MHCC buys Summit Medical in Casper

The Converse County commissioners on Tuesday morning agreed to Memorial Hospital of Converse County’s purchase of Summit Medical Center in Casper, a move that cleared the way for the deal that had been shrouded in secrecy for months as details were being hammered out.

MHCC’s board voted Sept. 28 to move forward with the $38 million purchase of the private surgical practice on Casper’s east side, making it the sole owner of the high-end, for-profit surgery center. The county resolution adopted Tuesday also allows MHCC to create a new limited liability company, called Summit Memorial Management, to provide the administrative services for the center.

The negotiations over Summit were kept secret by a nondisclosure agreement – a standard practice in business sales – but one required by the seller rather than the hospital, according to MHCC officials.

The new company, which will be owned 100% by MHCC, will be kept at arm’s length in terms of financial obligations from the Converse hospital and, thus, from Converse County, officials said, but any net revenues (profits) will flow back to MHCC.

The deal calls for MHCC to pay $13.5 million in cash for Summit with another $25 million in debt to be carried by the seller at 4% interest to be borne solely by the new LLC. In simple terms, according to MHCC Board Chairman Bob Kayser, the seller is bearing the full risk of the deal after the initial $13.5 million payment because the debt (which has an 18 month grace period before any payments are due) has to be paid by Summit’s operations, not from MHCC.

As Kayser explained to the commissioners, the deal creates two levels of LLCs between Summit Medical and MHCC, further distancing the hospital from financial liability while allowing net revenues to flow back into Converse County.

“That is critically important to us to secure the financial future of MHCC,” Kayser said as he detailed the financial benefits of the purchase, including an initial $1.25 million infusion of accounts receivables, $5-$6 million a year more in net revenues added to MHCC’s bottom line and $2-$3 million more in savings from no payments on the debt for 18 months.

Kasyer, MHCC CEO Matt Dammeyer and other hospital leadership provided what they said were very “conservative” financial projections showing a 3.3-year return on that $13.5 million investment. The board chairman then noted that several developments in the past few days will only add to that quick ROI, including the hiring of two spine surgeons and their associated practices, better negotiated terms with private insurance companies for Summit’s reimbursements and other surgical additions coming to MHCC and/or Summit.

In other words, he said, those additional revenues are not in the projections, which will only be better than what was being presented.

Nevertheless, the hospital’s projections showed a $3.7 million “cash gain” for MHCC by 2023 and growing each year after that, not counting some savings from combined purchasing power and scale of services. 

MHCC is not buying the property, located just off the Hat 6 exit along East Second St. in Casper, but will have a favorable lease, Kayser said. Those details are still being worked out, and the closing on the sale will happen in 1-2 weeks when the lease is finalized. (The lease terms are known generally but the property ownership may change in the coming weeks.)

Kayser, who spent his work life doing major business deals, said this is “probably the most favorable (terms I have ever seen) in my career” but the seller wanted to work with MHCC rather than the other two buyers interested in it, even though they offered more money for the practice.

The 1.5 hour meeting Tuesday covered a great number of intricate details about the sale and the risks involved but only a few members of the public attended.

Willox, Commissioner Robert Short and others, including Kayser, conceded there is a risk involved, nonetheless, but Kayser said the hospital has done this deal to minimize the risk to MHCC and Converse County to the $13.5 million upfront payment. He noted, and several agreed, that with other buyers ready to acquire Summit, that MHCC could sell it and recoup its investment if “things went sideways” but they do not expect that to happen.

Not everyone at Tuesday’s meeting was happy about the purchase or county resolution approving it. Trent Kaufman, a Republican candidate for county commissioner who ran in the primary on a platform that included controlling MHCC’s expansion into other counties, expressed his strong opposition.

In a written statement to the commissioners, Kaufman listed 17 concerns and questions about the purchase and MHCC’s financial position to back up his stance against it. 

Kaufman, like Willox and Short, are the only Republicans on the general election ballot this fall, but Constitution Party candidate Derek Joppru is also running. No Democrats are on the ballot for the three county commission seats open.

Some of his concerns included “cannibalizing” services from one facility to another; not accounting for losing physicians at Summit when the deal goes public; MHCC using nearly all of its $17 million in reserves to complete the purchase; and how the two centers can compete for the same high-profit surgeries which are trending down this year.

The MHCC reps responded that those are all good questions they considered as well, but Kayser said the goal of remaining an independent, county-owned hospital requires growing services and providing top quality care. Bringing $3.8 million to Converse County each year will help MHCC fulfill that mission and continue offering services here.