rovidence Hospital/Providence Heart Institute (Columbia, South Carolina) is a 239-bed facility built in 1938. Until November 1995, Providence was a not-for-profit corporation whose sole member was The Sisters of Charity of St. Augustine Health System (CSA). At that time, substantially all non-financial assets and certain liabilities of Providence were conveyed into a partnership, of which a 50 percent interest was sold to a Columbia/HCA (C/HCA) affiliate. C/HCA received a management contract to run Providence directed by a partnership board having equal representation from both partners and comprised of appointed members from CSA and C/HCA. The partnership operates under agreements to continue the Catholic Mission and IRS nonprofit Acommunity benefits@ standards. Net proceeds ($82.5 million) funded the Sisters of Charity Foundation of South Carolina. The Foundation will address root causes of poverty, with emphasis on youth and family.

Conversion Process

Motivation. CSA believed a partnership would improve their ability to continue and expand their mission in health and human services. CSA wanted to ensure continued delivery of Catholic health care in the communities they serve. Providence was and continues to b a strong and financially healthy hospital – a well known cardiovascular center of excellence with a good reputation for delivering affordable, high quality health care. To continue their Mission, CSA realized it needed to develop alliances or find a strong financial partner. CSA explored various arrangements with Catholic/faith-based, not-for-profit and for-profit organizations, seeking an arrangement that would offer joint ownership/control and the ability to retain its Catholic Mission. After a lengthy period, CSA chose C/HCA as a partner offering better purchasing power, access to capital, management expertise and information systems.

Public Oversight. The conversion stimulated community interest but no significant opposition or negative press. Major provisions of the partnership were publicized 6 months before being adopted. Meanwhile, a proposed merger of the city=s two largest hospitals diverted public attention. Public trust in CSA may have defused potential opposition.

The Attorney General was appropriately involved in the conversion. Although state law does not regulate hospital joint ventures, the state's Attorney General is responsible for protecting nonprofit organization assets. Therefore, appropriate notice was given and background matter shared with the Attorney General (no public hearings were held as there was no requirement to do so). The partnership posed no antitrust issues.

Fair Value. The 50 percent interest seems to have been sold at a fair price. The purchase price was not disclosed. CSA obtained a fairness opinion for the hospital's