Franklin, Tenn.-based Community Health Systems will buy Health Management Associates Inc. for $7.6 billion.
HMA, based in Naples, Fla., is the parent company to Summit Medical Center in Van Buren and Sparks Health System in Fort Smith.
In Arkansas, Community Health owns hospitals in eight cities, including Northwest Arkansas Medical Center in Bentonville and Springdale, Medical Center of South Arkansas in El Dorado and Helena Regional Medical Center in Helena.
The definitive merger agreement, which will not be complete until the first quarter of 2014, includes Community Health taking over $3.7 billion of HMA’s debt. When completed, Community Health will own or operate about 206 hospitals in 29 states with a total bed count of more than 31,000.
Community Health currently operates or leases 135 hospitals in 29 states. In more than 55 percent of the markets served, CHS-affiliated hospitals are the sole provider of health care services, the Community Health website states. HMA operates 71 hospitals in 15 states with about 11,000 licensed beds.
"This compelling transaction provides a strategic opportunity to form a larger company with a diverse portfolio of hospitals that is well positioned to realize the benefits of health care reform and to address the changing dynamics of our industry," Wayne T. Smith, chairman, president and CEO of Community Health Systems, stated in a Tuesday press release. "Our complementary markets and the ability to form networks in key states, along with the synergies that will be available to us, can create value for the shareholders of our companies, the communities we serve, our employees and medical staffs. We look forward to working with the physicians and employees of HMA to advance the commitment shared across both organizations to pursue clinical excellence and to deliver quality care for patients."
The merger is subject to approval by a 70 percent vote of HMA’s stockholders. Under the terms of the agreement, Community Health will acquire all of the issued and outstanding common stock of HMA for a combination of cash and CHS stock valued at $13.78 per HMA share. Both the Community Health and HMA boards of directors approved the merger with a recommendation to stockholders for approval.
HMA Board Chairman William J. Schoen stated the agreement represents "the successful conclusion" of a strategic review process, "during which we evaluated several alternatives, including remaining independent and potential transactions with other strategic parties."
In April, HMA announced plans to locate a regional service center in Fort Smith that will employ 500.
"The details of the integration of Health Management and CHS will take many months to unfold," said Eric Waller, a senior vice president and chief marketing officer for HMA. "We look forward to a thoughtful planning process. As one company, Health Management will have an even stronger financial and operation profile and enhanced means to compete, grow and thrive in a rapidly evolving health care landscape."
John M. Starcher Jr., 43, was named interim HMA president and chief executive officer, effective Aug. 1. Starcher was Health Management’s Eastern Group president.
"The board of directors is delighted that John Starcher will lead Health Management at this important time in the company’s history," Schoen said. "He is a great leader with a track record of success at Health Management and throughout his career. Under John’s leadership, Health Management will continue to execute its strategic plan and take the steps necessary to complete our combination with Community Health Systems."
In May, Gary Blan, Arkansas market CEO for Sparks and Summit since March, resigned. On Monday, HMA named a new chief financial officer for its Arkansas, Oklahoma and Texas markets, David Rothenberger, who previously worked for Community Health.