Announcements of separate joint ventures between Lifepoint and a regional medical center in Wisconsin and Carondelet and three major health systems in Arizona top the latest round of healthcare business news.
LifePoint Health has entered the Wisconsin hospital market after finalizing a joint venture that gives the Brentwood, TN-based for-profit company a majority stake in Watertown Regional Medical Center, the hospitals announced jointly on Tuesday.
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Jeff Seraphine |
The deal marks the first conversion of a hospital's tax status from not-for-profit to for-profit in the state of Wisconsin.
Jeff Seraphine, president, Eastern Group at LifePoint Health, says the hospital chain has had Wisconsin on the expansion radar for a long time.
"It's always been an attractive state for us, there just hasn't been a lot of opportunities," Seraphine says. "There haven't been a lot of pieces moving around up there that gave us the opportunity to partner with communities, but when the Watertown opportunity came about, we were right there and excited to be a part of it."
Jeff Baum, chairman of the WRMC board of directors, says it took a little extra effort to convince community leaders and state regulators, that the conversion to for-profit status would benefit all of the stakeholders.
"We had a lot of explaining to do. The staff got it pretty quickly, but it did raise some questions. Let's put it that way," Baum says. "When the community heard we were going to become a for-profit hospital the first thing they said was, 'Oh my God! You're going to have to raise all the prices to pay the shareholders.' But that's not true."
Allan Baumgarten, a Minneapolis-based research consultant who monitors hospital acquisitions across the Midwest, says Wisconsin has been "relatively late to get for-profit hospital companies."
"Michigan didn't have a for-profit hospital presence until about six years ago, but now has Tenet, LifePoint, and Prime and almost got Community Health Systems," Baumgarten says. "I assume that LifePoint is looking for other hospitals to acquire in the state."
"Almost all of the hospitals in the southeast corner of the state (from Madison south and east to the lake and the Illinois border) are already in larger systems," he says. "If LifePoint wants to grow in that region, it may be looking at some of those systems. Or it may be looking in other parts of the state, where there are still a few dozen independent hospitals, many of them small critical access hospitals."
Financial terms of the JV were not immediately disclosed, however it is understood that LifePoint will own 80% of the hospital and WRMC and the community will own 20%. Governance will be shared equally on a board with equal representation from WRMC and LifePoint.
The joint venture will invest $100 million in WRMC and the community over the next 10 years, targeting "significant advancements" in technology, expanding clinical services and population health and wellness initiatives. No layoffs are anticipated and LifePoint has committed to hiring all employees, subject to pre-employment screenings.
Seraphine says LifePoint was comfortable with an 80/20 joint venture model instead of an outright acquisition because WRMC wanted an ownership stake, and that similar governing structures have worked in other LifePoint ventures.
"Our goals and the way we work in either a full acquisition or a partnership model [is] so we work with the community to find out what works for them," Seraphine says. "We feel comfortable with a shared governance model where we can work in a collaborative way with the community, especially in a state like Wisconsin where there hasn't been a long history for an investor-owned company like LifePoint. It's a great way for the community to be at the table from a governance perspective, and it allows people to be more comfortable with a new arrangement."
Baum says the JV ensures that the community will have a say in how healthcare is delivered.
"We still own a part of the hospital and that made it much easier to talk to the man on the street and explain that we still owned part of the hospital," he says. "When LifePoint offered up 50% of the board, that pretty much sewed it up for us."
Proceeds from the transaction will be used to pay off WRMC's existing financial obligations. The remaining assets will be used to create a charitable foundation focused on community health.
Richard Keddington will become WRMC's new CEO on Sept. 14, replacing John Kosanovich, who retires after 20 years as WRMC's CEO. Keddington has served for the past five years as CEO of Select Specialty Hospital, a two-campus, 63-bed hospital in Milwaukee.
The joint venture between Watertown Regional Medical Center and LifePoint was subject to regulatory reviews by the Attorney General of Wisconsin. Baumgarten says the JV with LifePoint could signal an end to WRMC's strategic alliance with University of Wisconsin Health. "The website no longer mentions anything about being a member of the UW Health Partnership."
Tenet, Dignity, Ascension Finalize Carondelet Deal
Tenet Healthcare, Dignity Health and Ascension announced jointly Tuesday that they have finalized a joint venture to own and operate Tucson-based Carondelet Health Network.
Financial terms of the deal were not disclosed, and the health systems declined to comment beyond the media release. However, Tenet is the majority partner and will manage the operations of the network's three hospitals, two physician groups, outpatient and ambulatory services, and affiliated businesses in Tucson and Nogales, AZ. Dignity Health and Ascension have minority interests in the partnership, the health systems said in a joint statement.
Tenet and Dignity Health separately own and operate hospitals and clinics in the Phoenix area and together manage Arizona Care Network, an accountable care organization that includes more than 750 facilities across Tenet's and Dignity Health's Phoenix-based healthcare systems, with more than 3,400 providers and more than 200,000 covered lives.
The Tucson-based joint venture will connect Carondelet to ACN, which will is expected to increase access to care for patients, strengthen and grow Carondelet's relationships with physicians, provide development opportunities for current and future employees, and fund strategic growth initiatives across Southern Arizona.
The facilities in the new partnership include:
- St. Joseph's Hospital (486 beds) in Tucson
- St. Mary's Hospital (400 beds) in Tucson
- Holy Cross Hospital (25 beds) in Nogales
- Carondelet Heart & Vascular Institute at St. Mary's Hospital
- Carondelet Neurological Institute at St. Joseph's Hospital
- Carondelet Medical Group
- Carondelet Specialist Group
Carondelet's services also include imaging centers and other ambulatory services and ancillary businesses. The joint venture will maintain Carondelet's Roman Catholic identity through an agreement with the Diocese of Tucson. Carondelet's existing charity care policies will remain in place.
SSM Health Commits $500M to Build New St. Louis Hospital
One day after transferring ownership from Tenet Healthcare Corp., Catholic, not-for-profit SSM Health announced on Tuesday that it has committed $500 million to build a new replacement hospital and outpatient care center within the next five years. The new hospital will be built near the existing 365-bed academic medical center now known as SSM Health St. Louis University Hospital, the health system said in a media release.
SSM Health and Saint Louis University this week mark the start of their expanded partnership, which includes Saint Louis University Hospital joining SSM Health St. Louis. In June, SLU announced it would reacquire the hospital from Tenet and would give the hospital to SSM Health in exchange for a minority financial interest and governance rights in SSM Health St. Louis. The deal became official on Tuesday.
"While the current hospital has served the community well, we have the opportunity to construct state-of-the-art academic facilities that incorporate the best practices in patient-centered design," said SSM Health President/CEO William P. Thompson said in prepared remarks. "This significant investment will enable us to deliver an improved patient experience and even better care for our community."
For-profit Tenet has operated SSM Health St. Louis University Hospital for the past 17 years. The sale was completed on Monday. The relationship between SSM Heath and the university extends back to 1903.
John Commins is the news editor for HealthLeaders.