Is ProMedica a Red Flag for Other Healthcare System Partnerships?

Word emerged last week that the U.S. Golf Association and nonprofit hospital system ProMedica had quietly ended their 10-year partnership a month earlier after just one year.

The agreement making ProMedica the USGA’s official health and well-being partner and presenting sponsor of The U.S. Women’s Open was hailed upon its signing in January 2022 for raising the purse of the women’s championship from $5.5 million to $10 million, “the largest in not only women’s golf but all of women’s sport,” according to Golf Channel.

While clearly a blow to the golf governing body, ProMedica’s withdrawal could also be a warning to other rights holders with partners from the highly active hospital/healthcare system category.

In a statement, ProMedica blamed the sudden end to its partnership on conditions buffeting the industry. “We are grateful for those partners like the USGA that understand the extreme financial challenges the healthcare industry has been navigating and have worked with us in a professional manner to reassess prior engagements.

“ProMedica, like many other health systems across the country, is experiencing financial strain coming off of 2022, which was declared the worst financial year for the healthcare industry since the start of the pandemic. While we were hopeful the industry’s financial performance was improving at the beginning of 2022, challenges like extreme staffing shortages and rapidly rising expenses proved to be significant hurdles.”

ProMedica reported operating losses of more than $350 million through the first three quarters of 2022. The company has yet to announce fourth quarter results.

Certainly not every healthcare system is in ProMedica’s dire straits. Consider that three hospital entities were confident enough to sign MLS jersey sponsorships prior to the beginning of the season last month: UCHealth with the Colorado Rapids, UT Southwestern Medical Center with FC Dallas and Providence Health with Seattle Sounders FC. They joined four others from the category as MLS jersey-front sponsors.

However, properties with or seeking sponsors in the category should stay on top of developments. For example, earlier this month Fitch Ratings released an analysis titled “Early NFP (Not For Profit) Hospital Medians Show Expected Deterioration; Will Worsen.” The report predicts “materially weaker profitability and liquidity…due to expense increases and investment market losses.”

For the rest of the year, “Fitch does not expect a rapid financial recovery for most providers, although hospitals under operational pressure will begin to see breakeven results on at least a month-to-month basis at some point in 2023 with revenue growth and expense pressures easing.”

As for its other partnerships, Toledo-based ProMedica also last week “suspended” a $10 million pledge to MetroParks Toledo for the Glass City Riverwalk project and downgraded its sponsorship of this summer’s Toledo Jeep Fest from a $60,000 title position to a $5,000 supporter. It had previously slashed funding to $150,000 for an annual summer concert series it title sponsors in the city.

Additionally, according to WTOL-TV, the Lucas County Board of Commissioners agreed to restructure the payment schedule for the company’s $5-million naming rights deal for Toledo’s Glass City Center powered by ProMedica convention and performing arts center. The initial agreement signed in December 2020 called for ProMedica to pay $333,000 annually for 15 years. Terms of the new deal allow the healthcare system to make one payment of $200,000 this year by July 31, two payments of $383,000 in 2024 and two payments of $266,500 in 2025. ProMedica will then return to paying the $333,000 annual amount.

Meanwhile, the USGA spot vacated by ProMedica creates an opportunity for a brand looking to make a demonstrable commitment to women’s sports to step in and be a hero in securing the historic financial payout of the U.S. Women’s Open, which will be played In July at the famed Pebble Beach for the first time ever. USGA CEO Mike Whan told Golfweek that a number of companies have already expressed interest.