Role re­ver­sal

Deal would give not-for-profit own­er­ship stake

Modern Healthcare - - THE WEEK IN HEALTHCARE - Ashok Selvam

ATen­nessee divi­sion of As­cen­sion Health and Capella Health­care are work­ing on a deal that flips the blue­print of the steady flow of part­ner­ships and ac­qui­si­tions be­tween Catholic or­ga­ni­za­tions and for-profit chains.

Un­der a let­ter of in­tent an­nounced last week, As­cen­sion’s five-hos­pi­tal St. Thomas Health would form a joint ven­ture with Capella that would give the Catholic sys­tem an own­er­ship stake and role in run­ning four Capella hos­pi­tals in Ten­nessee.

The deal would leave Franklin, Tenn.based Capella as man­ag­ing mem­ber and ma­jor­ity part­ner of the new ven­ture, as well as the exclusive de­vel­op­ment part­ner for Nashville-based St. Thomas in mid­dle Ten­nessee and south­ern Ken­tucky. St. Thomas will take joint own­er­ship and an undis­closed mi­nor­ity in­ter­est in the four Capella hos­pi­tals.

The more com­mon path has been for strug­gling Catholic hos­pi­tals and sys­tems to pair with or sell to for-profit com­pa­nies, such as the cre­ation of Bos­ton-based Stew­ard Health Care Sys­tem through sale of Car­i­tas Christi Health Care to a pri­vate-eq­uity firm, and the ac­qui­si­tion of Detroit Med­i­cal Cen­ter by Nashville-based Van­guard Health Sys­tem.

“It’s new in the sense that an in­vestorowned hos­pi­tal has sold part of its port­fo­lio and put it in a joint ven­ture with a non-profit aca­demic med­i­cal cen­ter,” said David Atchi­son, pres­i­dent and CEO of Chicagob­ased health­care con­sult­ing firm Pon­der & Co.

Yet, although this one has the roles re­versed, Atchi­son said the ar­range­ments re­mind him of two other deals. Duke Univer­sity Health Sys­tem, Durham, N.C., and Life­point Hos­pi­tals, Brent­wood, Tenn., this year com­bined so the new or­ga­ni­za­tion, DLP Health­care, could ac­quire other hos­pi­tals (Feb. 7, p. 12). For-profit Health Man­age­ment As­so­ci­ates, Naples, Fla., in 2010 in­vested in three ru­ral Florida hos­pi­tals run by Shands Health­care of Gainesville, Fla., with HMA ac­quir­ing 60% own­er­ship (July 12, 2010, p. 18).

Those deals have sim­i­lar goals, Atchi­son said. They help pro­tect re­fer­rals and con­nect ru­ral hos­pi­tals with larger, bet­ter-known brand names. He said he’s never seen a part­ner­ship like the one pro­posed by Capella and St. Thomas, but added he wouldn’t be sur­prised to see oth­ers.

The agree­ment in­cludes for-profit Capella’s 125-bed River Park Hos­pi­tal in Mcmin­nville, 44-bed White County Com­mu­nity Hos­pi­tal in Sparta, 52-bed Dekalb Com­mu­nity Hos­pi­tal in Smithville and 60-bed Stones River Hos­pi­tal in Wood­bury. Those hos­pi­tals would join the St. Thomas Health net­work, made up of 425-bed Bap­tist Hos­pi­tal in Nashville; the flag­ship 395-bed St. Thomas Hos­pi­tal in Nashville; 286-bed Mid­dle Ten­nessee Med­i­cal Cen­ter in

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