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 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.
“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 most needed in two areas: electronic health records and physician alignment. Affiliating with Stanford can solve those issues, he said. Follow Bob Herman on Twitter: @MHbherman