Flurry of Healthcare Acquisitions and Agreements Announced

Organizations involved in separate deals include LifePoint Health, Duke LifePoint, Baylor Scott & White Health, Tenet, and Community Health Systems, among others.

The hospital mergers and acquisitions market spent the first week of 2016 wrapping up old business from 2015. Several previously announced deals from the past several months were finalized with the New Year. In addition, some new deals were announced in the final days of 2015. Here's a quick update.

LifePoint Health Acquires St. Francis (GA) Hospital
LifePoint Health on Monday finalized its acquisition of the 376-bed St. Francis Hospital in Columbus, GA, which was first announced last fall.

Financial terms of the deal were not disclosed. However, St. Francis, founded in 1950, had been in financial straits since November 2014 when the not-for-profit hospital disclosed a $30 million accounting error.

News media in Columbus, GA reported that LifePoint paid off about $240 million in St. Francis debt, most of which was a loan from the U.S. Department of Housing and Urban Development that funded a hospital expansion in 2011.

St. Francis was also the subject of a lawsuit filed last summer in federal court by Community Health Systems, Inc. related to failed merger negotiations.

Under the LifePoint acquisition, St. Francis will switch to for-profit tax status, and continue its existing charity care policies, with a local board of advisors.

Brentwood, TN-based LifePoint owns community hospitals, regional health systems, physician practices, outpatient centers, and post-acute facilities in 21 states.

Duke LifePoint Acquires 2 NC Hospitals

Duke LifePoint Healthcare on Monday finalized its previously announced acquisition of Tenet Healthcare Corp.'s 137-bed Central Carolina Hospital, in Sanford, NC; 355-bed Frye Regional Medical Center in Hickory, NC; and 19 regional physician practices.

Financial terms were not disclosed for the deal, which was first announced in November.

"With the addition of these providers to our network, we've expanded Duke LifePoint's strong presence in North Carolina to include nine hospitals across the state," William J. Fulkerson Jr., MD, executive vice president of Duke University Health System, said in prepared remarks. 

"We have opportunities to collaborate with Central Carolina and Frye Regional to provide enhanced services that will help make people in Sanford, Hickory, and surrounding communities healthier and advance the delivery of quality healthcare throughout this region," Fulkerson said.

Under the deal, Duke LifePoint has hired all eligible Central Carolina and Frye Regional employees and will maintain all service lines. With the acquisitions, Duke LifePoint now operates 14 hospitals in North Carolina, Virginia, Pennsylvania, and Michigan.

The sale leaves Tenet with no hospitals in North Carolina. During a conference call with investors, Tenet CEO Trevor Fetter said the Dallas-based company was leaving markets "where we don't believe we can achieve the scale needed to be the most efficient local healthcare provider."

Baylor Scott & White Health, Tenet Complete North Texas JV

Baylor Scott & White Health and Tenet Healthcare Corp. on Monday completed the previously announced joint venture to own five hospitals in North Texas that was announced last March.

The hospitals are: Centennial Medical Center in Frisco; Doctors Hospital at White Rock Lake in Dallas; Lake Pointe Medical Center in Rowlett; Texas Regional Medical Center at Sunnyvale; and Baylor Scott & White Medical Center – Garland.

"Together, we will advance and strengthen the population health model in the greater Dallas area by creating a strong network to improve the wellbeing of people in our communities," Baylor Scott & White Health CEO Joel Allison said in a joint statement.
 
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 branding this spring. Physicians, advanced practice providers, and other employees of Tenet's North Texas physician group will transition to Baylor Scott & White Health's physician group, HealthTexas Provider Network.
 
"We have already made meaningful progress in advancing population health through our physicians' participation in the Baylor Scott & White Quality Alliance, a leading local accountable care organization, and the completion of this joint venture is an important next step in coordinating top-quality, value-based care in North Texas," Tenet CEO and Chairman Trevor Fetter said in a joint statement.

Tenet operates 84 general acute care hospitals, 20 short-stay surgical hospitals, and more than 470 outpatient centers in the United States.

Baylor Scott & White Health was formed from the 2013 merger between Baylor Health Care System and Scott & White Healthcare. The not-for-profit healthcare system reports total assets of $9 billion.

CHS Buys Majority Stake in 2 IU Health Hospitals

Franklin, TN-based Community Health Systems, Inc. will acquire majority ownership of Indiana University Health La Porte Hospital, and Indiana University Health Starke Hospital in northwestern Indiana, the for-profit health system announced in late December.

When the deal is finalized early this year CHS will assume 80% ownership of the hospitals and IU Health will keep a 20% stake. The two IU hospitals will lose their not-for-profit status and become local taxpayers, according to media releases.

Financial terms were not disclosed, but nwitimes.com reported that the La Porte hospital campus alone had an assessed value of $21.76 million, while the Starke hospital property was assessed at $2.37 million, according to their respective county assessor's websites.

