Press release from Mad River Hospital:

On May 20, 2023, the Board of Directors of Mad River Community Hospital (“Mad River”) approved a Non-Binding Letter of Intent with hospital management company Southwest Healthcare Services, LLC (“Southwest”), setting a general framework for Mad River to be acquired and, thereafter, operated as part of Southwest’s affiliated healthcare network. Over the course of the next 90 days, the parties will complete their mutual due diligence and work towards a definitive agreement. The parties expect to reach a definitive agreement, secure regulatory approvals, and implement the change of control in the Fall of 2023. During such period and through the transition, Mad River will remain open and continue to operate normally.

As part of the framework, Southwest has committed to (i) maintaining employee wages and benefits; (ii) maintaining physician contracts; (iii) maintaining existing services; and (iv) investing heavily in facility upgrades and service line expansions, including behavioral health.

“I am very excited to make this announcement today,” said Mad River Chairman and CEO Douglas Shaw, “My father built this hospital, and it has been my life’s passion to carry on his legacy. I am proud of Mad River’s 50-plus year heritage as a stand-alone hospital. However, as small rural hospitals continue to struggle financially in the aftermath of the COVID-19 pandemic, it has become clear that, to ensure Mad River’s long-term viability in this community, we need to partner with a proven healthcare management team that can navigate the current uncertainties in the economic climate for hospitals in California.”

“Southwest is the perfect fit at the perfect time,” said Shaw, “led by Precious Mayes, an executive who has won accolades for her leadership of critical access and safety net hospitals, Southwest will be operating a small but stable hospital network that shares Mad River’s values and culture. I look forward to the community getting to know her and her talented team over the weeks and months to come.”

Mr. Shaw emphasized that the choice of new management was driven by shared values and culture. “In recent decades, Mad River has been approached about potential acquisitions, but we have declined to give up our independence based on concerns that such a move would neither serve the needs of the community nor protect our devoted staff,” said Mr. Shaw. “However, we were attracted to this team because of its commitment to our staff and its track record with other hospitals in difficult circumstances.”

Southwest is a hospital management company that currently manages Pacifica of the Valley Hospital (“Pacifica”) in the San Fernando Valley and the Behavioral Health Urgent Care Center in Sylmar, CA. Southwest is currently working to open other hospitals following their closures by prior owners in order to serve the communities in which each is located. “This strategic partnership presents an enormous opportunity to fulfill our mission of strengthening access to medical and mental health services” said Ms. Mayes. “ Ms. Mayes emphasized that the coming weeks and months will be devoted to getting to know the community in preparation for meeting its healthcare needs. “We are deeply humbled by the opportunity presented to us by Mad River’s leadership, and we are committed to earning the trust of the communities Mad River serves.”

FAQs

1. Why did Mad River choose to evaluate partnership options?

Healthcare is facing difficult times and stand-alone hospitals are vulnerable and challenged to continue in the current environment. The impact of the pandemic has exacerbated the already difficult operating environment, notably reductions in reimbursements and increased costs.

This is particularly the case for small, rural hospitals like Mad River. To ensure Mad River’s long-term viability and commitment to Humboldt County, we need to partner with a healthcare network that has the foundation to remain stable in an uncertain economic climate for hospitals in California.

This decision will secure the future of quality healthcare in our community, while retaining meaningful continued influence.

2. Why Southwest Health Care Services, LLC?

Mad River selected Southwest following an exhaustive and competitive process, in which leadership met with more than a half dozen organizations.

Ultimately, Southwest was selected because its philosophy, culture, and leadership best met Mad River’s objectives, and we felt they would be the best to carry forward Mad River’s legacy and values.

Southwest intends to manage Mad River directly or through a Southwest affiliate.

3. During the period of transition, will Mad River continue to operate?

Yes, Mad River will continue to operate under its existing ownership and management until the transition is complete and Southwest assumes management. Leadership from Mad River and Southwest are committed to a seamless transition for our patients, employees, and providers.

4. Who is Southwest Health Care Services, LLC and Precious Mayes?

Southwest Health Care Services, LLC is a hospital management company that has a long history of successfully assisting independent community hospitals. It presently manages Pacifica of the Valley Hospital in the San Fernando Valley and the Behavioral Health Urgent Care Center in Sylmar, CA. Southwest is currently working to open other hospitals following their closures by prior owners in order to serve the communities in which each is located.

Southwest is led by Chief Executive Officer Precious Mayes, who has 25-plus years of healthcare leadership experience. In 2019, Precious was presented with a congressional award given by Congressman Tony Cardenas, 29th Congressional District. Precious was recognized for her years of outstanding community service, advocacy, leadership and tireless involvement as CEO at Pacifica Hospital.

Additionally, Precious has received the prestigious San Fernando Valley Business Journal awards for “Business Executive of The Year”, and “Women in Business of the Year”. Precious was also listed in the “2019 Valley 200 Book” as one of the top 200 Influential Business Leaders in the San Fernando Valley. Precious was a nominee recipient 4 consecutive years for “Women in Healthcare” by LA Business Journal. She is an active member of the California Hospital Association (Leadership Committee), California Association of Healthcare Facilities, American Healthcare Association, United Hospital Association and National Center for Assisted Living.

Precious was featured on the cover story of Insight Success magazine as one of the “Most Admired Women Leaders in Business for 2020”. January 2021, The Boss Magazine featured Pacifica Hospital in a cover story article, “PACIFICA HOSPITAL OF THE VALLEY DELIVERS BEST-IN-CLASS PUBLIC HEALTH CARE.”

5. Without this partnership, would Mad River close?

No, Mad River is committed to its long-term presence and success in our community, with or without this partnership.

6. Will the name of the hospital change?

No name change expected.

7. When will the transition occur?

Mad River and Southwest anticipate that the change of control will occur at some point in the Fall of 2023.

8. Is the transition guaranteed to occur?

No. At this point, the parties have signed a Non-Binding Letter of Intent, which sets a framework for the transaction and is an aid to drafting a binding agreement. Under the Letter of Intent, the parties will continue their mutual due diligence and work towards the execution of a definitive agreement, which creates binding commitments.

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CORRECTION: This post initially misidentified where Southwest Healthcare Services LLC is located. The Outpost regrets that error.