Business Roundup: CHS Enters Michigan, Humana Launches ACO

Community Health Systems, Inc. has announced that it will purchase 80% equity in Metro Health. In Colorado, Humana and Boulder Community Health have announced the launch of an accountable care arrangement and population health partnership.

Community Health Systems, Inc. will enter the Michigan market with its announced purchase of 80% equity in Metro Health, a not-for-profit community hospital in the Grand Rapids suburb of Wyoming, MI.

Financial terms were not disclosed.

"Metro Health provides an opportunity for our company to expand into Michigan and add the state's fastest growing market to our organization," Wayne T. Smith, CEO and President of Franklin, TN-based CHS said in prepared remarks. "This health system has served Western Michigan for many years, and we look forward to supporting Metro Health's medical staff and employees in their ongoing work to provide quality care."

The acquisition, announced Friday includes the 208-bed Metro Health Hospital, outpatient centers, and other assets and businesses. For-profit CHS also agreed to invest between $100 million and $125 million in capital over the next five years for facilities, services, medical technology, and physician recruitment.

Metro Health posted a net loss of $3.4 million in 2013, according to its Medicare cost report. The health system had posted a net gain of $7.2 million in 2012.

The deal is subject to regulatory approval by the Michigan Office of the Attorney General and certificate of need review by the Michigan Department of Community Health, a process that is expected to take several months.

If the sale is approved, Metro Health will change its tax status to for-profit as it girds to compete against Spectrum Health, the 11-hospital not-for-profit system and a dominant player in the Grand Rapids and western Michigan market.

"We had the luxury of time to work together with CHS to achieve the best long-term strategic outcome," Mike Faas, president/CEO of Metro Health, said in prepared remarks. "We could be patient looking to the future, not in a panic mode for a short-term solution."

Along with the access to capital, CHS has agreed to retain the Metro Health workforce, including more than 500 physicians on the medical staff, adopt the not-for-profit system's charity care policies, continue residency and fellowship programs, retain the local board of directors, and maintain relationships with the University of Michigan, Orthopaedic Associates of Michigan, Pennant Health, and other affiliations.  

CHS owns, leases or operates 206 hospitals in 29 states with an aggregate of approximately 31,100 licensed beds. The deal marks CHS's entry into Michigan, and also the first affiliation in West Michigan of a community hospital with an investor-owned, national health system.

Josh Fangmeier, a senior health policy analyst at the University of Michigan Center for Healthcare Research & Transformation, says the same forces that are pushing hospital consolidation elsewhere in the nation are at play in Michigan.

"We are seeing increasingly fewer and fewer independent hospitals. There is a lot of pressure to join larger systems for a variety of reasons," Fangmeier says. "Just in the southeast Michigan area recently we have seen Crittenton Hospital in Detroit acquired by Ascension Health, a not-for-profit chain. Also Garden City Hospital just outside of Detroit was acquired by an out of state for profit chain. We're also seeing Duke-LifePoint making a presence in the Upper Peninsula and now we are starting to see acquisitions in western Michigan in the Grand Rapids area with more out-of-state, for-profit activity."

Fangmeier says Michigan is getting a lot of attention from out-of-state for-profit chains ever since Nashville-based Vanguard Health Systems, Inc. acquired Detroit Medical Center in 2011.

"A few years ago the state was almost entirely not-for-profit-based hospital systems. Many of these systems faced significant financial challenges, particularly those that are independent, relatively small and without a lot of negotiating power," Fangmeier says.

"We are going to continue to watch not only these remaining independent hospitals, of which there are almost none in the Detroit Metro area. There are a few remaining in the state, but what are the next steps for them? Are they going to be able to continue the status quo?"

"There is a lot of financial pressure not only from Medicare reimbursement reductions under the Affordable Care Act, but also from private insurers to slow cost growth. So, for a lot of these systems that don't have a lot of bargaining power there is going to be more pressure on them to join other systems, whether those are other existing chains already here in MI or out of state partners."

Stony Brook U. Hospital, Southampton Hospital Deal Advances
Stony Brook University Hospital and Southampton Hospital are moving toward an affiliation following the unanimous approval this month by the State University of New York Board of Trustees.

"There is still work to be done, but this is an extraordinarily important first step as we look at the future of Stony Brook University Hospital and our ability to compete in a crowded marketplace, but one in which we are excelling," Samuel L. Stanley Jr., MD, president of Stony Brook University, said in prepared remarks.

"For both Southampton Hospital and for Stony Brook University Hospital, this is a win-win in every sense of the word. We are taking two very strong institutions and strengthening both of them through this action."

Stony Brook University Hospital, a tertiary academic medical center and Southampton Hospital, a 125-bed community hospital, have been formally affiliated since 2008 and provide healthcare services to the South Fork of Long Island. In August 2012, leadership from both hospitals signed a non-binding letter of intent in which Southampton Hospital would join the Stony Brook Medicine healthcare system.  

Humana, Boulder Community Health Launch ACO
Humana Inc. and Boulder Community Health have announced the launch of an accountable care arrangement and population-health partnership through Connect for Health Colorado and Humana's commercial HMOs for employers.

Humana members will have in-network access to the inpatient, outpatient, and emergency care services at Foothills Hospital and Boulder Community Hospital as well as the urgent care center, physician offices and special medical services at Mapleton Center and at Community Medical Center. More than 128 primary care physicians and specialists affiliated with Boulder Community Health, an integrated health system, are also now in-network to Humana members.

The value-based arrangement uses measures defined by the National Committee for Quality Assurance Healthcare Effectiveness Data and Information Set for diabetes care and treatment, breast cancer screenings, colorectal cancer screenings and high-risk medication.

"These types of partnerships are a critical step for Humana in Colorado as we look to create a system that works in a more coordinated way," Jeremy Gaskill, Regional Vice President, of Market Development for Humana's West Central Region, said in prepared remarks.

"With a tremendous scope of services and highly integrated model, Boulder Community Health is an ideal partner as we continue developing improved quality care and health care experiences for our members

CT's Johnson Memorial Medical Center Sold to Saint Francis Care
The board of directors at financially strapped Johnson Memorial Medical Center has approved the sale of the health system to Saint Francis Care.

The agreement came after discussions among JMMC's board of directors, lenders, governmental agencies and consultants. Under the arrangement, JMMC will enter a voluntary reorganization under a Chapter 11 bankruptcy filing, which hospital leaders said was the most expedient way to proceed with the deal under the terms negotiated, which includes a debt restructuring."

"This will clear the path for JMMC's continued financial strength and stability," the health system said in a media release. "The terms of the transaction will allow JMMC to emerge from this process with less debt and the deepened relationship with Saint Francis Care will help to achieve the goal of becoming a stronger, more financially sound hospital, well-positioned for the future."

JMMC and Saint Francis Care signed an affiliation agreement in July 2012.

"Our current affiliation agreement provides the framework necessary to ensure the continued delivery of quality care to the local community and sustain a major economic resource for the region," Christopher Dadlez, president and CEO of Saint Francis Care, said in prepared remarks. "Recently we have watched JMMC stabilize and strengthen its operations. Both parties are enthusiastic about the next steps ahead."

Under the deal, which requires regulatory approval, JMMC would become a wholly owned subsidiary of Saint Francis Care as part of a clinically integrated healthcare delivery system.

Saint Francis Care is an integrated healthcare system anchored by Saint Francis Hospital and Medical Center, which is licensed for 617 beds and 65 bassinets.