Van­guard-Tufts part­ner­ship rides wave of con­sol­i­da­tion

Modern Healthcare - - NEWS - Jaimy Lee

Van­guard Health Sys­tems and Tufts Med­i­cal Cen­ter are mak­ing a play to­gether for influence in Mas­sachusetts, forg­ing an­other in a grow­ing ar­ray of hookups in rapidly con­sol­i­dat­ing health­care mar­kets.

Van­guard, Tufts Med­i­cal Cen­ter, and the Tufts-af­fil­i­ated New Eng­land Qual­ity Care Al­liance physi­cian net­work an­nounced last week that they are in talks to form two for­profit joint ven­tures. One will mar­ket ac­count­able care-re­lated ser­vices and tools to physi­cians. The other will buy, merge or af­fil­i­ate with the state’s community hos­pi­tals.

Van­guard, a Nashville-based for-profit health sys­tem, owns two hos­pi­tals in Mas­sachusetts. The Tufts sys­tem in­cludes a 279-bed flag­ship aca­demic med­i­cal cen­ter in Bos­ton.

Sim­i­lar joint ven­tures are un­der way out­side of Mas­sachusetts. Duke Life­Point, a joint ven­ture be­tween Duke Univer­sity Health Sys­tem, Durham, N.C., and Life­Point Hos­pi­tals, com­pleted its fourth ac­qui­si­tion this month when it closed its deal to buy Mar­quette (Mich.) Gen­eral Hospi­tal St. Louis-based As­cen­sion Health an­nounced plans in Fe­bru­ary 2011 to join with Oak Hill Cap­i­tal Part­ners to ac­quire Catholic hos­pi­tals (Feb. 21, 2011, p. 6). The ven­ture, called As­cen­sion Health Care Net­work, has not yet com­pleted any deals.

Such part­ner­ships in­volv­ing aca­demic med­i­cal cen­ters are “a win-win,” said Me­gan Neuburger, an an­a­lyst with Fitch Rat­ings. For­profit com­pa­nies can tap into an aca­demic med­i­cal cen­ter’s rep­u­ta­tion, while community hos­pi­tals will have ac­cess to new re­sources and man­age­ment ex­pe­ri­ence. The par­tic­i­pants, she said, also gain more ne­go­ti­at­ing power with pay­ers with­out hav­ing to com­mit to the same level of cap­i­tal needed in an ac­qui­si­tion.

As part of the Tufts joint ven­ture, Van­guard will take ma­jor­ity stakes in the hos­pi­tals ac­quired, and Tufts will make mi­nor­ity in­vest­ments. Tufts also would take a mi­nor­ity stake in Van­guard’s 158-bed MetroWest Med­i­cal Cen­ter in Fram­ing­ham, ac­cord­ing to a Van­guard spokesman.

In the Mas­sachusetts mar­ket, where at least five hospi­tal deals and af­fil­i­a­tions have been an­nounced since Jan­uary, the joint ven­ture is de­signed as an al­ter­na­tive for the community hos­pi­tals that are in­creas­ingly look­ing to align with larger health sys­tems.

The state’s two largest health sys­tems —12hos­pi­tal Part­ners Health­Care Sys­tem and the 11-hospi­tal Stew­ard Health Care Sys­tem—have each ac­quired one hospi­tal in Mas­sachusetts so far this year. Stew­ard, Van­guard and Kin­dred Health­care, which owns two small hos­pi­tals in Pe­abody and Brighton, are the only op­er­a­tors of for-profit acute-care hos­pi­tals in Mas­sachusetts.

Daniel Stein­gart, an an­a­lyst with Moody’s In­vestors Ser­vice, at­trib­uted the rise of for­profit mar­ket ac­tiv­ity in Mas­sachusetts to the growth of Stew­ard, which has ac­quired five hos­pi­tals in less than two years.

“The ques­tion on peo­ple’s minds has been: What is Tufts go­ing to do?” Stein­gart said. “Now you have the an­swer.”

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