Samaritan Health System in Phoenix rejected late last month a buyout offer from Nashville-based Vanguard Health Corp. in favor of considering two of its hospitals and its rapidly growing managed-care plan for partial sale or joint venture.
Vanguard, recently formed by onetime OrNda HealthCorp top executive Charles Martin Jr., made an undisclosed offer to buy Samaritan, according to sources and the Phoenix Business Journal. Vanguard may also seek deals with other hospitals in the region, the sources added.
Samaritan officials declined comment on the Vanguard offer. Martin did not return phone calls seeking comment.
Samaritan's decision to seek a business partner came after an internal review determined its $380 million in long-term debt hampered its access to capital. Two previous attempts by Samaritan to merge with other hospital systems have failed.
Samaritan officials said they are developing plans for a sale, partial sale or joint venture involving 213-bed Maryvale Samaritan Medical Center in Phoenix and 118-bed Havasu Samaritan Regional Hospital in Lake Havasu City, Ariz., officials said. The system is also seeking capital for its HealthPartners managed-care plan.
The hospitals are among Samaritan's smaller acute-care facilities. Its flagship facility, 714-bed Good Samaritan Regional Medical Center in Phoenix, and its 511-bed Desert Samaritan Medical Center in Mesa, Ariz., are not involved in the planning.
Dan Green, Samaritan's vice president of development, said Maryvale Samaritan will require $30 million in capital investment over the next five years, including $18 million to build a sorely needed outpatient clinic.
Havasu Samaritan's capital needs are even more pressing-$30 million over the next three years for upgrades to outpatient facilities and a consolidation of its scattered inpatient beds.
"The area is experiencing extraordinary growth. The hospital has a very high market value and could be key for our growth," Green said.
Samaritan also will hire an investment banking firm to explore capital options for its HealthPartners of Arizona affiliate, a managed-care plan it co-owns with Tucson, Ariz.-based TMC HealthCare. Its commercial and Medicaid plans have grown by a third in the past year, to 400,000 enrollees.
Green said he believes HealthPartners will require up to $70 million in capital investment over the next five years to beef up its information and medical management systems.
Previous transactions involving Samaritan have not come to fruition. Mergers planned in the past year with San Francisco-based Catholic Healthcare West and Phoenix-based HealthPartners of Southern Arizona fell through. Samaritan officials said differences in opinions over governance killed both deals.
Samaritan, which operates eight hospitals throughout Arizona and one in California, is among the largest healthcare providers in the Southwest.