Tag Archives: M&A

Steward Health Care to acquire IASIS Healthcare

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http://www.beckershospitalreview.com/hospital-transactions-and-valuation/steward-health-care-to-acquire-iasis-healthcare.html

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Boston-based Steward Health Care has signed a definitive agreement to acquire Franklin, Tenn.-based IASIS Healthcare.

The Wall Street Journal reported the transaction is for $1.9 billion. Becker’s has reached out to Steward to verify the value of the deal and the article will be updated accordingly.

Under the deal, Steward will become the largest private for-profit hospital operator in the U.S. with 36 hospitals across 10 states, managed care operations in Arizona, Utah and Massachusetts and projected revenues of nearly $8 billion in 2018, the first year of consolidated operations. The transaction, which is subject to regulatory approvals and customary closing conditions, is expected to close in the third calendar quarter of 2017, according to a news release on Steward’s website.

Currently, Steward operates 18 hospitals and directly employs more than 1,300 multispecialty physicians in facilities across Massachusetts, Ohio, Florida and Pennsylvania. IASIS operates 17 hospitals and one behavioral health hospital across Utah, Arizona, Colorado, Texas, Arkansas and Louisiana.

The deal will transfer operations of IASIS Healthcare’s 18 hospitals, which encompass nearly 7,500 patient beds and approximately 38,000 employees — including more than 1,800 directly employed multispecialty physicians and several thousands aligned physicians — to Steward Health Care. Steward will also assume operations of IASIS’ 140 outpatient facilities across Arizona, Arkansas, Colorado, Louisiana, Texas and Utah, according to The Wall Street Journal.

Steward Health Care is backed by private-equity firm Ceberus Capital Management LP and real estate investment trust Medical Properties Trust. Under the deal, Medical Properties Trust has agreed to acquire the interests of substantially all of IASIS’ hospital real estate subject to long-term leases and loans with Steward, according to the news release from Steward. The terms of the agreement specify that cash proceeds paid by MPT and other financing sources will be used to retire IASIS’ senior secured term loans and unsecured notes. Remaining cash proceeds will be paid to IASIS equity holders, including its majority stockholder, TPG Capital.

This deal marks the latest in a series of acquisitions for Steward, which in May closed a deal to acquire eight hospitals from Franklin, Tenn.-based Community Health Systems.

Top 10 MACRA Considerations for Providers

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Most physician practices are running a race against time to implement Medicare’s value-based payment system, survey data indicates. They have a lot to think about as they go about it.

As Medicare’s reviled Sustainable Growth Rate (SGR) formula for physician reimbursement fades to extinction, its replacement, the Medicare Access and CHIP Reauthorization Act (MACRA) of 2015, is posing a new set of challenges.

This week Black Book Research identified 10 of the top MACRA challenges that physician practices are facing. The survey is based on responses from 8,845 physician practices collected from February to April.

1. MIPS compliance technology: Physician practices are seeking technological solutions to help them achieve reporting compliance, with 77% of practices that have at least three clinicians mulling the purchase of Merit-Based Incentive Payment System Compliance Technology Solutions (MIPS) software.

2. Electronic Health Record (EHR) optimization: MACRA appears to be a golden opportunity for the largest EHR vendors. For the top eight EHR companies, 83% of their physician-practice users reported working to upgrade their system for MIPS compliance. At physician practices with smaller EHR vendor partners, however, 72% reported they were not working with their vendor partner to upgrade their system for MIPS compliance.

3. Consultant opportunity: The EHR capabilities required for participation in MIPS or Alternative Payment Models (APMs) represent a business opportunity for EHR consultants. Most (80%) of physician practices report that conducting a technology inventory is key to strategic planning for a value-based payment system.

4. Data wrangling: Taming data to conform with the reporting requirements of MIPS and APMs is daunting for many physician practices. At practices with at least four clinicians, 81% of physicians report being unable to align their data with the new reporting requirements.

5. Paying for procrastination: Physician practices that have not developed an in-house strategy for participating in MIPS or an APM are looking for outsourcing options. Of these practice procrastinators, 80% are planning to find turnkey software or a MACRA-administration partner this year.

6. MACRA-induced physician-practice consolidation: Black Book found that three-quarters of independent physician practices surveyed are considering selling their practice to a health system, hospital, or large group practice because of the regulatory and capital-cost burdens of MACRA.

In an equally dour data point, 68% of independent physicians predicted that MACRA would either burden or bankrupt their practice by 2020.

7. Economic incentives: For the first five years of the Quality Payment Program, there are powerful economic incentives to beat the MIPS performance threshold.

