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For-Profit Hospital Chain to Acquire East Orange General Hospital

East Orange (N.J.) General Hospital and Prospect Medical Holdings, a for-profit hospital operator based in Santa Ana, Calif., have signed a nonbinding letter of intent to pursue a "strategic partnership."

Under terms of the deal, PMH would make a "substantial capital investment in the hospital" during the next five years, although exact figures were not provided. In addition, PMH would keep East Orange General as an acute-care facility. There would also be no layoffs.

PMH will assume East Orange General's debt and provide "several million dollars" to the hospital's foundation, as well, according to a hospital news release. According to the hospital's 2011 Form 990, the latest one available on Guidestar, the hospital recorded more than $118 million in revenue and had $39.4 million in net assets.

East Orange General President Kevin Slavin said healthcare reform has changed the paradigm for independent community hospitals. East Orange General issued a request for proposal in early 2013 to more than 24 hospitals and health systems before ultimately choosing PMH.

"The unique healthcare transformation fostered by the [Patient Protection and] Affordable Care Act has led many hospitals to explore new, innovative partnerships," East Orange General Hospital President Kevin Slavin said in a news release. "Our goal here was simple from day one; to identify the right strategic partner that will not only ensure financial viability for our hospital both today and tomorrow, but also embrace and improve our essential services, such as acute care, primary care and behavior health. We have found that partner in Prospect."

Last June, PMH signed a nonbinding letter of intent to acquire another hospital in the state: two-hospital Raritan Bay Medical Center, based in Perth Amboy, N.J. However, the Raritan Bay board of directors at its February meeting voted to end the period of exclusivity with PMH. Raritan Bay President and CEO Michael R. D'Agnes said in a statement: "The medical center continues to experience continued growth, opening up additional opportunities for partnerships in the not-for-profit arena, and the medical center wishes to explore these possible partnerships. This action however does not eliminate Prospect as a potential buyer of Raritan Bay Medical Center in the future."

PMH, supported by Los Angeles-based private equity firm Leonard Green & Partners, currently owns two health systems: Alta Hospitals System, a five-hospital system based in Los Angeles, and Nix Hospitals System, a one-hospital system based in San Antonio. This past September, it also signed a definitive deal to form a joint venture with CharterCare Health Partners, a two-hospital system in Providence, R.I.

More Articles on Hospital Transactions:
Duke LifePoint to Acquire Conemaugh Health System
Northwestern Memorial, Cadence Health to Merge
Tenet, Yale New Haven Form Regional Partnership

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