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Stanford Hospital in talks to merge with nearby ValleyCare


By Bob Herman
Posted: June 2, 2014 - 6:45 pm ET
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Stanford Hospital & Clinics and ValleyCare Health System have signed a nonbinding letter of intent to merge, marking Stanford's first foray into the community hospital M&A scene.

ValleyCare, a two-campus hospital system based in Pleasanton, Calif., is located approximately 30 miles northeast of Palo Alto, Calif.-based Stanford. ValleyCare has recorded operating losses the past few years—ValleyCare CEO Scott Gregerson said the system lost $5.1 million from operations on $280 million of revenue in fiscal 2013 alone. Stanford, meanwhile, recorded $252.8 million in operating income on $2.7 billion of revenue in 2013.

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“It's a challenging time for hospitals of our size. We're a midsize community hospital, truly independent,” Gregerson said. “We want to be able to meet the needs of this community going forward, and that is a very heavy lift. There's a lot of investment that needs to be done.”

The investment, Gregerson said, is needed in two primary areas: electronic health records and physician alignment. Affiliating with Stanford can solve those issues, he said.

Gregerson was named CEO of ValleyCare this past winter. Previously, he was the vice president of strategic partnerships at the system. Serious discussions with Stanford began last fall, he said.

“We don't want to just react to the changes in healthcare,” Gregerson said. “We want to be part of that transformation. A lot of that happens at the community level. Stanford recognizes that as well.”

Stanford executives were not immediately available for comment. In a statement, Stanford Hospital & Clinics CEO Amir Dan Rubin said, “The goal of this affiliation is to support delivery of premier healthcare services to residents of the Tri-Valley region, while building upon Stanford's pre-eminent academic health system capabilities.”

Health system executives will now conduct due diligence before signing a definitive agreement. No timeline was given.

Follow Bob Herman on Twitter: @MHbherman


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