In 2019, MIPS is set to redistribute about $199 million from physicians who perform below the performance threshold to physicians above the threshold, and this redistribution mechanism is set to expand over time.

There also is $500 million in supplemental funding available for each of the first five years of MIPS implementation. To chase these opportunities, 64% of hospital-networked physician organizations reported including incentives in physician-compensation packages to boost MIPS performance.

8. Reputation risk: A majority (54%) of those surveyed did not know that MACRA would result in performance data being reported publicly through Medicare’s Physician Compare website and other rating systems.

9. ACO appeal: Joining an accountable care organization can increase the odds of MIPS success through penalty avoidance and resource utilization bonuses. Small physician practices have taken notice, with 67% considering joining an ACO to increase the likelihood of MIPS success.

10. Cost and quality transparency: Based on its physician-practice survey and other research, Black Book Research expects MACRA to be one of the market factors driving healthcare cost and quality transparency.

One survey noted 52% of large group practices, independent practice associations, ACOs, and integrated delivery networks reported they were preparing to release cost and quality measures for individual physicians by next year.

 

Hackensack Meridian Health, JFK Health sign definitive agreement to merge

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http://www.beckershospitalreview.com/hospital-transactions-and-valuation/hackensack-meridian-health-jfk-health-sign-definitive-agreement-to-merge.html

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The boards of trustees of Edison, N.J.-based JFK Health and Hackensack Meridian Health, also in Edison, signed a definitive agreement to merge the two health systems following five months of due diligence.

The transaction is subject to regulatory approval. If the merger is successful, the combined entity will consist of a total of 15 hospitals and academic medical centers, along with a network of physician practices, ambulatory surgery centers, assisted living facilities and outpatient centers, among other health facilities. The merged entity will employ a staff of more than 33,000 individuals and more than 7,000 physicians.

The organizations first revealed plans to affiliate in November 2016.

The financial terms of the deal were not disclosed.

“Choosing the right partner that provides the highest-quality care and value to the communities we serve is essential. We are thrilled JFK wants to be part of Hackensack Meridian Health. We believe JFK Health will be a great addition to our network,” said Robert Garrett, co-CEO of Hackensack Meridian Health. “We will continue to improve the well-being of communities with more cost-effective care that delivers quality, safe outcomes, clinical excellence and a superior experience.”

“In a rapidly changing healthcare environment that stresses the efficient delivery of care, this merger strengthens and aligns our two organizations to maximize our population health initiatives and increase access for everyone,” said Raymond Fredericks, president and CEO of JFK Health. “Hackensack Meridian Health’s culture of caring is one that matches our values and principles sustained during JFK’s 50-year history.”

 

CHS records $199M net loss, says divestiture spree is over

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http://www.beckershospitalreview.com/finance/chs-records-199m-net-loss-keeps-focus-on-performance-improvement.html

OR Efficiencies

Franklin, Tenn.-based Community Health Systems posted a net loss of $199 million in the first quarter after recording net income of $11 million in the same period of the year prior.

CHS said revenues dipped to $4.49 billion in the first quarter of this year, down from $4.99 billion in the same period of 2016. The decrease in revenue was attributable, in part, to lower patient volume. On a same-facility basis, admissions were down 1.5 percent in the first quarter of this year. When adjusted for outpatient activity, admissions decreased 1.4 percent year over year.

Although CHS kept operating expenses in check in the first quarter, one-time charges took a toll on the company’s bottom line. CHS said its first-quarter financial results included $250 million in impairment charges and losses related to the sale of some of its hospitals.

Commenting on the company’s financial results, CHS Chairman and CEO Wayne T. Smith said, “We are focused on performance improvements that we believe will yield additional efficiencies as we move through 2017. At the same time, we are making progress with our portfolio rationalization strategy as we work to create a stronger, more sustainable company for the future and further reduce our debt.”

To improve its finances and reduce its nearly $15 billion debt load, CHS put a turnaround plan into place last year. As part of the plan, the company is selling off 30 hospitals, which includes 11 hospitals it divested this week. Twelve other transactions are under definitive agreement and seven are under letter of intent, Mr. Smith said on a first quarter earnings call Tuesday.

“We’re about finished with our divestiture process, this 30 just about lines it up,” said Mr. Smith. “There may be one or two more, but we are not specifically thinking about doing anything significant for the rest of the year.”

 

Anthem loses Cigna takeover appeal

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http://www.healthcaredive.com/news/anthem-cigna-merger-over/441551/

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Dive Brief:

  • The U.S. Court of Appeals on Friday upheld a decision to block the $54 billion merger between insurance giants Anthem and Cigna.
  • A federal judge ruled in February that the combined company would result in reduced competition in the national health insurance market, agreeing with the U.S. Department of Justice, which brought the antitrust case last July. Anthem filed an appeal to reverse the decision later that month.
  • In a 2-1 decision, the court ruled Anthem had failed to “show the kind of extraordinary efficiencies necessary to offset the conceded anticompetitive effect of the merger.”

