The opening of a new, $35-million state-of-the art outpatient center and a switch from Marshalltown Medical & Surgical Center to Central Iowa Healthcare are but two changes Central Iowans have seen at the hospital in recent months.

More – including another name change – might be coming this fall.

All will take place if a joint venture formed between CIH, Mary Greeley Medical Center of Ames and LHP Hospital Group, Inc. of Plano, Texas becomes reality.

CIH’s Board of Trustees announced Tuesday they are exploring the joint venture.

The three parties have entered into a non-binding letter of intent under which they will engage in exclusive negotiations over the next 90 days.

CIH CEO John Hughes made the announcement public Tuesday afternoon at the Marshalltown Rotary Club and later at an afternoon press conference with CIH Board of Trustees President Carol Hibbs.

Hughes addressed employees and vendors, among others earlier Tuesday. No representatives from Greeley or LHP were present at Rotary or the press conference.

What it means

The signing of the non-binding letter of intent allows the three to work together exclusively as they complete due diligence and negotiate a definitive agreement. While the type of arrangement model between the organizations has not yet been finally determined, the three have specified in the letter of intent to work towards LHP and Greeley forming a limited liability company that would acquire substantially all of CIH’s healthcare assets, including its facilities. CIH would be re-named LHP and would lose its not for profit status and become for profit.

CIH operates a 49-bed, acute care hospital, four primary care medical clinics and an outpatient center which opened in mid-August 2015. More than 60,000 residents receive health care services from CIH.

Joint venture?

Hospital affiliation is commonplace. More than three-quarters of Iowa’s hospitals have some kind of affiliation, according to the Iowa Hospital Association.

“Today’s announcement moves forward our commitment for improved healthcare services for our community,” said Hibbs. “Through a deliberate exploration process, the trustees achieved its goal to find a partner that would strengthen quality and access to care as well as bring substantial investment and resources. We are looking forward to moving ahead together with the LHP and Mary Greeley joint venture.”

A definitive agreement will be signed upon the successful completion of due diligence and negotiation and the receipt of all necessary approvals and consents. The parties will be working in concert with governmental and other regulatory authorities, such as the State Attorney General, for customary approvals. In addition, any transaction would be subject to the approvals of the respective governing bodies of LHP, Greeley and CIH. Once all of such conditions have been satisfied and currently anticipated to occur this fall, the transaction would close.

Industry factors

The trustees announced in March they would be seeking a health care partner after rigorous planning sessions designed to plot a course for CIH’s future.

Two factors were identified – the need to adapt to a challenging financial landscape and a desire to enhance local health services.

The board hired Chicago-based investment banking firm Juniper Advisory in March to assist in finding suitable partners.

For years, the CIH board considered the possibility of forming a partnership, Hughes said, but pressure increased as national health care reforms raised costs and reduced reimbursements.

CIH’s investment in new facilities and technology to attract and retain patients also increased costs.

Selection of Greeley and LHP

Juniper reviewed more than 24 health system affiliates. The trustees evaluated these organizations against a lengthy set of criteria including their ability to recruit doctors, expand clinics, invest in the Central Iowa region, and insure that patients have access to excellent care, close to home for the distant future.

“LHP has a good track record in recruiting doctors,” said Hughes.

Part of the trustee’s and administration’s due diligence was visiting a LHP-owned hospital in Harker Heights, Texas, said Hibbs.

Administrators and trustees were positive about LHP after touring the facility, she said.

LHP Hospital Group, Inc.

LHP is well-known throughout the industry for its innovative approach to collaborative relationships with not-for-profit providers. LHP is a privately-held hospital company. LHP was established to provide essential capital and expertise for not-for-profit hospitals and health systems in a manner consistent with their values and historical missions. LHP has established itself as the partner of choice for some of the top mission-oriented health systems in the country. LHP is owned by affiliates of private equity firm CCMP Capital Advisors, LLC and the CPP Investment Board, as well as certain members of the company’s management and board of directors.

Mary Greeley

Greeley is a publicly-owned 220-bed municipal hospital. While a municipal hospital, it receives no funding through the city tax structure. Greeley has a medical staff of more than 200 providers covering over 50 specialties and sub-specialties together with more than 1,300 staff deliver services.

Public information

“As a vital organization and one of the largest employers – approximately 550 employees – in the region, CIH is committed to keeping employees, physicians and the members of the communities informed and engaged throughout this process,” said Hughes.

A dedicated website – www.futureforCIH.com – has been launched to keep the public informed of project progress and a place to submit questions answered by CIH.