In one of three deals Tenet Healthcare signed Monday, it formed a joint venture with United Surgical Partners International to have ownership interests in 244 ambulatory surgery centers, 16 short-stay surgical hospitals and 20 imaging centers in 29 states.
Monday was a busy, busy day for Tenet Healthcare Corporation, which announced three separate deals that will expand the for-profit provider's footprints in its Dallas backyard, across the nation, and into the United Kingdom.
For starters, Tenet and United Surgical Partners International announced that they will combine their ambulatory surgical and imaging assets under a joint management plan that will create the nation's largest provider of outpatient surgery.
In a deal valued at about $2.5 billion, which includes $1.5 billion in assumed debt, Tenet will own 50.1% of the joint venture and will consolidate its financial results. USPI principal investors Welsh, Carson, Anderson & Stowe, a private equity fund, will own the remaining 49.9%. By 2020 Tenet will have full ownership of USPI through a put/call structure, the companies said in a joint media release.
"This transaction is transformational for our outpatient strategy. It immediately establishes us as the market leader for short-stay surgeries," Tenet CEO Trevor Fetter said in a conference call Monday.
"It also enhances our growth and profitability potential and positions us well for the future of healthcare delivery, where a consumer-centric model and a compelling value proposition will be essential."
When the deal is finalized this fall, the Dallas-based joint venture will have ownership interests in 244 ambulatory surgery centers, 16 short-stay surgical hospitals and 20 imaging centers in 29 states. It will maintain the USPI brand, and its three-way partnership model with physicians and not-for-profit health systems.
Fetter says the investment in outpatient care reflects the rapidly shifting landscape in healthcare delivery.
"We are operating in an environment where consumers increasingly make their own healthcare decisions," he says. "Improvements in medical technology around more complex procedures has transitioned to the outpatient setting, and changing models for reimbursement incentivize patients to select lower-cost options for care. USPI enhances our position in this new landscape."
"Additionally, USPI gives us the premier ambulatory platform in a fragmented market, which provides our new joint venture substantial opportunities to continue growing through accretive acquisitions and development of new centers," he says. "In our acute-care market this partnership will also enhance our ability to expand ambulatory services, build integrated networks, and participate in the value-based models."
Tenet will contribute 44 freestanding ambulatory surgery centers and 20 imaging centers. Welsh Carson will contribute USPI's 202 ambulatory surgery centers and 16 surgical hospitals. Tenet will pay approximately $425 million in cash to Welsh Carson and the other existing shareholders in USPI to align the respective valuations of the contributed assets. The venture expects to realize approximately $50 million of corporate and facility level synergies over the next three years, the companies said.
The combined operations will have partnerships with 50 health systems and more than 4,000 physicians at the facility level. Bill Wilcox will continue to lead USPI as CEO. Tenet's Kyle Burtnett will be USPI's president of ambulatory services and chief integration officer.
Tenet Buys UK's Aspen Healthcare for $215M
Also, Monday, in a separate transaction, Tenet announced that it will buy Welsh Carson's Aspen Healthcare Ltd., for $215 million in cash.
Aspen Healthcare operates nine private hospitals and clinics in the United Kingdom. Aspen began as a two hospital system that was acquired by USPI in April 2000 with backing from Welsh Carson. USPI grew the system before a restructuring of the USPI group in 2012, which resulted in it becoming an independent company majority owned by Welsh Carson, the companies said.
Tenet says the Aspen acquisition provides an opportunity to enter the U.K. market, where there is a growing demand for private healthcare services due to an aging population, growth in consumer spending, and more opportunities for private providers to work within the National Health Service.
The deal is expected to be finalized this fall.
Tenet, Baylor Scott & White Health Form TX Partnership
And finally on Monday, Tenet and Baylor Scott & White Health announced a partnership to provide care through five North Texas hospitals in Rockwall, Collin and Dallas counties.
The two providers will jointly own Centennial Medical Center, Doctors Hospital at White Rock Lake, Lake Pointe Medical Center, and Texas Regional Medical Center at Sunnyvale—currently owned and operated by a subsidiary of Tenet – and Baylor Medical Center at Garland—currently owned and operated by Baylor Scott & White Health. Baylor Scott & White Health will hold a majority ownership interest in the five hospitals, and all five will operate under the Baylor Scott & White Health brand.
Financial terms were not provided.
"This is an exciting step as we partner with a like-minded organization to create a strong network that will improve the health of individuals, families and communities across eastern and northeastern Dallas," Gary Brock, president/COO of Baylor Scott & White Health, North Texas, said in prepared remarks. "This partnership demonstrates our commitment to advancing population health in North Texas."
Under the agreement:
- The partnership will be governed by a jointly appointed board of managers. Each hospital will have a governing board and independent medical staffs and medical staff leadership responsible for certain medical staff and clinical matters.
- Centennial Medical Center, Doctors Hospital at White Rock Lake, Lake Pointe Medical Center, and Texas Regional Medical Center at Sunnyvale will transition to Baylor Scott & White Health.
- Tenet will continue to manage the operations of Centennial Medical Center, Doctors Hospital at White Rock Lake, Lake Pointe Medical Center, and Texas Regional Medical Center at Sunnyvale on behalf of the partnership. Baylor Scott & White Health will continue to manage Baylor Medical Center at Garland.
- The leadership teams for each hospital will remain in place, and there should be little-to-no change for employees at the five hospitals.
- Each hospital will maintain an independent medical staff, and physicians will retain their hospital privileges.
- Centennial Medical Center, Doctors Hospital at White Rock Lake, Lake Pointe Medical Center and Texas Regional Medical Center at Sunnyvale will adopt Baylor Scott & White Health's charity care and community benefit standards.
The deal is subject to regulatory review, but is expected to be finalized later this year.
Separately, Tenet's North Texas accountable care organization recently entered into an affiliation agreement with the Baylor Scott & White Quality Alliance, effective February 23, 2015. Baylor Scott & White is the largest not-for-profit healthcare system in Texas.
Humana Sells Concentra for $1B
Also Monday, Louisville, KY-based Humana Inc. announced that it would sell Concentra Inc., a wholly owned subsidiary and one of the nation's largest providers of occupational health, urgent care and physical therapy services, to MJ Acquisition Corp., in a cash deal valued at more than $1 billion.
MJ Acquisition Group is a joint venture formed by Select Medical Holdings and Welsh, Carson, Anderson & Stowe, a private equity fund, to purchase Concentra, which Humana says provides more than 14% of all work-related injury care nationwide.
Humana acquired Concentra in December 2010 in a push to expand affordable healthcare for its membership base. These efforts included investments in primary care physician practices, clinics and medical services organizations. Humana said that the primary care platform proved to be a better way to advance company's integrated care delivery model than Concentra's focus on occupational injuries.
Humana CEO and President Bruce D. Broussard said the decision to sell Concentra demonstrates the company's commitment to vigorous, ongoing portfolio review.
"Though Concentra's operations did not ultimately align with Humana's strategy as well as we had originally anticipated, we believe Humana and Concentra have gained valuable insights into consumer behavior over the past several years that will serve us both well moving forward," Broussard said in prepared remarks. "We expect Humana will continue to invest in other primary care assets, including MSOs, as we continue to expand our integrated care delivery model."
The deal is expected to be finalized by June. Humana will use the net proceeds from the sale to advance unspecified strategic growth priorities, to fund additional share repurchases under its existing $2 billion authorization and for general corporate purposes.
John Commins is the news editor for HealthLeaders.