Dive Insight:

Unless Anthem takes it to the Supreme Court, this is the end of the deal after several months of contentious debates and infighting among the two health insurance giants.

The healthcare industry has been closely watching the case. The American Medical Association was quick to issue a statement applauding the decision from the Court of Appeals. “The appellate court sent a clear message to the health insurance industry: a merger that smothers competition and choice, raises premiums and reduces quality and innovation is inherently harmful to patients and physicians,” said AMA President Andrew W. Gurman.

Cigna has been wanting to end the merger plans for months. After the merger was first blocked, Cigna filed a lawsuit against Anthem seeking at least $14 billion in damages, which is a lot more than the $1.85 billion contractual breakup fee. It also asked for a statement that Cigna had lawfully terminated the deal.

Anthem was granted a temporary restraining order against Cigna shortly thereafter. The infighting certainly did not help support Anthem-Cigna’s argument that it would effectively implement the claimed efficiencies that would benefit consumers.

Earlier this week, Anthem filed a motion with the Delaware Court of Chancery for a preliminary injunction that would block Cigna from terminating the deal on April 30, which is the contractual deadline.

Anthem and Cigna could soon end their plan to merge. Once it’s over, it will be “harder for either Anthem or Cigna to do another deal that involves a combination of another large insurer,” Mitchell Raup, an antitrust attorney from Polsinelli, told Healthcare Dive. “They would have to convince the Department of Justice or perhaps a court that the next deal is not like this deal, that the judge’s opinion about this deal doesn’t apply to the next deal.”

Also this week, Anthem released first quarter 2017 earnings showing it beat projections with $1 billion in net income. It also said it would cautiously begin work on 2018 rates for the Affordable Care Act exchanges. Anthem and other payers, however, are still anxiously awaiting word from the President Donald Trump administration on whether it will continue the cost-sharing reduction subsidies.

Healthcare Dive requested comments from both payers. Anthem has not yet sent a statement. Cigna, through a company lawyer, said it has no comment at this time. An 8-K Cigna filed earlier today just states that it “continues to work through the litigation process in the pending Delaware Court of Chancery matter involving Cigna and Anthem, including the preliminary injunction hearing scheduled for May 8, 2017.”

PinnacleHealth pursues affiliation with UPMC, inks deal to acquire 4 CHS hospitals

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http://www.beckershospitalreview.com/hospital-transactions-and-valuation/pinnaclehealth-pursues-affiliation-with-upmc-signs-deal-to-acquire-4-chs-hospitals.html

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PinnacleHealth, a three-hospital system based in Harrisburg, Pa., announced Tuesday it is expanding its network of acute care hospitals and also looking to partner with a bigger system.

PinnacleHealth signed a definitive agreement to acquire four Pennsylvania hospitals from Franklin, Tenn.-based Community Health Systems, which will more than double the number of hospitals in its network. The following hospitals are included in the transaction:

  • 100-bed Memorial Hospital of York (Pa.)
  •  214-bed Lancaster (Pa.) Regional Medical Center
  •  148-bed Heart of Lancaster Regional Medical Center in Lititz, Pa.
  • 165-bed Carlisle (Pa.) Regional Medical Center.

CHS said it expects the transaction, which is subject to customary regulatory approvals, to close this summer. CHS is selling the hospitals as part of a turnaround plan it put into place last year. The company is selling 25 hospitals to trim its debt load.

PinnacleHealth is also looking to expand its reach through a partnership with Pittsburgh-based UPMC. The two systems have signed a letter of intent to pursue an affiliation and have begun the due diligence process.

“Having PinnacleHealth affiliate with UPMC is an exciting opportunity for the system and central Pennsylvania,” said Philip W. Guarneschelli, president and CEO of PinnacleHealth. “Affiliation supports geographic expansion and introduces more choices for health insurance through a provider-sponsored health plan.”

As both a provider organization and an insurer, UPMC includes more than 25 hospitals, a 3 million-member insurance division and 600 physicians’ offices and outpatient sites.

 

CHS to sell 25 more hospitals after $1.7B loss in 2016

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http://www.healthcaredive.com/news/chs-to-sell-25-more-hospitals-after-17b-loss-in-2016/436555/

Dive Brief:

Dive Insight:

The downfall of CHS continued into the fourth quarter of 2016, although it could have been worse. On a per share basis, earnings came in at 46 cents per share while financial analysts had predicted earnings of 12 cents per share, according to an Associated Press report.

