A flurry of end-of-the-year hospital deals pushed this year's record merger and acquisition activity even higher.
Before the deals, some 768 hospitals were involved in mergers, acquisitions or similar transactions this year (See related story, p. 37).
Late last week, 502-bed Sparrow Health System and 198-bed St. Lawrence Hospital and Healthcare Services, both of Lansing, Mich., agreed to merge. The systems have combined assets of $360 million and account for about two-thirds of inpatient admissions in Ingham County, Mich. Sparrow will own 80% of the combined entity, which will retain the Sparrow name. St. Lawrence's parent, Farmington Hills, Mich.-based Mercy Health Services, will own 20%. While St. Lawrence is Catholic, the new entity will be secular. However, Sparrow agreed to stop providing abortions. The deal hinges on Sparrow finding an acceptable alternative abortion provider in the community. Federal antitrust approval and a state certificate-of-need are also required. Ingham County's other hospital system, Michigan Capital Healthcare, wants to sell all or part of its assets to Columbia/HCA Healthcare Corp., but that deal has been held up in state court.
In Pennsylvania, Mercy Health Corporation of Southeastern Pennsylvania in Darby and Jefferson Health System of Philadelphia inked a tentative agreement to create a mergerlike partnership. The deal is expected to be completed by April 30. In choosing Jefferson, Mercy rejected an offer from University of Pennsylvania Health System. Mercy and Jefferson will maintain their separate ownership and historic assets, but the partners will explore options for coordinating primary care, physician networks and ambulatory-care centers. The alliance would form an integrated health network in Pennsylvania's Delaware Valley with more than 2,700 hospital beds and 3,000 physicians.
Naples, Fla.-based Health Management Associates signed a 30-year lease agreement with the Rankin County (Miss.) Board of Supervisors to operate 112-bed Rankin Medical Center in Brandon, Miss. Terms of the agreement weren't disclosed. HMA plans to increase Rankin's bed count to 134 after the deal closes Jan. 1. It's HMA's third hospital acquisition this year. The deal will give HMA 26 primarily rural and nonurban hospitals in 11 states.
Robert Wood Johnson Health System, New Brunswick, N.J., and Florham Park, N.J.-based Atlantic Health System plan a mergerlike alliance to jointly negotiate service contracts with payers in a deal that will spread the systems' geographic reach over the northern half of New Jersey. The systems will maintain their ownership and assets. Robert Wood Johnson, with eight hospitals and four health centers, is New Jersey's largest health system. Atlantic owns five hospitals and a host of clinics throughout northern New Jersey.
One deal that won't make anyone's list of hospital mergers and acquisitions is the proposed privatization of the Maricopa County (Ariz.) healthcare system, which operates 474-bed Maricopa Medical Center in Phoenix. After working on privatization plans for two years, the Maricopa County Board of Supervisors surprisingly pulled the plug on the plans late last week. Instead, the board decided to revitalize the system as a public institution, authorizing an immediate expenditure of $5 million to make capital improvements.
The county had solicited bids and chosen one company to negotiate with. Not-for-profit Healthcare Providers was to pay $5 million in annual rent and assume the county's contracts for healthcare paid by government and health plans. But Health Providers couldn't come up with enough operating capital to persuade the county's financial staff it could provide care for indigents and keep up the payroll for 4,000 county healthcare workers.