Foot-dragging by Tenet Healthcare Corp. let competitor Universal Health Services steal away the much-sought-after George Washington University Hospital in the District of Columbia.
Assuming the $125 million deal goes through, GWU Hospital will become the first for-profit hospital in the district.
Last week, King of Prussia, Pa.-based Universal agreed to enter a joint venture with GWU Hospital and essentially take over the 346-bed facility. The hospital had a tentative joint venture deal with Tenet, which inherited the transaction from OrNda HealthCorp. Tenet acquired OrNda in January (Feb. 3, p. 4).
GWU Hospital executives said they rejected the Tenet deal because the Santa Barbara, Calif.-based chain didn't move quickly enough to sign a partnership deal.
Under the terms of the deal with Universal, a for-profit joint venture will operate the hospital. Universal will own 80% of the joint venture, with George Washington University keeping a 20% interest.
Universal will pay $125 million for its stake, with most of that money earmarked for capital improvements at the hospital. Some $80 million will be paid upfront, and the $45 million balance will be paid over 10 years.
The joint venture will be operated by a board of directors with equal representation from both George Washington University and Universal. That arrangement, both parties say, will ensure the hospital continues to serve indigent patients and maintains its academic mission.
The hospital itself will continue to have a 12-member board of trustees with at least seven community members. The hospital board will oversee accreditation, quality assurance and service delivery.
The deal also comes as GWU is being hemmed in by networks in both the District of Columbia and the suburbs of northern Virginia.
Medlantic Healthcare Group, the not-for-profit company that owns Washington Hospital Center, is trying to develop a physician network, while Inova Health System in Springfield, Va., has its own network.
Allan Weingold, M.D., executive dean and vice president of GWU Hospital, said about one-third of Universal's payment probably will go toward developing a physician network.
GWU and Universal intend to file for certificate-of-need approval to complete the deal with the district government no later than May 30.
The district also is considering legislation that would require such deals to be approved by its corporation counsel (March 24, p. 21).