LifePoint to Enter Wisconsin Market

The board of Watertown Regional Medical Center reviewed 23 suitors before deciding to pursue negotiations for a joint operating agreement with LifePoint Hospitals.

LifePoint Hospitals Inc. is negotiating a joint operating agreement with Watertown (WI) Regional Medical Center that if finalized, will mark LifePoint's entry into the Badger State.

"Hopefully this is the first of many," says Leif Murphy, EVP/CFO of Brentwood, TN-based LifePoint. "Watertown is a wonderful partnership opportunity for us and we believe that together with Watertown we will seek other opportunities across Wisconsin."

Located 52 miles west of Milwaukee, non-profit WRMC is a 55-bed general medical and surgery hospital that has clinical affiliations with UW Health.

John Kosanovich, president and CEO of WRMC, says the hospital's board had been considering some sort of affiliation over the past two years, and reviewed 23 suitors over the summer before deciding upon LifePoint.

"There was a large amount of research and due diligence done," Kosanovich says. "The board was impressed with LifePoint's track record of investing in and growing community hospitals that look much like ours across the country and feeling like they were most understanding of the situation of hospitals and organizations and communities our size."

The two parties are expected to continue negotiations toward a letter of intent to be finalized in the next six weeks. Details on the ownership arrangement beyond a JOA have yet to be made public, although WRMC will switch from nonprofit to for-profit status.

After due diligence and regulatory approvals, the hospitals expect to finalize the JOA in early 2015.

LifePoint has said it will:

• Invest more than $100 million in WRMC. The WRMC board will use the money from the deal to create a foundation focused on community health;
• Enhance and expand services locally, including WRMC's Wellness Initiatives;
• Ensure equal representation on the hospital's governing board, preserving a local voice in the operation and strategic direction of WRMC;
• Retain all jobs for WRMC's employees;
• Promote WRMC's mission to serve all who need care;
• Continue the clinical tertiary care affiliation with UW Health;

LifePoint, which operates more than 60 hospitals in 21 states, was drawn to Wisconsin because of the market's growth potential. Murphy says the for-profit hospital chain hopes to attract new partners in Wisconsin by demonstrating the value of the Watertown deal.

"We won't be aggressive at all. We will be responsive," Murphy said. "We are very excited about Watertown, but if it is the only opportunity we have in the state, we would still be excited."
"We would like to build a network of hospitals there, but that will be a function of the decisions made at the board level of different hospitals in the market," he said.

"It has been our experience that the message gets out with our track record. As we bring resources to Watertown, as we bring capital to Watertown, and as other community and hospital leaders in the market see the progress and the investments that are made, that is typically what takes root and brings invitations to us to come in and talk about whether or not we can make a difference in other communities."

Kosanovich says the WRMC board opted for the JOA instead of an outright acquisition or merger to maintain some level of local control.

"We are still early in this. We haven't signed a letter of intent. A lot of details need to be worked out," he says, "but the format in that joint venture structure and the way it is laid out made our board feel very comfortable that we would be able obtain the benefits and the resources that are available through LifePoint but still have active local involvement in the organization."
Murphy says LifePoint's partner Duke University Health System won't play a formal role in the Watertown JOA, but that the North Carolina health system's presence will be felt.

"Through our national quality affiliation Duke will have boots on the ground in Watertown," Murphy says. "From a program affiliation perspective, we've felt that there were strong partnerships in place with UW and we didn't want to interfere with those relationships by introducing another partner. But Duke will be another great resource for folks on the ground in quality, patient safety, and programmatic evaluation, and we will work to continue to develop those tertiary relationships with UW."

The general focus of the Duke-LifePoint brand is largely regional in North and South Carolina and Southern Virginia, Murphy says. It’s also an option for hospital acquisitions outside of that region that require clinical expertise in tertiary care, such as Marquette (MI) General Hospital, and Conemaugh Health System, in Johnstown, PA. "With secondary hospitals, especially when there is a more natural geographic partner, we will look to that more natural geographic partner for the clinical affiliations," Murphy says.