HealthEast Care System is the largest healthcare provider in Minnesota’s Twin Cities East Metro area. HealthEast Care System has four hospital campuses in the St. Paul metro area: Bethesda, St. John’s, St. Joseph’s and Woodwinds.
In March of 2007, HealthEast met with Health Inventures (HI) to review and plan for the systems future ambulatory joint venture strategy. During the meetings, the group identified seven opportunities for hospital-physician collaboration. The opportunities included existing ASCs and potential de novo opportunities at HealthEast ambulatory sites.
HI conducted a comprehensive market assessment in April of 2007. Maplewood Surgery Center, an existing, licensed ASC, was identified as the most immediate opportunity for collaboration. Maplewood was 100 percent owned by HealthEast Diversified Services, a subsidiary of HealthEast. Maplewood is a four-OR, one-procedure room ASC, operating at 73 percent capacity in a 12,678 usable square foot facility. The ASC is attached to St. Johns hospital in the Maplewood Professional Building owned by HealthEast Properties.
Wellspring Partners, an independent valuation firm, arrived at a fair market value based upon a multiple-approach valuation method and a minority ownership offering. HI conducted extensive physician interviews and generated financial projections based on the current facility operations and physician feedback. The Minnesota Department of Health re-approved the facility as an ASC at the state and federal levels in July 2007.
A steering committee of interested physicians, hospital representatives, HI representatives and attorneys met several times from May through July to review and approve the Operating Agreement, Private Placement Memorandum (PPM) and Subscription Agreement.
In September 2007, HealthEast and HI had a kick-off meeting to open the offering to physician investors. The offering closed with 14 physician investors from six medical groups. Sixty-two physician units (or 10.3 percent) were issued ownership. A management board of six voting managers was elected by the owners. HealthEast Diversified elected three of the managers, the physician owners elected two managers and Health Inventures elected a manager. Maplewood has entered into a long-term management services agreement with HI while payor-contracting services were purchased from HealthEast.
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