and, in return, would commit $235 million over a 10-year period to HMH in operating and capital investments and $126.4 million to Hardin County over a 25-year period.
Judge-Executive Harry Berry, chairman of the HMH Board of Trustees, "As a result of this asset purchase agreement between two institutions that have worked together for decades, HMH will emerge stronger operationally and financially. With Baptist’s committed infusion of $235 million over 10 years, the future of HMH as a regional healthcare leader is assured. This agreement is clearly in the best interests of the 400,000 individuals in 10 counties which our health system has served with quality healthcare for more than 60 years.”
Allen Rudd, chairman of the Baptist Health Board of Directors, said, “We are pleased to add the caring healthcare providers of Hardin Memorial Health to the Baptist Health family. We are committed to expanding HMH’s services, growing its market presence and enhancing its position and reputation as our new hub for Central Kentucky. The residents of Central Kentucky will greatly benefit from Baptist Health Hardin becoming part of the Baptist Health system and our investments in this facility and community so that residents can continue to enjoy quality healthcare right at home.”
Specific terms of the agreement regarding HMH call for Baptist Health to invest a minimum of $150 million in the first five years to build new facilities, recruit more physicians, upgrade HMH’s information technology and equipment and strengthen HMH’s position and reputation as the preferred regional healthcare center. After the first five-year period, Baptist Health will commit an additional $85 million in capital investments to HMH.
Regarding Hardin County, Baptist Health will pay the county $60 million at closing, less the amount used to fully fund all liabilities associated with HMH’s defined benefit pension plan (estimated at $30-$35 million); pay the county $66.4 million over 25 years; assume all of HMH’s current debt obligations of approximately $37 million; and provide up to $150,000 per year (inflation adjusted) for 25 years for healthcare services to inmates of the Hardin County jail.
Commenting on the payments to Hardin County, Judge-Executive Berry said, “This agreement will also ensure a steady source of non-taxpayer funding for the county for many years, as well as assuming HMH liabilities and continuing HMH-provided inmate health services.”
Among other elements, the agreement includes the following:
- Baptist Health will offer employment to all HMH non-contracted employees at their existing rates of compensation.
- Baptist Health will provide HMH employees with continuing health benefit coverage and employee benefits consistent with those offered similarly-situated Baptist Health employees.
- All pension obligations of HMH, associated with the defined benefit pension plan, will be fully funded. Baptist Health will also maintain retiree medical benefits under the HMH plan that covers employees who began employment at HMH prior to July 1, 2005.
- All HMH physician employees have contracts with HMH. HMH will assign these to Baptist Health Medical Group (BHMG) at closing. The assignment will include some terms that apply to BHMG physician contracts. Physicians will transition from HMH retirement and benefit plans to BHMG retirement and benefit plans. HMH and Baptist Health will work to ensure that each physician’s fair market value compensation remains consistent through this assignment process.
- Baptist Health will continue to provide medical staff membership and clinical privileges to HMH medical staff members and practitioners with clinical privileges in good standing.
- Baptist Health will retain Dennis Johnson as President of the hospital, and other members of the HMH senior leadership team will continue in their current positions of hospital leadership.
- The hospital will be governed by a Hospital Administrative Board, consisting of 11 members, with at least six from Hardin County.