The acquisition of OrNda HealthCorp cements Tenet Healthcare Corp.'s position as the nation's second-largest hospital chain, but don't expect any quick changes in its corporate strategy.
Unlike Columbia/HCA Healthcare Corp., the country's largest hospital chain, Tenet will not undertake a national branding campaign. It also doesn't plan to offer physicians equity stakes in the company once its proposed $3.1 billion acquisition of OrNda is completed. The target date for the closing is next March.
"We (Tenet and OrNda executives) are basically the same (kind of) people; we don't have an `own the world' philosophy," Michael Focht, Tenet's president and chief operating officer, said last week.
Santa Barbara, Calif.-based Tenet's acquisition of Nashville, Tenn.-based OrNda will give the company $8.5 billion in annual revenues and 126 hospitals (Oct. 21, p. 2).
"We look forward to the OrNda transactions and look to expand in those markets," Focht said.
Tenet will focus on expanding in OrNda strongholds in Arizona, Massachusetts, Nevada, Oregon and Washington. It will look for acquisitions primarily in urban markets, where Columbia is likely to be a rival.
One of the first things Tenet-OrNda officials did after the Oct. 17 announcement of the proposed mega-merger was fly to Massachusetts to try to mollify local healthcare executives who had sold facilities to OrNda. The executives wanted to know if agreements with OrNda would be jeopardized by the consolidation.
Focht and Keith Pitts, chief financial officer and executive vice president of OrNda, flew to Worcester, Mass., to meet with executives at Fallon Foundation, which sold Saint Vincent Healthcare System in Worcester to OrNda (Sept. 2, p. 22). Pitts will be executive vice president in the expanded Tenet.
"The obligations that OrNda brought to the table will be lived up to," Focht said.
Fallon officials said they do not see any problems as a result of the Tenet acquisition. "We're moving forward," said Fallon spokeswoman Paula Green.
The Fallon deal called for OrNda to pay about $135 million for the healthcare system by assuming the liabilities and other costs of Saint Vincent Hospital, three nursing homes, a home healthcare agency and a laboratory. OrNda also said it will build a replacement hospital called Medical City at a cost of about $215 million. OrNda's total financial commitment was nearly $400 million and included the purchase of an equity stake in Fallon Clinic, a 300-physician medical practice.
OrNda and Tenet's physician relationships differ from Columbia's syndications. Columbia allows doctors to invest in a Columbia subsidiary that runs the hospital. Through their stake, physicians share in the profits of the hospital.
OrNda is known more for purchasing minority equity stakes in medical groups such as Fallon Clinic, and Tenet develops management service organizations to help run physician practices (March 25, p. 81).
Tenet executives said they don't plan to change any of OrNda's operations for now. Essentially, they will continue to pursue each company's corporate strategies.
Focht said Tenet's acquisition of OrNda removes doubts about whether Tenet can compete and develop its markets.
"We now have made a clear statement: We are here to stay," Focht said.