Business Roundup: KP to Acquire Seattle-based Group Health Coop

Market consolidation remains active as the year winds to a close. Recent deals span from acquisitions announced by Kaiser Permanente in the northwest and WellStar in Atlanta, to a sale by Tennessee-based Community Health Systems.

Kaiser Permanente has announced that it will acquire Seattle-based Group Health Cooperative, a member-governed, nonprofit health system, in a deal worth $1.8 billion.

In a joint press release, KP and Group Health Coop said the acquisition would expand KP's reach to an additional 590,000 people in Washington and northern Idaho and advance the growth of an integrated care model. When the deal is finalized, Group Health will become the eighth KP region.

Because Group Health is governed by individual corporate members, and "owned" by the communities it serves, the funds from the $1.8 billion transaction will go toward the creation of a not-for-profit community foundation dedicated to improving community health, the two systems said.

"This agreement is a natural extension of our long, successful working relationship with Group Health and it provides us with the opportunity to expand access to high-quality, affordable care and coverage," Bernard J. Tyson, chairman and CEO of Kaiser Foundation Health Plan and Hospitals said in prepared remarks.

"Kaiser Permanente and Group Health Cooperative are a natural fit. The opportunity to unite will allow us to best serve the current and future needs of our members, customers and employees. We look forward to welcoming the people of Group Health Cooperative into the Kaiser Permanente family."

Susan Byington, chair of the Group Health board, said the cooperative entered the acquisition as "a highly sought after, financially strong, and nationally recognized healthcare organization.

"I believe this opportunity to join with Kaiser Permanente creates even greater assurance that the committed teams and care delivery system that has kept me and my family healthy will be serving families for decades to come," she said.

KP and Group Health have a relationship that precedes the acquisition through shared best clinical practices and the development of non-profit innovations. They also have allowed each health plan's members to receive care in the other's service areas.

Scott Armstrong, president and CEO of Group Health, said the deal provides "a unique opportunity to accelerate our growth and potential through a vastly deepened relationship with Kaiser Permanente by tapping into their exceptional resources, skills, track records, and reach. Through this acquisition, we'll better be able to tackle rising healthcare costs and implement even more powerful technologies to serve our members."

WellStar Buys Tenet's 5 Atlanta Hospitals
Tenet Healthcare Corporation is selling its five Atlanta-area hospital to WellStar Health System in a deal valued at up to $500 million.

The hospitals in the sale are Atlanta Medical Center and its South Campus, North Fulton Hospital, Spalding Regional Hospital, Sylvan Grove Hospital and 26 physician clinics. The companies began exclusive negotiations for the sale last summer, and the deal is expected to be finalized in early 2016.

"We are pleased that our hospitals will join a leading regional healthcare network like WellStar," said Keith Pitts, vice chairman of Tenet. "This agreement will better position these facilities for long-term success, benefiting all stakeholders."

WellStar president and CEO Candice Saunders said that "with addition of Tenet's metro Atlanta hospitals, we will be better able to provide world-class healthcare to our patients for years to come."

When the deal is finalized, Tenet will no longer operate hospitals in Georgia. The Dallas-based for-profit hospital chain pulled up roots in North Carolina earlier this year.

In a May 5 conference call with analysts, Tenet CEO Trevor Fetter explained the exodus.

"There are markets where we don't see a path either by acquisition or partnership to develop the scale we believe will be necessary as healthcare delivery continues to evolve. In those markets, we believe our hospitals would be better positioned under another operator," he said. "For example, we continue to pursue strategic alternatives for our hospitals in Georgia and North Carolina and expect this process will likely result in sales of these facilities."

Providence Health, St. Joseph Health to Merge
Catholic health systems Providence Health & Services and St. Joseph Health have signed definitive agreement to merge. The new parent organization will be called Providence St. Joseph Health.

"Together, we can invest more in the needs of everyone we serve, especially the most vulnerable," Rod Hochman, MD, president and CEO of Providence Health said in prepared remarks. "Our commitment is to improve affordability, enhance clinical care, and improve access to much-needed services."

Deborah Proctor, president and CEO of St. Joseph Health, said the two health systems share common mission and similar histories. "We are two mission-focused organizations that have the potential of being better together, delivering outstanding clinical care and providing a compassionate presence in all the communities we serve," she said.

Providence St. Joseph Health will focus on a shared mission and vision, and the strategic, financial, and operational direction for the system overall.

Hochman will serve as the CEO of the parent organization, which will be based in Renton, WA. There will be two system offices – in Renton and in Irvine, CA. The board of directors of the parent organization will include seven members appointed by Providence and seven members appointed by St. Joseph Health.

Providence and St. Joseph Health serve different communities, but together they form a contiguous geography. Providence operates 34 hospitals, 475 physician clinics, senior services, supportive housing and other health and educational services. The health system and its affiliates employ more than 76,000 people in Alaska, California, Montana, Oregon and Washington.

St. Joseph includes 16 hospitals, physician organizations, home health agencies operating in California, Texas and New Mexico.

CHS Sells NJ Hospital to Prime Healthcare
Franklin, TN-based Community Health Systems, Inc. will sell the 126-bed The Memorial Hospital of Salem County (NJ) and related outpatient services to Prime Healthcare Foundation in a deal that is expected to be completed by June, 2016.

Financial terms were not disclosed.

"Prime Healthcare looks forward to continuing The Memorial Hospital's history of quality and success because we believe exceptional healthcare should be part of every community," said Prem Reddy, MD, chairman, president, and CEO of Prime Healthcare. "The experienced team of physicians, nurses, and staff at The Memorial Hospital of Salem County are recognized for their exceptional care and will be a welcome addition to the Prime Healthcare family of hospitals."

Ontario, CA-based Prime Healthcare Foundation is a 501(c) (3) public charity and an affiliate of for-profit Prime Healthcare Services, which operates 38 hospitals in 11 states.  

CHS is one of the largest for-profit hospital companies in the nation and owns, leases, or operates 198 affiliated hospitals in 29 states.
The proposed partnership is not yet final. Both health systems are working with the California Attorney General's office on next steps and hope to complete the review and approval process in 2016.

Providence Health & Services is a not-for-profit Catholic health system. It operates 34 hospitals, 475 physician clinics, and employ more than 76,000 people across five states – Alaska, California, Montana, Oregon and Washington. St. Joseph Health is a not-for-profit, integrated health care delivery system that includes 16 hospitals, physician organizations, home health agencies, hospice care, outpatient services and community outreach services.