Healthcare Business News

Indiana health systems cancel affiliation over bond issues

By Bob Herman
Posted: June 17, 2014 - 2:45 pm ET

Two Indianapolis-based health systems have called off a planned partnership because tax and bond regulations muddled the deal.

In February 2013, Community Health Network and Eskenazi Health agreed in principle to form an affiliation. At the time, system officials said the deal would be neither a merger nor an acquisition, since no sale or combination of assets would occur.

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The top leaders within Eskenazi Health and its parent, taxpayer-funded Health and Hospital Corp. of Marion County, wrote a letter to community members, saying “complex federal tax laws and regulations” related to bond structures stymied the proposal. The most significant challenge involved Build America Bonds. BABs, created under President Barack Obama's stimulus package from 2009, are taxable bonds in which the federal government subsidizes some of borrowing costs for state and municipal issuers. BABs can be used to fund capital projects on public buildings and other government-owned structures, such as hospitals. The program ended in late 2010.

Eskenazi Health, formerly Wishard Health Services, is the safety net health system operated by the public hospital district. The system used BABs to partially cover the construction of its new $754 million Sidney & Lois Eskenazi Hospital, which opened in December.

Officials said combining the two debt portfolios would have been overly burdensome, since private issuers aren't eligible for the BAB program. CHN is a private not-for-profit with five acute-care hospitals.

“After careful examination, the resolution of tax and bond issues would create such a cumbersome and complex structure it outweighs the advantages of integration,” they wrote. “Eskenazi Health and Community Health Network have mutually determined that a comprehensive integration of the two health systems is not advantageous at this time.”

CHN executives said the system will still partner with Eskenazi Health on some service lines, including trauma and behavioral care.

Follow Bob Herman on Twitter: @MHbherman

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