ary Black Memorial Hospital (Spartanburg, South Carolina) is a 226-bed previously not-for-profit facility built in 1925 and sold in July 1996 to Quorum Health Group through a joint venture with local physician investors. Major conditions of the sale included a continuation of acute care services for 8 years, historical levels of capital investment for 5 years and maintenance of charity care for 5 years. $20.8 million was paid for 57 physician practices, and the $61.4 million paid for the hospital went to the Mary Black Foundation. This Foundation was reconfigured from hospital fund-raising to a grantmaking foundation whose new purpose is to enhance the health status and wellness of citizens of Spartanburg County through both wellness and prevention efforts.

Conversion Process

Motivation. The MBMH board viewed either partnership with a local hospital or with a national chain having access to capital as the only choice for continued survival. MBMH was financially healthy in 1994-95, but there was concern about long-term prospects given competition from nearby Spartanburg Regional Medical Center (SRMC). For more than a year, the board explored a merger with SRMC, but rejected this and a purchase offer from SRMC based on antitrust issues and concerns that MBMH would no longer remain a full-service facility. Only then was a for-profit sale pursued.

Public Oversight. The conversion split community opinion, with some physicians and citizens strongly opposing the idea of a for-profit sale. Discussions with SRMC were well-publicized. In contrast, when a letter of intent was signed with Quorum in 11/95, this was not made public in the media, although there had been rumors for months of a possible sale. A local group held a public forum late in the process. Media coverage was often negative. Some concerned citizens alerted the Attorney General in hopes of halting the sale.

The Attorney General had limited involvement in the conversion. State law required 20 days. notice of a for-profit sale, which MBMH provided. The Attorney General reviewed the submission, talked with other parties (no public hearings were held) and wrote a letter stating that the sale would be permissible. The sale posed no antitrust issues.

Fair Value. Assets of the hospital appear to have been sold at a reasonable price. Quorum paid a total of $82.9 million, including $61.4 million for MBMH itself which was higher than KPMG Peat Marwick's $56 million appraisal. No RFP was used. The board had discussions with four suitors, and liked Quorum's philosophy best. The remaining $20.8 million paid for 57 physician practices (including $10.9 million in stock).

Community Control

The community has permanently lost ownership of MBMH, but retains partial control through two community representatives and three local physicians on the new 11-member board. This loss of control does not appear to be of general concern as Quorum has been very receptive to local input and has not taken any controversial actions.

Community Health Impact

Hospital Survival. The conversion likely will improve the hospital's long-term survival prospects. Quorum is expanding MBMH services and is developing a regional hospital network to improve the ability to contract with managed care plans or payers. There are mixed views whether Quorum is committed to MBMH over the long term.

Access. The sale has not led to barriers to access for the uninsured or Medicaid patients. The agreement guaranteed continuation of historical levels of indigent care for a period of five years. Access barriers appear not to have increased following conversion and Medicaid access may be better. Services increased at the hospital following conversion. The agreement also specified continuation of historical levels of capital investments for at least fivc years. Though not required, Quorum has added or expanded several