Floyd Medical Center enters into 'strategic combination' with Atrium Health System

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Floyd Health System, the parent corporation of Floyd Medical Center, and North Carolina-based Atrium Health announced plans to merge, but the deal may take up to a year before completion.

In a called meeting Tuesday, Floyd’s board approved the agreement — termed a “strategic combination” — between the two hospital systems.

The approval of the letter of intent triggers a series of final negotiations to hammer out details in one of the largest business deals ever in Floyd County.

The entire process could take up to a year before it is completed, said FMC President and CEO Kurt Stuenkel.

“I am a believer in what we’re doing here,” Stuenkel said. “This is the culmination of, really, a two-year journey for us as we have been examining as an organization what do we need to do to position ourselves to face the future. ... It’s time to consider getting bigger.”

Atrium’s Executive Vice President Carol Lovin said that the health care giant was attracted to FMC because of its culture of caring for the entire community.

“I can assure you they are celebrating up in Charlotte this morning,” Lovin said following Tuesday’s meeting.

Characterizing the merger as a partnership, Stuenkel said it will function much like how Polk Medical Center and Cherokee Medical Center joined the Floyd Medical Center family. FMC is now joining the Atrium family.

“It is not a sale, it is a joining of our two organizations,” Stuenkel said.

The deal

Atrium has a network of nearly 40 hospitals and 900 service delivery locations in North Carolina, South Carolina and Georgia.

Floyd Medical Center is owned by the Hospital Authority of Floyd County and leased to Floyd Healthcare Management. Floyd Healthcare Management Inc. will continue to exist and operate as it has in the past.

As part of this deal, the Floyd board will get two new members from Atrium.

“Atrium, in this proposed transaction, has allowed Floyd to maintain a tremendous amount of local governance – which you don’t always see in a transaction like this,” FMC’s lead staff attorney Tommy Manning said. “It will continue to operate in a similar fashion in the future.”

Atrium further committed to invest a minimum of $650 million in FMC and its affiliate hospitals in Cedartown and Centre over an 11-year period of time.

It also agreed to invest an estimated $50 million in surplus cash at FMC, along with another $30 million – for a total of $80 million – with Floyd Health Care Foundation at the time the deal is completed. Interest from that $80 million will be used to address health needs related to indigent care and social issues in the region.

“That’s a new element in our health system that would not exist had it not been for this journey we’ve been on the past two years,” Stuenkel said.

Part of the terms of the letter of intent include Atrium’s commitment to remove Floyd County as a guarantor of all bonded indebtedness at FMC.

“For some in our community that has been an issue; they’ve been concerned about that. Well, that concern will go away,” Stuenkel said.

The county backed $127.5 million in bonds, out of a total of $185 million, for expansion and upgrades to the hospital. As of June 30, the remaining bonded amount was at $123,215,000.

“That’s a real big deal,” said Floyd County Commissioner Wright Bagby, a member of the Hospital Authority of Floyd County and Floyd Healthcare Management board of directors.

“Our debt will be gone as one of the first items in this thing. They (Atrium) have an even better bond rating than we do as a county. They may substitute them for us or they may put together their own bond package for the debt thing.”

According to a 2018 report on mergers nationwide by Kaufman-Hall, healthcare mergers and acquisitions have continued to focus on what they term as “strategic growth.”

Hospitals are seeking out partners who bring strong operational capabilities or innovative clinical models to their markets, the report stated.

“We absolutely believe that we can be better by being together,” Lovin said. “We know that with size and scale health care systems can be more efficient.”

Aside from economies of scale, Lovin said that “economies of skill” are also critical to the deal.

“When we bring the talent of Floyd together with the talent of Atrium, we’ll do amazing things. We know we can draw from each others resources,” Lovin said.

Going forward

The deal will bring lots of intellectual capital to FMC, Stuenkel said.

“They have the clinical capabilities, the clinical knowledge, the administrative knowledge, economies of scale ... We’ve chosen a great partner that is going to bring us all of that,” Stuenkel said.

All of the executive, physician and employment contracts at Floyd Medical Center will be honored once the deal is completed.

Atrium will also recognize prior service of FMC employees for the purpose of benefit eligibility. Stuenkel, for as long as he remains president and CEO at FMC, will report to the Atrium CEO, as will any successor to Stuenkel.

Atrium has also agreed to maintain and operate the hospitals in Rome, Cedartown and Centre for no less than 10 years.

Last year, Atrium entered into a similar arrangement with Navicent Health in Macon. Navicent operates hospitals in Bibb, Baldwin and Peach counties.

Stuenkel said the question that kept coming up among his leadership team is how the hospital could best position itself for the future in a rapidly changing health care environment.

“Hospitals in Columbus, in Athens, in LaGrange and in Macon have all gone through a similar thought process,” Stuenkel said.

“We’ve joined an industry-leading provider that is doing innovative things ... Even though we’re a $500 million organization, we’re not as big as others are to access clinical capabilities, administrative knowledge and we’ve chosen a great partner in Atrium Health that is going to bring us all of that,” he said.

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