The dance card of potential partners for Indian River Medical Center was narrowed to four suitors last week, and to the governing boards of the stand-alone, cash-strapped hospital, they were a good-looking lot.

The contenders are the Cleveland Clinic, ranked second in the country by U.S. News and World Report; faith-based Adventist Health System, which owns Orlando’s Florida Hospital among its 44 hospitals nationally; Orlando Health, a nine-hospital Florida chain that includes Orlando Regional Medical Center; and HCA, largest hospital chain in the U.S and owner of Lawnwood Regional Medical Center in Fort Pierce. 

All will have a chance to visit and be visited by IRMC officials in the coming weeks with an eye toward taking over the hospital.

Whether that takeover is in the form of a purchase, a lease or some hybrid of the two, the goal is to put the hospital’s future into the hands of a much larger operation, one healthy enough to fund a $270 million renovation while withstanding ongoing turmoil in healthcare industry.

In a crowded room at the hospital normally used for training, members of the IRMC board of directors and the elected Trustees of the Indian River Hospital District listened as a Chicago consultant hired to help the hospital find a suitable partner presented acquisition proposals on Friday.

Eight proposals from nonprofit and for-profit healthcare chains were reviewed. The proposals were received last week after consultants put out feelers to 33 companies in August.

They were the first glimpse at outsiders’ notions of what IRMC might be worth to a partner.

While all eight bidders envisaged trying to work out a deal with the Hospital District to continue leasing the hospital buildings, which are owned by Indian River County taxpayers, rather than attempting to buy the facility outright, the proposals for taking over the hospital business varied.

Two of the finalists, Cleveland Clinic and Adventist Health System, proposed acquiring the IRMC hospital business through what is called in the non-profit hospital world “member substitution,” a model in which the larger hospital group takes on the liabilities of the smaller hospital, makes a commitment to spend capital, and becomes the corporate member of the acquired organization.

The other two finalists, Orlando Health and HCA, instead proposed acquiring the IRMC hospital business by buying some or all of its assets.

Because of the different approaches, comparing the size of the offers was a bit like comparing apples and oranges, but what certainly caught the eye of everyone in the Powerpoint presentation were the figures for total financial consideration which ran as high – in the case of healthcare giant HCA – as $415 million including gross proceeds and 10 years’ worth of promised capital expenditures.

Additional prospective partners were not ruled out in Friday’s four-hour session, led by associates of Juniper Advisory, a Chicago-based firm specializing in the complex business of healthcare systems. After hearing explanations of the various proposals, the two boards separated to hash out their top three picks for further consideration.

“We’re delighted that you’ve got good options, and it’s going to be hard to whittle them down,” said Juniper’s Barry Sagraves as he charged the hospital board with narrowing the field.

The debate among each board resulted in choices that nearly meshed: The Cleveland Clinic got the nod from both boards, as did Adventist. The District Trustees voted to consider HCA, while the hospital board opted for Orlando Health.

That mix likely pleased the consultants, who had urged hospital leaders not to rule out for-profit companies, and not to limit themselves to their first pick – Cleveland Clinic – on the chance things don’t work out.

The nonprofit faith-based Adventist Health System, with more than $8 billion in revenues, owns 25 hospitals in Florida, the best known among them being Florida Hospital. Interestingly, IRMC’s best known surgeon, Dr. Cary Stowe, was lured to Vero from Florida Hospital.

Adventist’s competitor in the Orlando Market, Orlando Health has nine Florida hospitals including the downtown giant Orlando Regional Medical Center. A nonprofit, it has a good reputation among doctors, according to Vero doctors present Friday, but its revenues of only $3 billion gave some board members pause.

Sagraves was particularly bullish on HCA. That behemoth stepped up with pockets bulging, its $41.4 billion in annual net revenue backing the best financial offer of the eight submitted to IRMC.

Since the partnering process began, boards of both the hospital and the county’s elected Hospital District Board have envisioned a cash-rich healthcare system taking over the Vero hospital, currently in urgent need of a $270 million upgrade of its patient rooms and other facilities.

