FTC expands retrospective scrutiny of mergers

https://www.beckershospitalreview.com/hospital-transactions-and-valuation/ftc-expands-retrospective-scrutiny-of-mergers.html?utm_medium=email

Federal Trade Commission (FTC) Definition

The Federal Trade Commission is expanding its retrospective review of mergers and acquisitions, using data from before and after a deal to assess whether the transaction affected prices, quality and consumer choice. 

The FTC has retrospectively reviewed mergers since 1984. The two goals of the program are to understand whether the agency’s threshold for bringing an enforcement action in a merger case has been too permissive and to assess the performance of tools that FTC economists use to predict the effects of proposed mergers.

The expanded program means the agency will dedicate more time and resources to studying completed mergers, addressing antitrust questions that have not been extensively studied in previous years and expanding retrospective reviews to industries that have not been studied.

Compared to other industries, healthcare mergers have undergone extensive scrutiny under the retrospective review program, with eight studies since 2011. These retrospective analyses have proven influential to federal challenges of subsequent healthcare mergers: The FTC was able to challenge 13 hospital cases from 2008 to 2018.

As part of the expanded program, the FTC director of the bureau of economics will release an annual summary on lessons and findings from the retrospective studies.

 

 

 

 

Beaumont-Advocate Aurora merger stalls amid physician complaints: A timeline

https://www.beckershospitalreview.com/hospital-transactions-and-valuation/beaumont-advocate-aurora-merger-stalls-amid-physician-complaints-a-timeline.html?utm_medium=email

Beaumont Health closes deal to merge 3 nonprofit systems

Since Beaumont Health announced its intent to merge with Advocate Aurora Health in June, physicians, nurses and trustees of the Southfield, Mich.-based system have raised concerns about its leaders and the potential deal.

Below is a timeline of the news about the merger and subsequent complaints:

June 17: Beaumont Health announces it is in partnership talks with Advocate Aurora Health, less than one month after canceling a plan to merge with Akron, Ohio-based Summa Health. Advocate Aurora Health has dual headquarters in Downers Grove, Ill., and Milwaukee. The merger would create a $17 billion system with 36 hospitals. Beaumont has eight hospitals in Michigan, and Advocate Aurora has 16 hospitals in Wisconsin and 12 in Illinois.

July 22: News breaks that a no-confidence petition is being circulated by some physician leaders at Beaumont Health. Beaumont Health President and CEO John Fox and Executive Vice President and CMO David Wood Jr., MD, are targets of the petition, which cites concerns about the “imminent threat” of Beaumont’s merger with Advocate Aurora.

July 24: After concerns are raised by physicians, Beaumont’s board of directors pens a letter to employees voicing support of the potential merger and emphasizing it is not “selling” Beaumont. “Beaumont Health will continue to be a Michigan corporation with its own board of directors, leadership team and regional headquarters,” the board’s letter reads. “Stating anything other than this is simply factually wrong.”

Aug. 17: Beaumont confirms its board of trustees has agreed to delay a final vote on a merger with Advocate Aurora until physicians concerns are addressed. 

Aug. 19: Details of a survey completed by 1,500 of Beaumont physicians are released. The survey, which asked physicians to agree or disagree with several statements, revealed a lack of confidence in the system’s leadership. Specifically, 76 percent of the physicians who responded to the survey said they strongly disagree or somewhat disagree with the statement “I have confidence in corporate leadership.” The survey also revealed that 70 percent of physicians said they strongly disagree or somewhat disagree that “The proposed merger with Advocate Aurora Health is likely to enhance our capacity to provide compassionate, extraordinary care.”

Aug. 20. A report details the results of a survey completed by a group of nurses at Beaumont. The survey reveals that Beaumont’s leadership has lost the confidence of 650 nurses, and they also are concerned about the planned merger.

Sept. 10: It is reported that former Beaumont Health board vice chair and trustee Mark Shaevsky sent a letter to Michigan’s attorney general calling for the firing of Beaumont’s CEO, COO and CMO. Mr. Shaevsky told Crain’s that patient safety concerns raised by clinical leaders have not been addressed, and he is frustrated that the board supports the proposed merger. He also calls for the delay of the merger. Mr. Shaevsky served on the eight-hospital system’s board for 17 years.

 

 

 

 

Jefferson Health CFO walks back stance that Einstein is at risk without merger

https://www.beckershospitalreview.com/finance/jefferson-health-cfo-walks-back-stance-that-einstein-is-at-risk-without-merger.html?utm_medium=email

Jefferson Health Announces Partnership with Prepared Health to Coordinate  Care Transitions from Hospital to Home - Dina

Jefferson Health walked back its stance that Einstein Health Network’s flagship hospital is at risk of financial failure without a merger during the first day of arguments at a trial, according to Law360.