IU officials are touting the deal as one that would "create a new organization that will solidify the ability of the La Porte and Starke Hospitals to provide high quality, accessible care to their community long into the future." Although it surrenders a majority stake, IU Health says it will share equal governance of the new system with CHS to ensure that a local voice is included in all future decisions.

"We are pleased to be able to continue our long standing relationship with IU Health La Porte and Starke hospitals," IU Health CFO Ryan Kitchell said in prepared remarks. "This new arrangement will enhance patient care and service, as well as continue to provide access to the specialty care available within the IU Health system."

The Healthcare Foundation of La Porte has been established to receive proceeds from the change in ownership and will use the money to invest in community health initiatives directed by IU Health La Porte and Starke hospitals. This foundation will be governed and managed locally.

"This is a very important step for our organization and one that will have a profound impact on our ability to improve the health of our patients and the communities we serve," said G. Thor Thordarson, president of 227-bed IU Health La Porte Hospital.

"I'm looking forward to a period of significant growth that builds upon the rich history of excellence and innovation in healthcare dating back to the 1800s," he said. "To be able to add to this legacy in such a way is extremely gratifying."

Craig Felty, president of IU Health Starke Hospital, said the affiliation marks the latest step in a long-term growth strategy at the 50-bed hospital. "In a time when rural hospitals are going by the wayside, this speaks volumes to our successes, and we are very pleased to be able to execute a strategic direction that has growth, stability and mission-driven health at the core," he said.

CHS operates 197 hospitals in 29 states across the nation, including 11 hospitals in Indiana with the completion of this acquisition.

"We will support the work of these hospitals to improve the overall health of their communities by investing capital and expanding resources for physicians and employees to deliver high quality care," CHS CEO Wayne T. Smith said in prepared remarks. "Economic development efforts in Northwest Indiana between Valparaiso and South Bend and a new relationship with IU Health make these hospitals strong additions to our network of facilities."

In an unrelated transaction, CHS announced that it has completed the sale of Bartow (FL) Regional Medical Center and its outpatient services to BayCare Health System, Inc., effective Jan. 1.

Norton Healthcare, U of L Settle Kosair Children's Hospital Suit

Norton Healthcare and the University of Louisville announced jointly that they have reached a settlement that ends more than five years of negotiations and two years of lawsuits.

The dispute began in 2013 when U of L objected to Norton's plans to start a pediatric services affiliation with the University of Kentucky Children's Hospital in Lexington. U of L threatened to evict Norton from Kosair Children's Hospital, which Norton built and operates, but which U of L uses for pediatric training and research under a state lease. Norton filed suit and the two sides have been at it ever since.

The agreements, announced jointly late last month, include an amendment to the 1981 land lease between Norton and the Commonwealth of Kentucky for the children's hospital property that secures Norton's ownership and control of the hospital, confirmed by the Commonwealth and U of L. It also allows Norton to continue plans for more than $35 million in additional capital improvements to its children's hospital over the next five years. Those plans had been held up with the litigation.

"The combined agreements stabilize the relationship between Norton and U of L in pediatrics and facilitate additional investments in pediatric care, while also allowing for appropriate collaboration with UK and other providers across the state to advance pediatric care in Kentucky," Norton Healthcare CEO Stephen A. Williams said in prepared remarks.

The package of agreements includes an amendment to the 2008 academic affiliation agreement between Norton and U of L sets an eight-year term with automatic annual renewals thereafter. U of L will be Norton's primary academic partner for pediatrics with at least 90% of the Norton's residency positions at the children's hospital being made available to U of L. U of L guarantees that its pediatric residents will utilize the children's hospital as U of L's primary hospital training site and that the majority of its pediatric hospital admissions will be made to the children's hospital.

Norton will be allowed to pursue other third-party relationships, including the collaboration with UK Children's Hospital, as long as its commitments to U of L are fulfilled, and U of L agreed to participate in collaborative pediatric care joint programs.

Under the terms of the agreement, U of L will receive $272 million over eight years. Norton has extended its current total of $30 million in annual funding for U of L academic support and physician services over the next eight years, with an additional $3 million annually for additional pediatric care investments. U of L also will receive a one-time payment of $8 million to resolve financial disputes. The University of Louisville Physicians group and the Commonwealth of Kentucky are also parties to the agreements, the two sides said.

"We reached fair and mutually beneficial agreements that extend our long-time relationship for providing the highest level of pediatric care to the children of the Commonwealth and beyond," Larry Benz, chair of the U of L board of trustees, said in a media release. "Both organizations are passionate about fulfilling their missions in this regard. We are now focused on how our organizations will combine our strengths to make Kosair Children's Hospital a top tier pediatric hospital in the United States."