An­other Catholic sell-off

HMA to ac­quire Mercy Health Part­ners-tenn.

Modern Healthcare - - The Week In Healthcare - Mau­reen Mckinney

Ne­go­ti­a­tions an­nounced ear­lier this year have re­sulted in a de­fin­i­tive $525 mil­lion pur­chase agree­ment be­tween Health Man­age­ment As­so­ciates and Mercy Health Part­ners-Ten­nessee, a sub­sidiary of Catholic Health Part­ners, Cincin­nati.

Ac­cord­ing to a July 1 an­nounce­ment, Naples, Fla.-based HMA will ac­quire the seven-hos­pi­tal sys­tem, based in Knoxville, Tenn., for $525 mil­lion plus cer­tain ad­just­ments for work­ing cap­i­tal, and the as­sump­tion of cer­tain long-term lease li­a­bil­i­ties.

The HMA-Mercy agree­ment came as an­other large hos­pi­tal deal closed—Trin­ity Health’s $100 mil­lion pur­chase of Loy­ola Univer­sity Health Sys­tem of May­wood, Ill.

The sale of Mercy Health Part­ners-Ten­nessee, which was formed in 2008 through a merger of CHP-owned St. Mary’s Health Sys­tem and Bap­tist Health Sys­tem of East Ten­nessee, is the sec­ond by CHP in re­cent months. In May, the sys­tem closed a $150 mil­lion deal, sell­ing three Catholic hos­pi­tals in Penn­syl­va­nia to Franklin, Tenn.-based Com­mu­nity Health Sys­tems. That deal marked CHP’s exit from Penn­syl­va­nia’s hos­pi­tal mar­ket and it brought Com­mu­nity’s to­tal num­ber of hos­pi­tals in the state to 13. (May 9, p. 16).

The two deals to­gether prompted CHP to reshuf­fle its man­age­ment struc­ture, ac­cord­ing to a June 15 an­nounce­ment. The sys­tem said it would pare op­er­a­tions to two di­vi­sions from four and reshuf­fle top man­age­ment in or­der to be more nim­ble and bet­ter able to de­velop in­te­grated de­liv­ery net­works and grow un­der the new op­er­at­ing struc­ture.

CHP had an­nounced in May that it se­lected HMA for ex­clu­sive ne­go­ti­a­tions to buy Mercy Health Part­ners-Ten­nessee. Mercy Health Part­ners’ seven hos­pi­tals have an­nual net rev­enue of $600 mil­lion, ac­cord­ing to HMA. The Ten­nessee hos­pi­tals are: 473-bed Mercy Med­i­cal Cen­ter St. Mary’s, Knoxville; 108-bed Mercy Med­i­cal Cen­ter North, Pow­ell; 101bed Mercy Med­i­cal Cen­ter West, Knoxville; 66-bed St. Mary’s Med­i­cal Cen­ter of Camp­bell County, LaFol­lette; 56-bed St. Mary’s Med­i­cal Cen­ter of Scott County, Oneida; 54bed St. Mary’s Jef­fer­son Me­mo­rial Hos­pi­tal, Jef­fer­son City; and 47-bed Bap­tist Hos­pi­tal of Cocke County, New­port.

An in­vestor note from Deutsche Bank viewed the deal pos­i­tively for HMA, which is gain­ing en­try to the strong Knoxville mar­ket via a sys­tem that has an es­ti­mated 20% to 30% mar­ket share.

Jef­frey Ashin, pres­i­dent and CEO of Mercy Health Part­ners-Ten­nessee, praised the deal with HMA, call­ing it a “per­fect match.”

“Through Health Man­age­ment, our hos­pi­tals will be able to in­vest in their fa­cil­i­ties and new tech­nolo­gies, and pro­vide the train­ing needed to en­sure Mercy con­tin­ues to pro­vide the best, most cur­rent care avail­able in our com­mu­ni­ties,” Ashin said in a July 1 news re­lease from HMA.

Un­der the terms of the deal, an HMA sub­sidiary will ac­quire all of the as­sets of Mercy Health Part­ners. In ad­di­tion to the seven hos­pi­tals, HMA will also con­trol the sys­tem’s Knoxville-based an­cil­lary op­er­a­tions. The deal, which is still sub­ject to re­view and ap­proval by ap­pro­pri­ate authorities that in­clude the Vat­i­can, is ex­pected to close by Oct. 1.

In the Trin­ity deal, the Novi, Mich.-based sys­tem has taken over own­er­ship of Loy­ola Univer­sity Health Sys­tem, which in­cludes Loy­ola Univer­sity Hos­pi­tal, a 535-bed fa­cil­ity.

Along with the $100 mil­lion price, Trin­ity Health has agreed to spend $300 mil­lion for cap­i­tal im­prove­ments and $75 mil­lion to­ward a new $150 mil­lion health sci­ences re­search fa­cil­ity. The deal also in­cludes $22.5 mil­lion in an­nual pay­ments to the Stritch School of Medicine, which will re­main part of the univer­sity.

The two par­ties filed a letter of in­tent to merge in March, and since then all reg­u­la­tory and board ap­provals have been fi­nal­ized.

—with Re­becca Vesely

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