Healthcare Business News

Atlantic closes deal for Chilton Hospital, looks for more targets

By Melanie Evans
Posted: January 2, 2014 - 8:00 pm ET

Atlantic Health System, Morristown, N.J., has completed its previously announced acquisition of Chilton Hospital, Pompton Plains, N.J., but the deal hasn't quenched Atlantic Health's thirst for growth. It is in talks with other community hospitals under a strategy to expand its scale and provider network while better positioning the system to manage population health, Joseph Trunfio, the system's president and CEO, said in a conference call with reporters.

Atlantic Health, which owns four hospitals after the Jan. 1 acquisition of what is now called Chilton Medical Center, acquired 148-bed Newton (N.J.) Medical Center in March 2011.

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The latest deal adds a 260-bed hospital to the northeast of the system's flagship, the 616-bed Morristown (N.J.) Medical Center; Atlantic's fourth fourth hospital is 428-bed Overlook Medical Center in Summit, N.J.

Chilton Hospital joins Atlantic Health with a slim operating profit through the first nine months of 2013, the most recent figures available, after a 1.6% operating margin in 2012. Chilton Hospital closed its books on 2012 in December that year with operating income of $2.8 million on revenue of $168 million. Atlantic Health System reported a margin of 4.3%, or operating income of $59.2 million on revenue of $1.38 billion, during the same 12 months.

Hospitals have been active dealmakers in the last year, with a flurry of strategic mergers and acquisitions that included the union of two not-for-profit giants, Catholic Health East and Trinity Health, in May 2013. The robust activity has sparked a debate about who will benefit from the consolidation, with dealmakers who contend patients will receive more efficient and coordinated care and critics who fear prices will rise as health systems consolidate market power.

Trunfio acknowledged that concern, but noted that Atlantic Health and Chilton Hospital recently negotiated contracts separately with rates that will remain in place for three years.

Debbie Zastocki, Chilton Hospital's president and CEO, said the hospital also sought the advantages of scale from a deal. The hospital's board believed a larger partner with greater access to capital would be necessary to finance technology investments in coming years, she said.

Atlantic Health System, which was one of four potential partners, agreed to assume Chilton Hospital's $43 million in debt and invest $15 million in information technology. Atlantic Health System also pledged $10 million a year for five years to additional capital improvements.

Zastocki, when asked about how the deal may address the hospital's Leapfrog Group safety score, said Chilton Hospital would be better able to rapidly improve after the deal. Leapfrog reports the hospital's score as C.

Trunfio noted that Chilton Hospital ranked among the Joint Commission's top performers on certain measures. The Joint Commission lists Chilton Hospital as a top performer for heart attack, heart failure, pneumonia and surgical care.

Follow Melanie Evans on Twitter: @MHmevans

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