Business Roundup: Health System Buyers, Partnerships Sought

In need of financial stability, Wellmont Health System is reviewing its options, including possibly aligning with another health system. California-based Daughters of Charity Health System believes "new ownership is in the best interest" of the communities it serves.

Wellmont Health System is looking for a partner.

The Kingsport, TN-based health system, with seven hospitals serving Upper East Tennessee and Southwest Virginia, announced this month that it has "launched a process to evaluate strategic options for the organization's future, including the possibility of aligning with another health system."

Wellmont CEO Denny DeNarvaez says the myriad pressures and uncertainties in the healthcare sector have created an especially challenging environment for smaller, more isolated health systems. The challenges, named in a statement released by Wellmont, include the increasing sophistication of information technology and its cost, quality mandates, demand primary care services and population health management, lower patient volumes, reimbursement cuts and performance penalties under the Patient Protection and Affordable Care Act.

"Unlike many health systems, Wellmont is fortunate to be in a position of clinical strength and relative financial stability thanks to the great work of our physicians, co-workers and leadership," DeNarvaez said. Nevertheless, Wellmont must improve its financial position by millions of dollars during the next several years, she added. "The board and the administration are committed to continue pursuing all internal options to ensure the financial stability of our health system for the future.

Wellmont's challenges are particularly acute in Upper East Tennessee and Southwest Virginia, a service area that grapples with low Medicare payments and a high volume of Medicaid and uninsured populations. In fiscal 2012, Wellmont had a community benefit of $94 million, which included $77 million in uncompensated care, as well as free programs and services provided to the community, and cash and in-kind donations to community groups. Making matters worse, Virginia and Tennessee have not expanded Medicaid coverage.

The Wellmont Board has created a special committee to assess its options.

Daughters of Charity Health System (CA) Seeks Buyer
Los Altos Hills, CA-based Daughters of Charity Health System has announced that it is soliciting proposals from Catholic, public, non-profit and for-profit organizations either to buy the system's individual hospitals or the entire health system.

DCHS President/CEO Robert Issai said in prepared remarks that the decision came after a long review of the options available to preserve services at the health system, which includes six hospitals located along coastal California from San Francisco to Los Angeles.

"After careful consideration, our Board, management team, and advisors have determined that the sale of our hospitals is the most sound and responsible business decision," Issai said. "Like other health systems across the country, we recognize that the way health care is provided today—where it is offered, how it is paid for, how it is measured—is changing dramatically, and we believe that new ownership is in the best interest of the communities we serve."

Last year DCHS formed an affiliation with Ascension Health, which remains in effect. Issai said that DCHS has benefitted from the affiliation, but that it won't merge with Ascension Health.

DCHS Board Chair, Sr. Marjory Ann Baez, DC, called the decision to sell the healthcare ministry "difficult, particularly for the Daughters of Charity. But the realities of modern healthcare are harsh, and after prayerful discernment, it became clear that the responsible thing to do is to find new ownership, blessed with the resources necessary to thrive."

DCHS has already begun pursuing the sale of its hospitals in Northern California and is starting the process for its Southern California hospitals and the health system as a whole.

HCA TriStar Buys Grandview MC from Capella
HCA's TriStar Division has announced it is buying Grandview Medical Center from Capella Healthcare. Financial terms were not disclosed.

The 70-bed Grandview Medical Center is located in Jasper, TN, near Chattanooga, and serves five counties in Tennessee, Georgia, and Alabama. The hospital will become part of the Parkridge Health System in HCA's TriStar Division. With the acquisition of Grandview, the Parkridge Health System will grow to five hospitals in the Chattanooga market.

"The addition of Grandview Medical Center will enhance our ability to serve the Chattanooga market and deliver the highest quality patient care possible close to where people live and work," Steve Corbeil, president of HCA's TriStar Division, said in prepared remarks. "We look forward to welcoming Grandview to TriStar and Parkridge Health System."

The transaction awaits regulatory approvals but is expected to be completed by the end of March.