January 21, 2009
City of Marshall Approves Sale of Medical Center to Avera
The city of Marshall is selling the medical center to Avera in Sioux Falls. The city council voted unanimously in favor of the sale at their board meeting on January 27, 2009. The acquisition formally takes place on November 1, 2009.
"This decision follows an extensive evaluation and negotiation process," says Mike Rich, Avera Marshall board chair. "Avera’s partnership model fits our vision. Our goal is to remain a strong medical center and ensure the viability of quality health care for the region." The sale terms are a result of planning and visionary efforts of the mayor, city council members and board members of Avera Marshall.
The purchase price will be $38.5M. Specific focus areas were used to determine a fair and equitable valuation, including income from ongoing operations, market analysis of similar facilities nationwide and asset accumulation. Ben Martig, city administrator, says this is an exciting time for the community. “The timing was right for this to happen, given the financial strength of the hospital, the desire by Avera to invest deeper in the community and the city’s interest in divesting itself of health care operations.” The city of Marshall will pay off bond debt and associated costs, supplement the public employee retirement benefits that end with privatization and contribute back $10M to the medical center foundation to support projects including the hospital surgery remodeling and cancer program development and community health and wellness needs. The city will keep $2M to use for public purposes.
Described as “very complete,” this sale is the culmination of diligent efforts by all parties and careful legal review by all involved. “We looked at every aspect of Avera Marshall from both legal and financial standpoints, as well as the best possible future of health care for the community. We believe this to be a solid investment by Avera and consistent with the community’s vision to grow as a regional medical center,” says John Porter, Avera president and CEO. “Our organization’s mission is to provide quality health care for all individuals, and this acquisition benefits both Avera and the Marshall community.”
Art Olson, long-time board member for Avera Marshall, indicated that one of the concerns from employees regarding a sale was changing from public employee retirement benefits because of becoming a private organization. “We worked very hard to secure a viable replacement plan for the employees,” he says. “Our future workforce and employee satisfaction are critical, and one of the initial concerns of a sale was making it work for our employees. We’ve succeeded in protecting, if not enhancing, the employees’ options.”
The medical center, including the hospital and nursing home, will remain nonprofit, with revenues directed back into operations in Marshall. Decisions for the medical center will continue to be made by a local board of directors with input from Avera. Administration will continue to be charged with day-to-day operations.
