Exempla transfers control to gain access to capital

LAFAYETTE – Exempla Inc. plans to transfer its stake in two hospitals to a Catholic-oriented nonprofit health-care manager in order to gain access to capital to resuscitate the Exempla system.

As part of the deal, Exempla will transfer its control of Exempla Good Samaritan in Lafayette and Exempla Lutheran Medical Center in Wheat Ridge to Arvada-based Community First Foundation, which would then transfer it to Kansas-based Sisters of Charity of Leavenworth Health System Inc.

With this deal, Exempla would hand over control of the two hospitals to Sisters, but in exchange, the hospitals would get access to much needed capital through Sisters.

The transfer complied with an arbitrator’s decision earlier this year to block it if value was exchanged. The arbitrator previously blocked a proposed $311 million sale of the two hospitals to Sisters.

“The interest we have is in their replacement of Saint Joseph hospital,´ said Kay Taylor, Exempla Healthcare System’s vice president.

Because Sisters is a large health-care system that currently owns or operates nine hospitals, including Exempla Saint Joseph hospital in Denver, the organization can secure the needed loans.

In late 2005, Exempla approached Sisters and the foundation in hopes of securing capital to renovate or rebuild Saint Joseph, which Sisters owns but Exempla operates, manages and governs, Taylor said. But without Exempla giving up “greater control,” the two organizations didn’t want to take the financial risk.

“We’re fulfilling a request they made,´ said Chris Woolsey, a Sisters of Charity spokeswoman.

That request included “simplifying Exempla’s governance and structure,” increasing “access to needed capital,” and keeping “the system together as a viable health-care system,” according to the memorandum of transfer signed by Sisters of Charity of Leavenworth Health Systems Inc. and Community First Foundation representatives Aug. 19.

“The bottom line still is all three hospitals are in dire need of capital,” Woolsey said speaking of Good Samaritan, Lutheran and Saint Joseph.

In exchange for the funds needed to keep Saint Joseph alive and advance a stalled expansion at Good Samaritan, Exempla gives up control of Good Samaritan and Lutheran.

“We absolutely believe that these additional resources are so badly needed,´ said Jean Galloway, Community First Foundation’s spokeswoman. “These projects were going to continue to stall.”

The foundation, which has a long relationship with Exempla, entered into a joint operating agreement with Exempla and Sisters years ago making it an integral part of the transfer.

She said Community First, which works to improve health and well-being in the community, is only concerned with providing quality health care to the Denver metro area. Through providing needed money, the transfer would continue to do that, she said.

If the transfer were approved, Sisters would borrow money on behalf of Exempla.

How much money has yet to be determined, but in late 2005 when the call for help went out, “hundreds of millions of dollars” were needed, Woolsey said.

Upon approval by various regulatory agencies, the two hospitals “will remain intact” and be governed by a board of directors comprised of 10 members equally appointed by Community First and Sisters. Those 10 members, down from the current 15-member board, will serve one-year terms, and, at most, six consecutive terms.

“Our priority has been and remains to strengthen Exempla’s ability to serve the Denver metropolitan community and we welcome the opportunity to play a significant role in nurturing this vital local resource,” Kenneth Eggeman, Community First’s president and chief executive officer, said in a statement.

Because of the Catholic-oriented health-care manager’s beliefs on issues like contraceptive and abortion, certain medical services likely won’t be offered if the transfer is completed.

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