Not surprisingly, HCA, with 226 hospitals, 49 of them in Florida, has an uneven reputation among its vast portfolio. Longtime residents of Indian River County recall the good and the not-so-good reputation of nearby HCA-owned Lawnwood over the years. Today, though, with a heart institute and stroke center, the hospital has grown into a regional Level II trauma center and the pediatric hospital of choice along the Treasure Coast. HCA also runs St. Lucie Medical Center in Port St. Lucie.

There were also deep concerns about considering a for-profit partner and HCA was the only for-profit chain among the four selected for a second look. The fear is there might be negative consequences for patients and staff alike if Vero’s small hometown hospital, the buildings of which have belonged to taxpayers since the 1950s, is turned into a profit center for a vast publicly-traded company.

And there have been serious concerns about a for-profit hospital putting an end to Vero’s tradition of hospital philanthropy – no more named “centers of excellence” to stand as tribute to Vero’s wealthiest donors unless the partner that is picked is a nonprofit, able to take donations.

And at least one doctor in on the debate, Dr. John Lindenthal, believes that Lawnwood may be geographically too close for comfort – that if HCA acquired IRMC, it would cause one to cannibalize the other rather than offer duplicate services at both.

Still, HCA’s whopping offer – a purchase price of $150 million plus a promise of $265 million in capital expenditures – got some pulses racing at last Friday’s afternoon meeting. In addition, HCA said it would not re-sell IRMC for 15 years.

In the consultants’ view, HCA needed at least a second look. The chairman of the hospital board, Dr. Wayne Hockmeyer, agreed.

“I personally think size matters,” Hockmeyer said. “If you’re not generating $8 billion in annual revenues, you’re not of a size that will be sufficient for the future.”

That figure – $8 billion – is the estimate total net revenue of the for-profit Steward Health Care System, one of the hospital companies not selected. Steward’s offer was almost as generous as HCA’s, yet it was hardly mentioned Friday. Steward earlier this year acquired Sebastian River Medical Center as well as two hospitals in Brevard County. The concern was that Steward will be wrangling the financials of its latest acquisitions for some time.

Another for-profit chain with revenues similar to Steward, the publicly-traded Universal Health Services, also did not make the cut on Friday. Nor did a much smaller group, RCCH Healthcare Partners.

The not-for-profit Health First was back-burnered as well. Health First operates Holmes Regional Medical Center in Melbourne and had mustered buzz as a likely pick prior to Friday’s meeting, but it was quickly shelved by the IRMC board due to its small size – net revenues of $1.5 billion.

Orlando Health’s revenues were about twice that number but even those numbers struck some as low. Nevertheless, Orlando Health made the cut with the hospital board and into the final round, even though it didn’t get the vote of the Hospital District Board.

“It was a very civil discussion and a very high level of discussion,” said longtime Vero attorney William Stewart, who has worked with IRMC and sat in on the Hospital District’s session as a member of the public.

Among the eight suitors, it was more than clear to the IRMC board that the Cleveland Clinic was the prize catch. Referred to by Hockmeyer and others as “world-class,” the nonprofit healthcare system is ranked second nationally (after Mayo) by U.S. News and World Report. Its revenues hit Hockmeyer’s $8 billion threshold while maintaining only 10 hospitals.

However, Cleveland Clinic was also notably vague in its proposal. It declined to give any indication of how long it would commit to keeping IRMC until the two parties reached a definitive agreement. Under capital expenditures outlay, it simply offered this promise: “TBD: The Cleveland Clinic standard.” It would pay whatever it took to bring IRMC up to snuff.

Cleveland Clinic won the vote of both boards.

Vero hospital leaders will meet with the finalists this month and next and will visit their hospitals, including some that have recently been acquired by the four chains in the hopes of hearing how the transactions went and how transitions are going now.

Final proposals will be submitted in January with the hospital and District boards voting on their choice of partner that month. Whatever deal is finally negotiated is expected to close in August 2018.