The Federal Trade Commission’s legal challenge to block the proposed merger of Einstein Healthcare Network and Jefferson Health started in court Sept. 14. The FTC argues that combining the two Philadelphia-based systems would reduce competition in the Philadelphia region and Montgomery County.

In response to the legal challenge, Jefferson Health and Einstein argued that the merger is a matter of survival for Einstein’s flagship hospital

The health systems argued that Einstein, which has only had annual operating profits twice since 2012, is on a path to financial failure without the deal and needs $500 million to invest in key capital projects and deferred maintenance. Further, the organizations said that without the infusion, Einstein will continue to weaken “as it is forced to cut services or close facilities.”

However, at day one of the trial, Jefferson Health CFO Peter DeAngelis conceded during arguments that Jefferson had no evidence that Einstein is in danger of insolvency, despite painting the finances as bleak, according to Law360. 

The hearing on the preliminary injunction is expected to last the entire week, but a decision won’t happen by the end of the week. An additional round of filings must be submitted by the FTC and the two health systems by Sept. 28. The judge overseeing the case hopes to issue a decision before Jan. 1, according to The Philadelphia Inquirer. 

 

 

 

 

Atlantic Health System to add 8th hospital

https://www.beckershospitalreview.com/hospital-transactions-and-valuation/atlantic-health-system-to-add-8th-hospital.html?utm_medium=email

Health Services in Rockaway, NJ - Morristown - Atlantic Health

CentraState Healthcare System, a single-hospital system based in Freehold, N.J., has signed a letter of intent to join Atlantic Health System, a seven-hospital system based in Morristown, N.J.

Under the agreement, Atlantic Health will become the majority corporate member in CentraState and both systems would hold seats on CentraState’s board.

The systems signed the letter of intent after expanding their oncology and neuroscience clinical affiliation earlier this year.

“We are thrilled to partner with CentraState to support their longstanding commitment to the community and make this investment in the health and well-being of New Jersey’s residents and families,” said Atlantic Health System President and CEO Brian Gragnolati in a news release. “Having worked closely over the past few years with the CentraState team, we feel fortunate for this opportunity to combine our talents and resources to deliver high quality, affordable and accessible care for patients across the state.”

Both systems will now begin the due diligence process and work toward a definitive agreement. 

 

 

 

 

Mednax sells off its radiology division

https://mailchi.mp/365734463200/the-weekly-gist-september-11-2020?e=d1e747d2d8

M&A Analysis: Mednax to Sell its Radiology and Teleradiology Business -

National physician staffing firm Mednax announced the sale of its radiology practice—which includes teleradiology company Virtual Radiologic, known as vRad—to venture-backed Radiology Partners for $885M.

Publicly-traded Mednax has been hit hard by both contracting disputes with UnitedHealthcare, as well as pandemic-related volume declines. Both its anesthesiology and radiology businesses suffered big losses with the halt of elective procedures in the spring, and saw volumes decline between 50-70 percent compared to the prior year.

The company began divesting in May with the sale of its anesthesiology division to investor-backed North American Partners in Anesthesia. Mednax leaders say these decisions to sell were made independent of the pandemic, and that they have been planning to return to the company’s roots of focusing exclusively on obstetrics and pediatric subspecialty care, including changing its name back to Pediatrix.

Acquiring firm Radiology Partners is the largest radiology practice in the country, working with 1,300 hospitals and healthcare facilities. With this acquisition, it will have 2,400 radiologists practicing in all 50 states and the District of Columbia.

Hospital-based physician staffing firms have been especially hard hit by COVID-induced volume declines. This has created a softening in valuations and opened the door for investment firms to accelerate practice purchases.

We expect the pace of deals to quicken as independent practices experience continued financial strain—with large national groups leading the way, taking advantage of lower practice prices to build large-scale specialty enterprises.

 

 

 

 

Einstein’s flagship hospital at risk without merger, Jefferson and Einstein say

https://www.beckershospitalreview.com/hospital-transactions-and-valuation/einstein-s-flagship-hospital-at-risk-without-merger-jefferson-and-einstein-say.html?utm_medium=email

FTC says merger of Jefferson and Einstein would raise hospital prices 6.9%

The merger of Einstein Healthcare Network and Jefferson Health is a matter of survival for Einstein’s flagship hospital, the two Philadelphia systems argued in a federal court filing this week, according to The Philadelphia Inquirer.

The health systems are attempting to overcome opposition to their merger from the Pennsylvania attorney general and the Federal Trade Commission.

A Sept. 14 hearing is slated on the FTC’s preliminary injunction request. 

A court filing from the two health systems argued that Einstein, which has only had annual operating profits twice since 2012, is on a path to financial failure and needs $500 million to invest in key capital projects and deferred maintenance.

