The acquisition of OrNda HealthCorp by Tenet Healthcare Corp. last month indirectly scuttled a proposed merger between Arizona's largest integrated health network, Samaritan Health System, and HealthPartners of Southern Arizona.
Had it gone through, the merger would have created a network with seven acute-care hospitals, 5,300 physicians and 16,000 employees, making it Arizona's second-largest employer.
According to HealthPartners officials, the sticking point was another alliance Samaritan was negotiating with San Francisco-based Catholic Healthcare West and Nashville, Tenn.-based OrNda.
CHW operates 493-bed St. Joseph's Hospital and Medical Center in Phoenix, and OrNda/Tenet operates 296-bed St. Luke's Medical Center and an 86-bed psychiatric hospital in the city.
While HealthPartners spokesman Mark Cesnik said his organization's board of directors was not leaning toward OrNda or CHW, Tenet's $1.3 billion acquisition of OrNda last month ended the possibility of going forward. Its board voted last week to end the 14-month-long merger talks.
"It certainly did complicate the process and left us with an option that substantially changed in character," Cesnik said. "And as the merger process went forward, it seemed the wisest thing for us to do was to remove ourselves from it." Cesnik wouldn't comment on the nature of the deals that may have been on the table.
He added that HealthPartners, which operates 511-bed Tucson Medical Center and has 1,800 affiliated physicians and 5,000 employees, will remain independent.
Meanwhile, Samaritan Senior Vice President Dan Green said the system would continue to pursue a deal with CHW or another operator.
"We're looking at CHW, and we're still seeking information from Tenet regarding what OrNda has put on the table, but that's been delayed at this point," Green said.
As for the merger being called off, Green said Samaritan officials were not completely surprised.
"Forging a relationship in this volatile market is difficult, but we're disappointed because we worked long and hard to try and put together a statewide network for everyone's benefit," Green said.
According to Green, Samaritan and HealthPartners may still pursue some ancillary alliances in purchasing or another segment of operations.
Samaritan owns five acute-care hospitals throughout Arizona and one in California, as well as four specialty facilities. It posted a $19.5 million surplus last year but is under pressure to boost that figure in order to maintain its bond ratings. It embarked on a three-year program last summer to cut $100 million in annual costs and targeted 250 jobs for elimination.
In another transaction in Arizona, John C. Lincoln Hospital and Health Center and Phoenix General Healthcare System signed a letter of intent last week to merge. Each operates an acute-care hospital in Phoenix, with a combined 337 beds. Lincoln also owns two small specialty facilities. The merger is expected to be completed early next year.