The purchase of Health Management Associates by Community Health Systems for $7.6 billion and the sale of Vanguard Health Systems to Tenet Healthcare for $4.3 billion were healthcare’s two largest deals last year.
Hospital mergers and acquisitions in the United States declined in 2013, but the number of hospitals and hospital beds involved in those transactions hit a five-year high, according to the 2014 Health Care Services Acquisition Report.
M&A activity in 2013 was paced by the acquisition of Health Management Associates by Community Health Systems for $7.6 billion and the sale of Vanguard Health Systems to Tenet Healthcare for $4.3 billion, the year’s two largest Hospital sector deals.
“Those two acquisitions alone accounted for more than one-third of the hospitals sold in the U.S. in 2013,” said Lisa E. Phillips, an editor at Norwalk, CT-based Irving Levin Associates, which compiles the annual report.
Usually, Phillips said, beds owned by not-for-profits dominate the hospital M&A market, but because of those two billion-dollar deals last year, 78% of the target hospitals in 2013 were for-profit, compared with between 25% and 30% in a more typical year.
Globally, the dollar value of M&A activity across nine healthcare industry service sectors, including managed care and pharmaceuticals, increased by 1.8% to $52.7 billion in 2013. However, the number of transactions declined by 5.8% to 598 publicly announced healthcare services mergers and acquisitions in 2013.
In terms of number of M&A transactions, all but the long-term care and home health/hospice sectors posted declines in 2013 compared with 2012. The hospital sector declined 21.5% in deal volume to 84 announced acquisitions, which includes one large transaction in Germany, the report said.
“Without the strong performance of the long-term care sector, which had a 20% increase in transaction volume in 2013, health care services would have had a less robust year,” Phillips said.
Here’s a look at some more recent deals:
St. Tammany Parish Hospital Partners with Ochsner Health
St. Tammany Parish Hospital and New Orleans-based Ochsner Health System will form a strategic partnership to bolster healthcare access in the Northshore area of Lake Pontchartrain, the two providers have announced jointly.
“We looked at a variety of different models and really felt like the partnership, which is more like a Joint Operating Agreement, was the right structure,” Warner Thomas, president/CEO of the 10-hospital Ochsner Health System, said this week.
“It allows flexibility for St. Tammany and Ochsner, yet we are committed to working together in that marketplace, expanding services, and we are going to be exploring opportunities for reducing costs, and growth initiatives. There will be a lot of coordination between our organizations.”
“St. Tammany is not in a situation where they need to be acquired or merged with a larger entity. They are in a strong position,” Thomas says. “We have a significant physician base in that market. They have a very successful hospital in that market. It really is synergistic from that perspective.”
No money will change hands with the deal, but Thomas says there will be “financial integration going forward.”
STPH is a service district hospital under local governance. The partnership agreement does not change the governance, employees or medical staff relationships of St. Tammany Parish Hospital Service District #1 or of Ochsner Health System. Each organization will retain its name, assets and staff.
Michigan’s Ascension Health, CHE-Trinity Launch Integrated Network
Physicians with Ascension Health and CHE-Trinity Health have created a statewide clinically integrated network of healthcare providers. This new company, called Together Health Network, will include 27 hospitals and hundreds of ambulatory centers and physician offices.
“We believe this one-of-a-kind collaboration between two of the state’s largest healthcare organizations will set a new standard for providing value-based healthcare in Michigan,” Patricia Maryland, president of Health Care Operations and COO of Ascension Health, said in prepared remarks.
“Both Ascension and CHE Trinity Health have been performing at benchmark levels in terms of quality, while at the same time delivering care at cost levels well below the state average. This collaboration will allow us to combine our outstanding performances in terms of cost and quality into one, state-wide product unlike any other.”
Together Health Network is a Michigan LLC that will work with payers to develop health plan products, including those purchased on the Health Insurance Marketplace and private exchanges. Together Health Network is designed to achieve a state-wide presence with numerous access points and advanced care coordination services without merging assets.
Together, the Michigan footprint of CHE Trinity Health and Ascension Health Michigan creates a geographic provider network that spans a majority of the state – it is estimated that 75% of Michiganders will be within 20 minutes of a Together Health Network provider. Together Health Network will have a physician-majority board, a physician CEO, and physician led committees.
Lawrence (MA) General Joins Beth Israel Deaconess Care Organization
Lawrence General Hospital has joined Boston-based Beth Israel Deaconess Care Organization as part of a risk-sharing agreement aimed at improving population health, the two providers have jointly announced.
Dianne J. Anderson, RN, president/CEO of LGH, said the affiliation will strengthen and expand medical services available for the Merrimack Valley and Southern New Hampshire.
“Patients will see expanded and strengthened medical services, keeping more care local and coordinated from the doctor’s office, to Lawrence General, and, if necessary, to an academic medical center,” Anderson said in prepared remarks.
With BIDCO support, LGH can provide population health management and access to specialty care at BIDMC. LGH and its affiliated physicians also accept some of the financial risk for keeping patients as healthy as possible. The arrangement is subject to review by the Massachusetts Health Policy Commission.
Tenet, Texas Tech to Establish New Teaching Hospital
Dallas-based Tenet Healthcare Corporation and Texas Tech University Health Sciences Center at El Paso will develop a new teaching hospital and an 110,000 square foot medical office building in west El Paso, the providers have jointly announced.
The new 140-bed hospital will operate as a part of the Sierra Providence Health Network, Tenet’s system of hospitals and outpatient centers in El Paso. It will be a teaching hospital for medical students, nursing students, resident physicians and faculty from TTUHSC’s Paul L. Foster School of Medicine, eventually offering training for approximately 75 medical residents across a multi-year program.
Construction is scheduled to begin in 2014 and be completed in the fall of 2016.
“With today’s announcement, Tenet’s recently completed and planned investments in the community will exceed $550 million over a 10 year period, and we are pleased to continue our commitment to the health and wellbeing of this important region,” Tenet President/CEO Trevor Fetter said in prepared remarks.
Last year, Sierra Medical Center and Providence Memorial Hospital announced a $120 million investment in upgraded technology, expanded service lines and aesthetic remodeling, in addition to a $67 million expansion at Sierra Providence East Medical Center that was announced in 2012.
Port Huron (MI) Hospital joins McLaren Health Care
Port Huron Hospital has finalized a deal that makes it the twelfth hospital in Michigan’s McLaren Health Care system.
Under the agreement, the 186-bed Port Huron Hospital will be renamed McLaren Port Huron. The hospital will retain its local board of trustees and leadership, and will remain locally governed.
The agreement also provides capital funding for the construction of a new cancer center and a new inpatient tower. The hospital expects to break ground for the cancer center early in 2015 with construction of the inpatient tower beginning later in 2015. Financial terms of the acquisition were not disclosed.