Healthcare Business News
St. Joseph Medical Center, Towson, Md.
The sale of St. Joseph would leave Catholic Health Initiatives with no Maryland hospitals.

Regional News/Northeast: Catholic Health Initiatives to sell its only Maryland hospital, and other news

By Modern Healthcare
Posted: November 17, 2012 - 12:01 am ET

TOWSON, Md.—Catholic Health Initiatives would exit Maryland under a deal moving forward to sell St. Joseph Medical Center in Towson to the University of Maryland Medical System. The parties announced in March they had entered exclusive negotiations and last week said they had sought required approvals from the Federal Trade Commission, the Archdiocese of Baltimore and regulatory agencies. Mary Lynn Carver, spokeswoman for the University of Maryland Medical System, declined to disclose terms of the deal, which calls for the system to acquire the assets under a newly created not-for-profit, the University of Maryland St. Joseph Medical Center. University of Maryland Medical System has agreed to maintain the hospital's Catholic identity, Carver said. Catholic Health Initiatives, which operates 81 hospitals in 18 states, and the University of Maryland Medical System are seeking to close the deal Dec. 1. A newly formed “bridge board” named Dr. Mohan Suntha to take over as president and CEO. Suntha, 48, is chairman of the radiation oncology department at the University of Maryland Medical Center and played a role in the negotiations, according to a news release announcing the appointment. UMMS board member Francis Kelly was named board chairman of the University of Maryland St. Joseph Medical Center. The hospital's existing board chairman, Edward Gilliss, was named vice chairman of the newly formed not-for-profit. Catholic Health Initiatives moved to divest the hospital because it lacked the economy of scale and network presence in Maryland needed to prepare for changes such as accountable care organizations or population health management under healthcare reform, a spokesman said.

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PITTSBURGH—West Penn Allegheny Health System and insurer Highmark were attempting to salvage a deal that went sour and landed the proposed partners in court. Moody's Investors Service, meanwhile, lowered West Penn Allegheny's credit rating by three notches to Ca, or “highly speculative,” from Caa1. Moody's analysts said the rating action “reflects the severity of the financial status of the system and our belief that there is a high likelihood of a restructuring or bankruptcy filing, with or without the closing of an agreement with Highmark,” a rating report said. West Penn Allegheny lost a legal battle to call off its deal with Highmark after a judge rejected the health system's claim that Highmark violated terms of the agreement. On Nov. 9, the judge awarded a preliminary injunction to stop West Penn Allegheny from finding a new partner. Leaders from Highmark and West Penn Allegheny met Nov. 12 to talk about the system's finances and regulatory review of the acquisition, Highmark said in a statement. West Penn Allegheny said in unaudited financial statements that it lost $112.5 million on operations for the year ended in June compared with $51.8 million the prior year. In a statement to investors, West Penn Allegheny said it was “not surprised” by the downgrade and understood Moody's unfavorable view of the recent court decision. “Nonetheless, WPAHS continues to believe that an affiliation with Highmark is in the best interests of both organizations and of the greater community, and has agreed to work diligently in the days ahead with Highmark” to win regulatory approval, the statement said.

WATERBURY, Conn.—Vanguard Health Systems, Nashville, has entered into an agreement to form a joint venture that would operate Waterbury Hospital. The publicly traded system has inked a letter of intent to form a limited liability company with the Greater Waterbury Health Network, which owns the 192-bed hospital. Vanguard would own 80% of the joint venture. Matthew Burgard, a spokesman for Waterbury Hospital, said the parties hope to have a definitive agreement in place within 45 days, and the deal would then progress through the certificate-of-need process. Trip Pilgrim, senior vice president and chief development officer at Vanguard, said the joint venture could take several months to close. He declined to disclose financial terms, but said Vanguard would maintain Waterbury's leadership team. A 12-member board would run the joint venture and consist of six representatives from Waterbury and six from Vanguard, Burgard said. Carl Contadini, who chairs the hospital's current board of directors, would serve as the first chairman of the new board for a three-year term. The deal would be Vanguard's first in Connecticut, but the system is already present in Massachusetts. “We like to grow regional platforms,” Pilgrim said. LHP Hospital Group, Plano, Texas, and St. Mary's Health System, Waterbury, last year sought to include the Greater Waterbury Health Network in their own joint venture with LHP holding an 80% stake. Burgard said the deal unraveled in August after “we couldn't get to a solution on some of the key issues.” The hospital had previously identified Vanguard as a preferred buyer, but Burgard said LHP had offered Waterbury the possibility of building a new hospital. That plan has now been tabled, he said.

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