Vanguard-Tufts partnership rides wave of consolidation
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.”