Ascension Health and Oak Hill Capital Partners: an update

In February, Ascension Health, the largest U.S. Roman Catholic health system, and Oak Hill Capital Partners, a private equity firm, announced plans to buy Catholic hospitals before someone without the religious affiliation could.

Since then, the tight-lipped partners have said little publicly about their plans.

But in Philadelphia this weekend, the joint venture's chief executive discussed the company's acquisition strategy. Leo Brideau, president and CEO Ascension Health Care Network, told the Wharton Health Care Management Alumni Association that deals will depend on potential acquisitions' clout in the local marketplace.

The company will look to invest in Catholic hospitals or systems with enough market share and size to succeed, he said. Or the joint venture will enter markets where executives can consolidate Catholic and non-religious hospitals for sufficient scale, he said.

A single distressed Catholic hospital without clout or consolidation opportunities would not be attractive for the dealmakers, he said.

The strategy makes Ascension Health's recent deal for Alexian Brothers Health System in Chicago somewhat puzzling. Anthony Tersigni, president and CEO of Ascension Health, said as talks were announced in May, the deal was “a great opportunity to consolidate Catholic Healthcare in Illinois.” He added: “That's something we'll be working on.”

Why did the system—not its new private-equity backed joint venture—move to acquire Alexian Bros.? Brideau said Ascension Health's talks to acquire Alexian Brothers began before development of the joint venture.

Brideau declined to say when the joint venture might reach its first deal, but said the company had “an active pipeline.”

Brideau told the conference crowd he has crossed the county to sell hospitals linked to the church on for-profit Catholic healthcare. “You can imagine the disconnect,” he said to laughter. Nonetheless, most healthcare executives have begun to evaluate whether their operations have the size to stand alone. “Right now, it is all in play.”

You can follow Melanie Evans on Twitter: @MHmevans.