Well, the hospital found a buyer: St. Francis Blue Island to get second chance, new name -- -- chicagotribune.com


St. Francis Hospital & Health Center in Blue Island, which was threatened with closing, will continue operation under new ownership and with a new name in deal announced Thursday.

The Catholic-owned, non-profit hospital will become MetroSouth Medical Center after a "transfer of ownership" to a for-profit entity known as MSMC Investors and its affiliate, Transition Healthcare Co.

"We know how important it is to residents of Blue Island and the surrounding communities to keep the hospital operating for the long term and we intend to do just that," said Arnold Kimmel, the chief executive of Transition, which has offices in Chicago and Nashville.

Established in 1905, St. Francis, with 410 beds, was a bustling facility for decades and became known for a top-notch cardiology program. But as the number of its uninsured patients rose and hospitals in more-affluent suburbs opened new heart programs and other services, doctors joined those medical staffs to improve their own physician practices.

SSM Health Care, a Catholic-run organization that operates 20 hospitals, announced in April that it would close St. Francis after nearly 30 hospital operators and investment firms said they could not take on the hospital's myriad problems. The main issue was the influx of patients who couldn't pay their bills and flat reimbursements from health insurers.

The struggles at St. Francis gained national attention for the plight of non-profit hospitals because SSM said it couldn't give the hospital away for free.

Though Transition Healthcare and MSMC likely got a good deal on the takeover, substantial losses remain that will require money to keep the facility going. Transition was one of the prospective buyers in April, but it could not come up with financing until now.

Although little is known about the price Transition executives will pay, its financial backer said the plan calls for investing $30 million in new hospital equipment and facilities. MSMC, the acquirer, was created by Transition and its Harrison, N.Y.-based financial backer, Falcon Investors.

Neither SSM or MSMC would disclose further details of the transaction. But Falcon Executive Vice President Lawrence Krule said the firm has made successful investments in nursing homes and other long-term-care facilities in similar communities with high numbers of patients who either have no medical-care coverage or are insured by the Medicaid program for the poor. Falcon has not invested in a hospital before.

"This significant level of investment reflects our hope and aspiration for what we can achieve in the turnaround of the hospital for the communities it serves and for the employees," said Krule, who will become chief restructuring officer of MetroSouth.

SSM invested heavily in St. Francis and still couldn't turn the hospital around, pointing to $75 million in investments since 2000 that included upgrades to mostly private rooms, new operating rooms and a same-day-surgery facility. Even capital improvements couldn't keep the hospital from losing $40 million since 2002. St. Francis is projected to lose an additional $20 million this year alone, SSM has said.

Meanwhile, several doctors on St. Francis' medical staff have discussed moving their practices since SSM announced the closing, said executives at neighboring hospitals. Physicians with ties to an institution and who treat patients there are critical to a hospital's revenue stream and profitability.

But Kimmel, who is familiar with the Chicago hospital market from earlier executive jobs, said doctors are staying and patients continue to use St. Francis.

"Physicians have been remarkably stable," Kimmel said, adding that the hospital intends to maintain the size of the 1,400-employee workforce.

Executives also will evaluate programs to see where there is potential to expand and bring in new revenue.

Transition and SSM said they expect "a full transfer of ownership" in 60 to 90 days. It would still face approval of the Illinois Health Facilities Planning Board, which is the regulator for hospital sales and major medical equipment purchases by medical-care providers in Illinois.

To help win over the planning board, Transition and MSMC have hired Anne Murphy, former planning board attorney and general counsel to the Illinois Department of Public Health.

Illinois hospitals are known to hire influential lobbyists and attorneys to get projects through the board.

"It is the case that in most significant regulatory transactions … that parties retain counsel to assist them in that effort," said Murphy, of Chicago law firm Holland & Knight.