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M&A Roundup: KentuckyOne Health forms $1.4B JOA

 |  By John Commins  
   November 19, 2012

The healthcare sector got a little more concentrated last week with the announcement out of Louisville that University Hospital and James Graham Brown Cancer Center have signed a joint operating agreement with KentuckyOne Health.

Officials say KentuckyOne Health will invest about $1.4 billion in infrastructure improvements, research, and program development over the next 20 years.

The joint announcement was made by leaders from the University of Louisville and University Medical Center, which are the parent organizations for University Hospital and the Brown Cancer Center, and from KentuckyOne Health.

"Our Joint Operating Agreement ensures that we not only maintain our current academic and medical services, but that we have the financial resources and statewide network to continue to expand and innovate those services for the future," UMC President and CEO Jim Taylor said in prepared remarks. "This venture will put us at the forefront in our field to create an aligned organization that has both the breadth and depth to address the coming challenges of healthcare reform."

The agreement caps a year-long effort by UMC and the University of Louisville to find a suitable partner while allowing them to retain local control of the facilities. All UMC policies for women's health, end-of-life care, and pharmacy remain unchanged. UMC will continue to manage and operate University Hospital's Center for Women and Infants. All women's health services, which includes the full range of reproductive services, will continue to take place at CWI, at the same location and provided by the same people.

The JOA is scheduled to take effect on or before March 1, 2013. KentuckyOne will oversee most of the day-to-day operations, while UMC will retain ownership of its assets. UofL, UMC, and KentuckyOne Health have also entered into an academic affiliation agreement.

The JOA has the support of Kentucky Governor Steve Beshear and Attorney General Jack Conway, who said his review of the plan addressed concerns raised about transferring ownership of a state asset.

"The executive branch of the Commonwealth of Kentucky retains authority to oversee the new agreement. It also appears that the same health services will continue to be available on-site at University Hospital," Conway said in prepared remarks. "This partnership will help University Hospital secure financial stability, protect care for the indigent, and continue the excellent research and teaching that is conducted at our hospital."

Highmark, West Penn Allegheny leaders meet to resurrect merger
The on-again, off-again merger talks are apparently on again between Highmark and West Penn Allegheny Health System, the two systems jointly announced.

Highmark CEO William Winkenwerder, Jr. and West Penn Allegheny Chair John S. Isherwood said in a joint statement that they'd "held productive discussions" last week just days after a judge ruled that West Penn could not leave the merger.

"A very productive session was held that focused on efforts the parties could take to address the financial condition of WPAHS to secure approval of their affiliation agreement by the Pennsylvania Insurance Department. Both parties realize there are significant issues that must be addressed and that prompt action is essential," the joint statement read. "Highmark and WPAHS continue to believe that an affiliation between them is in the best interests of both organizations and of the greater community. The parties agreed to work diligently in the days ahead to finalize their efforts and to work together to gain PID [Pennsylvania Insurance Department] approval.

"The parties and their advisors met recently with representatives of bondholders of WPAHS. Further meetings are planned. In addition, both parties are committed to initiating actions now that can improve the operating performance and finances of WPAHS. In particular, the parties agreed to focus on assisting and supporting the physician retention and recruitment with WPAHS, and to improving ongoing communications and coordinated actions prior to any regulatory approval."

Piedmont, WellStar form Georgia Health Collaborative
Metro Atlanta's Piedmont Healthcare and WellStar Health System have formed the Georgia Health Collaborative.

The collaborative intends to develop innovative healthcare delivery models, economically aligned physician relationships, and service line cost savings.Under the deal, the two not-for-profit health systems will remain independent but will use the collaborative to serve a primary service area population of more than three million people across north Georgia. With a combined 2,393 hospital beds, 10 hospitals, seven urgent care centers, and more than 700 physicians in the Piedmont Physicians Group, Piedmont Heart Institute, and the WellStar Medical Group, the Collaborative will redefine the delivery of healthcare services in metro Atlanta, the two companies announced jointly.

"Even the strongest health systems recognize that creating a sustainable healthcare industry is going to require significant change," Piedmont President and Interim COO Gregory A. Hurst said in prepared remarks. "A collaborative allows us to create both scale and efficiency without the same debt and integration challenges that come with expansion or acquisition. Our systems seem perfect for this type of partnership."

ID hospitals seek injunction against medical group acquisition
Boise, ID–based Saint Alphonsus Medical Center–Nampa and Treasure Valley Hospital announced last week that they had filed a petition for an injunction asking a federal court to delay the acquisition of Nampa's Saltzer Medical Group by St. Luke's Health System.

The filing alleges that the planned acquisition of Saltzer Medical Group by St. Luke's will create a monopoly of primary care physicians in Nampa who regularly see commercially insured patients and will have a long-term detrimental impact on the Nampa community, its citizens, and the hospital that has served the community for more than 100 years, Saint Alphonsus and Treasure Valley said in a joint statement.

The Federal Trade Commission and the Idaho Attorney General's Office began an investigation into St. Luke's actions under federal antitrust laws and Idaho's Competition Act late last year. The Idaho AG's Office has asked St. Luke's to hold off on the purchase of Saltzer until their investigation was complete. St Luke's recently stated its intent to close the deal. This has compelled Saint Alphonsus Health System to act.

The injunction papers allege the acquisition would seriously harm the two hospitals and healthcare in the community. "Our complaint further states that St. Luke's has a demonstrated pattern of cutting off referrals to nearby hospitals after it purchases physician groups like Saltzer Medical Group," the media release stated. "The injunction papers allege that this action would damage the ability of Saint Alphonsus Medical Center–Nampa to serve its long-held role of 'safety net' hospital for the community of Nampa."

Kansas regulators OK Coventry sale to Aetna
Kansas Insurance Commissioner Sandy Praeger has approved the sale of Coventry Health Care of Kansas to Aetna, her office announced. The action follows a public forum and a formal hearing conducted by the Kansas Insurance Department November 5 in Topeka.

However, the acquisition still has to be approved by regulatory authorities in 20 states. Aetna announced its agreement to purchase Coventry Health Care in a deal worth $7.3 billion on August 20.

According to KID statistics, Aetna had $57.7 million in premium sales in Kansas in 2011, and Coventry registered $187 million in Kansas premiums. Aetna provides health insurance to 18 million people nationwide, dental insurance for 13.6 million people, and has 8.7 million pharmacy benefits members. Nationally, Coventry has 3.8 million medical insurance policyholders and 1.5 million Medicare Part D policyholders.

John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.

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