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Tenet to Acquire Vanguard in Surprise $4.3B Deal

John Commins, for HealthLeaders Media, June 25, 2013

Adam Powell, a healthcare economist and president of Boston-based Payer+Provider Syndicate, calls the acquisition "a clear win for Vanguard investors; time will tell whether it will be equally advantageous for Tenet investors."

"The additional scale and experience with business outsourcing offered by Tenet has the potential to lower costs within the Vanguard system," Powell says. "The two companies have a partial geographic overlap, so the merger offers both geographic expansion, and in some cases, greater market power."

The acquisition is expected to be finalized by the end of 2013, just as millions of people are expected to become insured either through Medicaid expansion or health insurance exchanges provided under the Patient Protection and Affordable Care Act.

With that in mind, analyst Allan Baumgarten said in an email exchange that Vanguard was an appealing takeover target because of its "broader experience and assets in operating managed care plans and Accountable Care Organizations."

"It is unique among investor-owned provider systems in that regard," Baumgarten says. "Vanguard has large Medicaid (Phoenix Health Plan) and Medicare (Abrazo Advantage Health Plan) HMOs in the Phoenix area. In 2012, it acquired ProCare in Detroit, a small Medicaid HMO (less than 2,200 members), with an eye toward growing its share of the Michigan market for Medicaid managed care. Further, two Vanguard divisions are in the forefront of Medicare ACO development. In Michigan, the Vanguard-owned Detroit Medical Center formed Michigan Pioneer ACO, one of the original class of risk-sharing ACOs. In Illinois, some of the Vanguard hospitals and their physicians have established Chicago Health System, a Medicare shared savings program ACO."

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1 comments on "Tenet to Acquire Vanguard in Surprise $4.3B Deal"


Andy Cowherd (6/25/2013 at 10:33 AM)
The Affordable Care Act should continue to drive consolidation, particularly for smaller hospitals. However, there's another important angle to this transaction. Blackstone still owns 38% of Vanguard and this transaction allows them to monetize their position at a premium. Otherwise they'd be faced with a series of secondary offerings at unpredictable prices. A good deal for them.