LifePoint will own 80% of the joint venture with Wisconsin's Watertown Regional Medical Center, which will retain a 20% ownership stake in the hospital if the deal is approved by regulators.
Wisconsin's Watertown Regional Medical Center, has signed a definitive agreement to partner with Brentwood, TN-based LifePoint Health.
Subject to regulatory approval, LifePoint will own 80% of the joint venture, while WRMC will retain a 20% ownership stake in the hospital, which will transition to for-profit tax status.
Governance will be shared equally through a board with equal representation from WRMC and LifePoint.
Financial terms of the deal were not disclosed, but the joint venture will invest $100 million in WRMC over the next 10 years for projects that include a wellness initiative and various capital improvements.
Proceeds from the joint venture transaction will be used to pay off WRMC's existing financial obligations, and the remaining assets will be used to create a substantial charitable foundation focused on community health.
John Kosanovich, president and CEO of WRMC, says the deal caps months of negotiations.
"The board determined that finding a partner was the move that made the most sense going into the future, given all the change that was happening in the healthcare environment, just the whole notion that the stand alone community hospital wasn't the best model for sustainability and viability in the future," Kosanovich says.
"Through that process we selected LifePoint. It was their track record of successfully managing and growing community hospitals and their proposal that included a joint venture structure that allowed for continued community involvement, including a 50−50 board and governance structure. The board really felt it was important that the community continue to be involved and not only contribute to, but benefit from the success of WRMC."
Kosanovich says the hospital's changing tax status "really doesn't matter anymore. Whether you are nonprofit or for profit you are making a profit to stay in business. The one difference we see, obviously, is payment of taxes and the city and the school board are pretty positive to see some more dollars added to the tax rolls."
UW Health was one of seven suitors in the deal before LifePoint was selected. Kosanovich says the relationship will likely change now that WRMC is with LifePoint, but that the hospital will retain some clinical affiliations with UW Health.
"We've worked with UW for a number of years in a clinical affiliation to enhance services that were available here, and look to continue to work with them in the provision of specialty services where it makes sense for both organizations," he says.
LifePoint Health, which this month changed its name from LifePoint Hospitals, owns and operates more than 60 community hospitals, regional health systems, physician practices, outpatient centers, and post-acute facilities in 20 states.
WRMC will update its brand and logo on July 1.
Allan Baumgarten is a veteran hospital and health system analyst who tracks hospital mergers and acquisitions throughout the Midwest. He notes that LifePoint gained a toehold in the Upper Peninsula of Michigan two years ago when it acquired Marquette General Health System.
"I assume that if they are entering Wisconsin with one acquisition [or] joint venture that others will follow," Baumgarten says.
John Commins is the news editor for HealthLeaders.