Business Roundup: Aria Health, Jefferson Sign Merger LOI

Aria Health CEO and President Kathleen Kinslow says finances are not the driving factor, rather, the deal is about "how can we be effective with population health and moving from volume to value."

Jefferson Health as entered negotiations for the acquisition of Aria Health System in a deal that could be finalized by mid-2016, the two Philadelphia-area health systems have announced. A non-binding letter of intent was signed last week and now the two non-profit systems will begin a 90-day due process period.

This past May, Abington Health and Jefferson Health System merged into a single system that became the second-largest in the Philadelphia area. The new system now includes five hospitals, 19,000 employees, 13 outpatient and urgent care centers, and physician practices across Philadelphia, Montgomery and Bucks Counties in PA, and Camden County, NJ.

The Aria acquisition would add three acute care hospitals totaling 485 beds, nearly 4,000 employees and a medical staff of more than 1,000, along with a network of outpatient centers and physician offices in Northeast Philadelphia and Lower Bucks County.

Aria Health CEO and President Kathleen Kinslow says the deal would be a membership substitution that would not involve an exchange of cash, although the new system would take on Aria's assets and debts. "The only cost is going to be the legal and consultant fees," she says. "We have very little debt. Our debt-to-cap is only about 16%. We have a very strong balance sheet and little debt."

Kinslow says Aria began its strategic review two years ago to determine if it needed a partner. "At the end of that process it was determined that because of changes in the Affordable Care Act and movement across the country in the consolidations we were seeing that it would be optimal for our organization, to be able to live our mission, that we should seek a partner as well."
 
Finances were a factor, but not the driving factor in determined whether or not to seek a partner, she says.

"We had a troublesome year in fiscal 2013 and 2014. Most of that was based on revenue cycle management," Kinslow says. "We did a financial turnaround plan and we were able to improve the efficiencies of operation as we entered a revenue cycle process. We opened a new emergency room so we have been able to reverse that trend. We saw an increase in market share of about 8% and our volume year-over-year has been up 5%, which has certainly improved the financials."

The decision to find a partner, Kinslow says, "was more about how can we be effective with population health and moving from volume to value, the infrastructure changes you need, the IT systems. Being able to partner with a great academic medical center like Jefferson will give us those opportunities to serve our population."

Make a Wholesale Shift to Value

Kinslow says Jefferson also has a strong sense of mission and "shares a similar culture to ours and we thought we could meld very well with them." As the two systems head into the 90-day due diligence period, Kinslow says she believes they're on the same page. "I have every confidence that as we go forward there will be no surprises," she says.

Regulatory snags are not expected. "Our research suggests we are in a good position," she says. "We don't have much overlap on the zip code analysis, so I feel very hopeful that we should not have problems."

To ensure some measure of local control, Kinslow says the structure will allow for a local board that would continue to manage and monitor quality in the organization and work with the physicians to ensure that clinical programs are moving forward.

"What makes this relationship very different from the traditional academic medical center and community hospital, is that Jefferson has been very willing giving two community health systems, Abingdon and Aria, authority on the governing boards, not just for the clinical enterprise, but at the university as well. You don't often see that and it's something that was very appealing to us. It allows us to continue to serve our community, yet have that strong academic base that will allow patients to have the best of both worlds."

FL, GA Systems Form Regional Alliance
Jacksonville, FL-based Baptist Health, Flagler Hospital and Southeast Georgia Health System have formed a regional alliance called Coastal Community Health that is designed to share best practices, improve outcomes and achieving efficiencies of scale.

"This is a very important affiliation and an opportunity to position ourselves to thrive in the future as a highly integrated network of community-based, locally governed health systems," Baptist Health CEO and President Hugh Greene said in prepared remarks. "Together, we believe we can expand access to healthcare services in our regions and further our mission to improve the health and well-being of the communities we serve. That community focus is our common core."

The three health systems serve separate, but contiguous markets spanning from Brunswick, GA, to Jacksonville, to St. Augustine, FL. and will continue to operate independently as locally governed, community-focused health systems. Greene will serve as initial CEO of Coastal Community Health. Joe Gordy and Michael Scherneck will serve as executive vice presidents of Coastal. All three will maintain their roles as CEOs of their respective health systems.

The Coastal board of directors has 12 members, three each from Flagler Hospital and Southeast Georgia Health System and six from Baptist Health.

Collaborative workgroups from each of the three health systems are looking at various initiatives to improve population health, including: enhanced child health services, telehealth, disaster planning, and care coordination.

Weill Cornell Medicine Changes Name
Weill Cornell Medical College has changed its name. Effective immediately the New York-based college is now called Weill Cornell Medicine.

In a media release explaining the name change, the college said "the brand succinctly unites Weill Cornell Medicine's three essential principles—to care, discover and teach—and underscores how patient wellbeing motivates the entirety of its ambitions."

Laurie H. Glimcher, MD, dean of Weill Cornell Medicine, said in a media release that the "name now fully encapsulates the strength and totality of our mission—keeping the patient at the center of everything we do."