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Regional News/South: Catholic Health Initiatives buys six hospital health system in Houston, and other news

By Modern Healthcare
Posted: April 27, 2013 - 12:01 am ET

HOUSTON—Catholic Health Initiatives will acquire six-hospital St. Luke's Episcopal Health System in Houston, pending regulatory approvals. The Texas Episcopal Diocese approved the definitive agreement, which includes a $1 billion investment from Englewood, Colo.-based CHI. CHI will also spend another $1 billion in establishing a foundation to help the community's underserved. The transaction is expected to be finalized in the summer, and the system would be renamed St. Luke's Health System. “The relationship with Catholic Health Initiatives ensures the Greater Houston area will retain one of its great healthcare institutions, while best preparing St. Luke's to meet future changes in healthcare,” CHI President and CEO Kevin Lofton said in the release. CHI beat two Texas systems to acquire St. Luke's after an 11-month evaluation process that included 30 suitors. CHI was among three finalists named last month: five-hospital Methodist Hospital System in Dallas, and eight-hospital Memorial Hermann Health System in Houston. Lofton said in an interview that the lure of being part of a national system was attractive to St. Luke's, which would give the system its only presence in Texas. St. Luke's asked all bidders to include a proposal to create a not-for-profit foundation, which the Diocese said would maintain its commitment to a healthy community while no longer providing acute care. “This new foundation will address a widening gap in healthcare throughout our 57-county area,” Diocese Bishop C. Andrew Doyle said in the release. In its fiscal 2012, ended Dec. 31, St. Luke’s earned $59.6 million on $1.24 billion in revenue.

—Ashok Selvam

(This item has been updated to correct St. Luke's earnings figures.)

OCALA, Fla.—Health Management Associates, Naples, Fla., beat out Duke LifePoint Healthcare in its bid to acquire Munroe Regional Medical Center in Ocala. The two systems had been engaged in a bidding war to acquire the 420-bed hospital before its trustees last week chose HMA to run the medical center over the next 40 years. HMA teamed up with Shands HealthCare, its frequent partner on similar deals. The publicly traded system offered $212 million in cash under a lease and asset purchase agreement, and pledged capital commitments totaling $225 million over the first five years and 4% of net revenue for years 6 to 10, and a last-minute $1.5 million in charitable donations. Duke LifePoint, which originally offered $138.7 million for the lease consideration and an initial $225 million in capital commitments, twice sweetened its proposal so that its final bid was $200 million for the lease and $255 million for capital commitments over the first five years and 2% of net revenue after that. The two systems courted Munroe up until the day before trustees cast their votes, according to publicly filed letters and e-mails from the suitors. The deal would have marked Duke LifePoint's first entry into Florida after the joint venture embarked on an ambitious nationwide expansion strategy last year. HMA, in contrast, has a heavy presence in the Florida market. The Marion County Hospital District, which operates Munroe Regional, formed a strategic options workgroup in October 2011, and Duke LifePoint and HMA/Shands were the final two bidders in a field that initially included seven investor-owned chains.

—Beth Kutscher

St. Luke's Episcopal Hospital is among the six hospitals that will be acquired by CHI.

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