Without the infusion, Jefferson and Einstein said Einstein will continue to weaken “as it is forced to cut services or close facilities,” the Inquirer reported.

“Einstein was unable to identify any alternative buyer to Jefferson that possessed the financial strength and scale necessary to address Einstein’s financial problems,” the filing read, according to the Inquirer. “No other potential strategic partners were willing and able to commit to keep EMCP [Einstein Medical Center Philadelphia] open with its current set of services.”

The FTC announced in February its intent to sue to block the merger, arguing that combining the two systems would reduce competition in Philadelphia and Montgomery County.

“Jefferson and Einstein have a history of competing against each other to improve quality and service,” the FTC said in the February announcement. “The proposed merger would eliminate the robust competition between Jefferson and Einstein for inclusion in health insurance companies’ hospital networks to the detriment of patients.”

The FTC said that with a combination, the two parties would own at least 60 percent of the inpatient general acute care service market around Philadelphia and at least 45 percent of that same market in Montgomery County.

 

 

 

Beaumont physician survey reveals lack of confidence in leadership

https://www.beckershospitalreview.com/hospital-management-administration/beaumont-physician-survey-reveals-lack-of-confidence-in-leadership.html%20?utm_medium=email

Doctors' 'no confidence' petition drive targets Beaumont CEO ...

The results of a survey completed by 1,500 of Beaumont Health’s 5,000 physicians revealed a lack of confidence in the Southfield, Mich.-based system’s leadership and concern about its proposed merger with Advocate Aurora Health, according to Crain’s Detroit Business

Crain’s reported the results of the survey after the results were presented to Beaumont’s board. The system confirmed this week that it is postponing a vote on the planned merger with Advocate Aurora until physician grievances are addressed. 

The survey asked physicians to indicate whether they agreed or disagreed with several statements. Seventy-six percent of the physicians who answered the survey said they strongly or somewhat disagree with the statement “I have confidence in corporate leadership,” while 13 percent said they strongly or somewhat agree and 11 percent said they neither agree nor disagree, according to Crain’s. 

Physicians were also asked about the proposed merger with Advocate Aurora, which has dual headquarters in Milwaukee and Downers Grove, Ill. According to Crain’s, 70 percent of physicians said they strongly or somewhat disagree with the following statement: “The proposed merger with Advocate Aurora Health is likely to enhance our capacity to provide compassionate, extraordinary care.” Nine percent of physicians said they somewhat or strongly agree with the statement and 21 percent said they neither agree nor disagree, according to the report. 

In a statement to Becker’s Hospital Review, Beaumont said it is working to address the physicians’ concerns.

“Our physicians provided valuable input and feedback to us through the survey,” the health system said. “We take our physicians’ responses seriously and we have already started addressing many of their concerns. We know our talented and skilled physicians, nurses and staff have helped to make Beaumont the region’s leading health system and they are also key to our future. Our caregivers truly live our mission of providing compassionate, extraordinary care, every day. We recognize the importance of having an open dialogue. That’s why we continue to meet with numerous groups of physicians, nurses and staff to listen to them, address their concerns and work together with them to determine the best path forward for Beaumont.” 

Beaumont and Advocate Aurora signed a nonbinding letter of intent in June to create a health system spanning Michigan, Wisconsin and Illinois. The merger would create a $17 billion system with 36 hospitals. 

 

 

 

 

Prime adds 46th hospital

https://www.beckershospitalreview.com/hospital-transactions-and-valuation/prime-adds-46th-hospital-4-things-to-know-about-the-350m-deal.html?utm_medium=email

SEIU: Hospital Chain with Record of Bilking Taxpayers and Cutting ...

Ontario, Calif.-based Prime Healthcare announced Aug. 14 that it has completed the acquisition of St. Francis Medical Center, a 384-bed hospital in Lynwood, Calif. 

Here are four things to know about the deal: 

1. Prime purchased St. Francis Medical Center out of bankruptcy. The hospital entered bankruptcy in 2018 when its previous owner, El Segundo, Calif.-based Verity Health, filed for Chapter 11 protection.

2. Under the $350 million deal, which closed after a four-month review process, Prime committed to invest $47 million in capital improvements at the hospital. Those investments include installing Epic’s EHR and Omnicell systems for automated medication dispensing. Prime said it also plans to expand the hospital’s service lines.

3. A spokesperson told Becker’s Hospital Review that Prime extended offers to approximately 80 percent of the more than 2,000 employees at St. Francis Medical Center. “In the midst of this pandemic and economic challenges, Prime has remained deeply committed to St. Francis, the caregivers, patients and community, and we continue to evaluate staffing and will post additional positions based on future community needs,” the spokesperson said.

