The University of Pittsburgh Medical Center Health System last week completed its acquisition of 272-bed Passavant Hospital in Pittsburgh. The university system signed a letter of intent to acquire Passavant in late January (Feb. 3, p. 49). Precise terms of the full-asset merger weren't disclosed, but Passavant retained its own board, administration and medical staff. The hospital, which was renamed UPMC Passavant, will spend $150 million over seven years on capital improvements, the funds for which will come from both the hospital and the system. With an initial $40 million to $50 million, UPMC Passavant will build a 100-unit assisted-living facility, an office building, parking garage and a three-story patient wing.
Harvard Pilgrim Health Care, a 1.2 million-enrollee HMO based in Brookline, Mass., and Lifespan, a Providence, R.I.-based regional healthcare network, last week agreed to an "expanded relationship" that paves the way for Boston's New England Medical Center to be included in Harvard Pilgrim's provider network once the hospital's merger with Lifespan is completed. New England Medical, the only academic medical center in Boston not in the provider group, had been agitating for months to be included after finding that its merger with Lifespan, a longtime contractor with Harvard Pilgrim, didn't by itself qualify the hospital for inclusion. The Massachusetts attorney general's office earlier this month declared there was no evidence of anti-competitive agreements between the HMO and competitors of New England Medical (Sept. 15, p. 25).
Humana, Louisville, Ky., has completed its acquisition of Physician Corporation of America, an HMO serving 1.1 million enrollees in Florida, Texas and Puerto Rico. Humana acquired Miami-based PCA for about $400 million in cash, or $7 per share, plus the assumption of about $130 million in debt. The deal was announced in June (June 9, p. 12).
The Federal Trade Commission has cleared Albuquerque-based Presbyterian Health Services' acquisition of FHP of New Mexico from PacifiCare Health Systems, Cypress, Calif. Insurance officials in Texas and New Mexico have yet to ratify the deal, the terms of which haven't been disclosed. PacifiCare acquired the New Mexico plan early this year through its $2.2 billion purchase of FHP International of Fountain Valley, Calif., but said it would sell regional plans based on their financial performance. The sale of FHP of New Mexico to Presbyterian was announced in late May (June 2, p. 2). Presbyterian, a not-for-profit system including 10 hospitals, 25 outpatient centers and an HMO, is bucking a trend by buying a struggling for-profit plan. FHP of New Mexico lost $2.8 million last year on revenues of $104.5 million.
Blue Cross and Blue Shield of Massachusetts said it entered exclusive negotiations with Birmingham, Ala.-based MedPartners to sell nine health centers that employ 130 physicians. A prior agreement in principle with a local company, Waltham, Mass.-based Physicians Quality Care, expired without a deal. MedPartners and PQC were two finalists among 35 companies that submitted proposals to acquire the Boston-based insurer's clinics. Many of the Blues' physicians favored PQC (Aug. 18, p. 12).
Houston-based Living Centers of America and Atlanta-based GranCare have amended the terms of their merger agreement again. Earlier, the companies announced that the outside equity provided by Apollo Management in Los Angeles to finance the deal would be upped to $228 million from $200 million (June 23, p. 50). That figure has risen to $240 million, the companies said. In addition, Living Centers shareholders will now receive $40.50 per share for 90.5% of their outstanding shares instead of 93%. That leaves 2.5% more shares to go toward a recapitalization of the company. In another change, all outstanding GranCare shares will be converted into shares of recapitalized Living Centers at an exchange ratio of 0.2346. It was previously agreed that 90% of GranCare stock would be converted at an exchange ratio of 0.2469 and that the remaining 10% of GranCare shares would have been converted into $10 per share in cash. As a result of the changes, the stake of Living Centers shareholders in the new company will increase to 14.1% from 12%. Apollo will own 44.1% and current GranCare shareholders will own 41.8%. The merger is expected to be completed by late October.
