Healthcare Business News

Cleveland Clinic strikes new deal with Akron General

By Bob Herman
Posted: June 9, 2014 - 7:45 pm ET

The Cleveland Clinic Health System and Akron (Ohio) General Health System have reached a new agreement for a joint venture roughly five months after nixing a deal that would have included for-profit Community Health Systems.

In January, Akron General called off acquisition talks with Cleveland Clinic and Franklin, Tenn.-based CHS. Cleveland Clinic and CHS created a strategic partnership in 2013 centered on quality initiatives, and the Akron General deal would've been their first foray into operating hospitals together.

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However, Akron General President and CEO Dr. Thomas "Tim" Stover said they backed out of the initial talks with Cleveland Clinic and CHS because the relationship between the two acquirers was "not well-defined." Akron General would've been converted into a for-profit entity, and the system was unsure of how the arrangement would incorporate clinical quality initiatives.

"We didn't get assurance what piece the clinic was going to play in its relationship with CHS," Stover said. "Not knowing that piece, both our board and I became uneasy of how that was going to play out."

Under the new transaction, the Cleveland Clinic would become a minority owner of Akron General and make a "substantial capital investment" in the health system. CHS is not involved. Specifics of the ownership stakes and capital investment were not provided.

Stover said he expects a definitive agreement will be reached in "a few weeks" because much of the due diligence has been completed from previous talks. Ann Huston, chief strategy officer at the Cleveland Clinic, said the deal is likely to close in no more than 60 days.

Both Stover and Huston said a key component of the deal is the Cleveland Clinic's Quality Alliance, which is a clinically integrated network that allows employed and independent physicians in the area to connect and share information.

The deal has competitive ramifications throughout Cleveland's suburbs. Acquiring part ownership of Akron General will give Cleveland Clinic its first significant footprint in Summit County, where its prime competitor, Cleveland-based University Hospitals, already has physician practices and outpatient clinics. Akron General includes its 498-bed flagship hospital, as well as Edwin Shaw Rehabilitation Institute in Cuyahoga Falls and Lodi (Ohio) Community Hospital, a critical-access hospital. In 2013 the system saw an operating loss of $6.9 million on $583.1 million in revenue.

"The clinic needs a presence in Summit County, and we needed the scale of a larger system, and you can't find one much better than the clinic," Stover said.

Huston said the Cleveland Clinic already views Summit County as part of its core service area and called the transaction a "very natural, compatible and promising opportunity to collaborate."

Cleveland Clinic has been in the news for the past several days. This week, Modern Healthcare published a three-month analysis of federal inspection reports, which showed the 1,268-bed academic medical center spent 19 months on "termination track" with Medicare between 2010 and 2013 as a result of inspections triggered by patient complaints. Dr. Delos "Toby" Cosgrove, CEO of the clinic, had been considered a leading candidate for VA secretary, but over the weekend withdrew his name from consideration.

Follow Bob Herman on Twitter: @MHbherman

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