How CHS will proceed from here remains unclear. The hospital operator divested from dozens of hospitals last year and deals to sell additional hospitals are in the works. Reports surfaced last year that CHS was considering a sale, but it may be difficult to find a buyer willing to take on debt accumulated by CHS.

In 2016, CHS’ net losses were “primarily related to impairment charges totaling approximately $315 million to reduce the value of long-lived assets,” the earnings report states. “These impairment charges were partially offset by the gain of $91 million on the sale of a majority ownership interest in the company’s home care division, which closed on Dec. 31, 2016.”

CHS has made some progress paying off its debt, but there is still a long way to go. Long-term debt totaled $16.5 billion at the end of 2015 and dipped to $14.8 billion at the end of 2016. The hospital operator has entered into agreements and letters of intent, “consisting of ten separate contemplated transactions,” to divest the additional 25 hospitals, which represent about $3.0 billion of 2016 net revenue.

Cigna ends merger with Anthem, sues for more than $14B

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http://www.fiercehealthcare.com/payer/cigna-ends-merger-anthem-sues-for-more-than-14b?mkt_tok=eyJpIjoiTm1Nd1lUTXdNRGxsTm1SaCIsInQiOiJqVTFQMklENmVyckE1T0RUUVdJOXlXUmVQS21VY09IR0dcL2VlUnEwd09Fa0tlamZhdUtDM21zc0gwMFZcL01xYmllZmVoWjJib3U4aUFxNU11NDk3YUZNM1J1UndFQ1k3NlE1cTZ4UU5mS0hjMlF0b29mRkZUSldXT1I0QkFQQ0NZIn0%3D&mrkid=959610&utm_medium=nl&utm_source=internal

Lawsuit document

In a move that defies Anthem’s push to fight for their deal, Cigna has terminated its merger agreement with Anthem and filed suit against the larger insurer.

Earlier this month, a federal judge ruled against the two insurers’ planned merger, saying it would violate antitrust law by lessening competition in the national accounts market. Anthem responded by saying it intends to appeal the ruling.

But in a statement issued Tuesday, Cigna said that given the court’s decision, it “believes that the transaction cannot and will not achieve regulatory approval and that terminating the agreement is in the best interest of Cigna’s shareholders.”

Thus, Cigna filed a suit against Anthem in the Delaware Court of Chancery, seeking a declaratory judgment that Cigna has lawfully terminated the merger agreement and that Anthem is not permitted to extend the termination date.

The suit also asked the court to compel Anthem to pay Cigna the $1.85 billion termination fee outlined in the merger agreement, plus additional damages of more than $13 billion. Those damages “include the lost premium value to Cigna’s stockholders caused by Anthem’s willful breaches of the merger agreement,” according to a question-and-answer document filed with the Securities and Exchange Commission.

For its part, Anthem maintains that “under the terms of the merger agreement, Cigna does not have a right to terminate the agreement. Therefore, Cigna’s purported termination of the merger agreement is invalid,” a company spokesperson said in an emailed statement. “Anthem will continue to enforce its rights under the merger agreement and remains committed to closing the transaction.”

21 recent hospital transactions and partnerships

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http://www.beckershospitalreview.com/hospital-transactions-and-valuation/21-recent-hospital-transactions-and-partnerships-21317.html

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The following healthcare mergers, acquisitions and general partnerships took place or were announced in the past week.

Kaiser Permanente operating income grows as membership booms

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http://www.beckershospitalreview.com/finance/kaiser-permanente-operating-income-grows-as-membership-booms.html

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Oakland, Calif.-based Kaiser Permanente saw revenue and operating income increase in 2016, according to recently released bondholder documents.

Kaiser said operating revenue for its nonprofit hospital and health plan unit climbed 6.4 percent year over year to $64.6 billion in 2016. After factoring in expenses, Kaiser ended 2016 with operating income of $1.9 billion, up from $1.8 billion in the year prior.

Kaiser reported a strong year in health plan membership growth. The system ended 2016 with 10.7 million members, an increase of 4.2 percent from the year prior. After completing its acquisition of Seattle-based health plan Group Health Cooperative Feb. 1, Kaiser’s health plan membership now tops 11 million.

In 2016, Kaiser’s capital spending increased to $2.8 billion, up slightly from $2.7 billion in 2015. The system opened a new technology campus in Atlanta and 12 new medical offices and two new dental offices last year.

Fueled by strong nonoperating income, Kaiser reported net income of $3.1 billion in 2016, up from $1.8 billion in 2015.