yerly Hospital (Hartsville, South Carolina) was a not-for-profit facility built in 1968 and sold to Health Management Associates (HMA) in August 1995. Sale conditions included building a new hospital, more physician recruitment, and continued indigent care. The sale proceeds went to the Byerly Foundation, including about $25 million in cash, nearly $2 million for a 3-year lease, and $3-6 million value of the old facility once the new hospital opens. Construction on this facility began in 1997 and will end in 1999. The Foundation will focus on education and economic development.

Conversion Process

Motivation. The old hospital board viewed a sale as preferable to costly renovation of an old hospital; better access to capital, a new facility and new physicians were expected to improve the odds of survival. Renovation may have cost $18-23 million and future growth was limited by the hospital's being land-locked. The board used an RFP to outline the goal of having a new full-service, community hospital, attracting new physicians, and continued indigent care. The RFP did not require a sale, so alternative structures could be proposed. HMA was selected from among seven bidders (including three other for-profit chains) because it best fit the community and seemed most committed to a new hospital.

Public Oversight. The conversion was well-publicized through local media and community planning initiatives. Nearly two years before the sale, the board alerted community leaders to Byerly's possible renovation or sale. In late 1994, it formally surveyed opinions of key business leaders and the general public. Since it was known that hospital renovations would be too costly, this allowed an informal assessment of the feasibility of a large fundraising drive for new construction, given the ambitious fundraising plans of other groups. These initiatives and word-of-mouth news made media coverage relatively less important in spreading the news. The Attorney General had minor involvement in the conversion. The Attorney General issued an opinion (but convened no hearings) finding that a sale to HMA posed no antitrust or nonprofit conversion problems.

Fair Value. Assets of the hospital appear to have been sold at a reasonable price. The Board did not seek to maximize the sales price: the primary objective was to ensure the hospital's survival. The bidding process, a Coopers & Lybrand appraisal (and their assistance in evaluating bids), and the unusually strong financial experience of key Board members, resulted in a fair price.

Community Control

The community has permanently lost ownership of the hospital, but retains advisory control through community members on the new board. This loss of control does not appear to be of general concern, as HMA has not yet taken any controversial actions.

Community Health Impact

Hospital Survival. The conversion probably will improve the hospital's financial health and prospects for long-term survival. Virtually all indicators of hospital volume increased from 1996 to 1997. Although the new hospital's financial performance is yet unknown, it is likely to be improved.

Access. The sale has not led to barriers to access for the uninsured or patients with Medicaid or Medicare. HMA has more businesslike billing practices, which has annoyed some patients, but not appeared to deter indigent admissions. The presence of a large employer with officers on the hospital board may be a factor in ensuring that HMA adheres to its contractual obligations. Services increased at the hospital following conversion. Since conversion, HMA has added or expanded services while dropping none. HMA has recruited new physicians to the community--both generalists and specialists. Some, but not all of this expansion would have occurred without conversion.