4. With the addition of St. Francis Medical Center, Prime owns and operates 46 hospitals in 14 states. The company has nearly 40,000 employees. 

 

 

 

 

Verity gets OK to sell 384-bed bankrupt hospital to Prime Healthcare, despite objections

https://www.beckershospitalreview.com/hospital-transactions-and-valuation/verity-gets-ok-to-sell-384-bed-bankrupt-hospital-to-prime-healthcare-despite-objections.html?utm_medium=email

St. Francis Medical Center | Verity Health

Despite objections for California attorney general and a last-minute attempt from an opposing bidder to block the sale, El Segundo, Calif.-based Verity Health System won bankruptcy court approval to sell a 384-bed hospital in Lynwood, Calif., to Prime Healthcare Services, according to The Wall Street Journal.  

California Attorney General Xavier Becerra conditionally approved the sale to Prime in July. Mr. Becerra set 21 conditions for the sale of St. Francis Medical Center to Prime Healthcare, a for-profit provider based in Ontario, Calif.

Verity challenged three of the conditions outlined by the attorney general, saying they were overly burdensome. The disputed conditions revolved around the amount of charity care and community-benefit services the hospital would need to provide.

As a result, the attorney general opposed authorizing the sale and approving Verity’s Chapter 11 liquidation plan, according to the Journal. 

U.S. Bankruptcy Judge Ernest Robles overruled the objections, which should allow the $350 million sale to finalize. The judge also said he would approve Verity’s Chapter 11 liquidation plan.

In addition, in late July, Los Angeles-based Prospect Medical Holdings made a last-minute attempt to block Prime from buying St. Francis Medical Center.

Prospect Medical, backed by a private equity firm, reportedly offered to pay $50 million more than Prime and offered to accept all of the attorney general’s conditions. 

However, the bankruptcy judge said Prospect lacked standing to oppose the Prime sale, and it didn’t submit its bid until after the deadline passed, according to the report.

Read the full article here

 

 

 

Regional chains Sentara, Cone to merge into 17-hospital, $11.5B system

https://www.healthcaredive.com/news/regional-chains-sentara-cone-to-merge-into-17-hospital-115b-system/583379/?utm_source=Sailthru&utm_medium=email&utm_campaign=Issue:%202020-08-12%20Healthcare%20Dive%20%5Bissue:29035%5D&utm_term=Healthcare%20Dive

Is Consolidation the Way to Survive in Today's Healthcare ...

Dive Brief:

  • Sentara Healthcare and Cone Health signed a letter of intent to merge the two regional, integrated health systems, according to an announcement Wednesday. Pending state and federal regulatory review, the deal is expected to close in the middle of next year, creating a 17-hospital, $11.5 billion system. 
  • Norfolk, Virginia-based Sentara is a nonprofit system with 12 hospitals in Virginia and North Carolina, employing more than 30,000 people. Its two health plans serve 858,000 members in Virginia, North Carolina and Ohio. Greensboro, North Carolina-based Cone Health has five hospitals in the state and around 15,000 employees. Its two health plans serve 15,000 members.
  • Corporate headquarters will remain in Norfolk, and Sentara’s current CEO, Howard Kern, will oversee the combined organization. Cone Health CEO Terry Akin will serve as president for the Cone Health Division, with regional headquarters in Greensboro.

Dive Insight

The providers contend the new system will focus on expanding value-based care models and increasing the companies’ health insurance options, according to a news release. Executives also hope to increase access points, including virtual ones, and make care more accessible in the surrounding communities.

After the deal closes, it’s expected to take up to two additional years for the two companies to fully integrate.

Sentara ended 2019 with $6.8 billion in revenue. Cone Health has about $2 billion in annual revenue.

Cone Health had planned to become the successor organization of Randolph Health when the 145-bed hospital in Asheboro, North Carolina, emerged from bankruptcy, but nixed the plan in March, citing uncertainty from the novel coronavirus.

It’s unclear how the COVID-19 pandemic has affected hospital M&A activity. Activity in the second quarter was not stalled as much as some analysts had expected, according to consultancy Kaufman Hall. Throughout the entire health services sector, however, M&A in the first half of the year was the lowest it’s been since 2015, PwC said recently.

Life Span and Care New England said in early June the coronavirus crisis reignited their merger talks. Heavyweight nonprofits Advocate Aurora Health and Beaumont Health announced they had signed a letter of intent to merge the same month, well into the pandemic.

Beaumont, however, cited COVID-19 as derailing its merger plans with Summa Health in May.

While the deal with Sentara and Cone Health are between two not-for-profit systems, a recent Health Affairs study found for-profits and church run health systems dominated M&A activity, at least from 2016 to 2018.