After months of talks, two of the nation's prominent hospital systems -- one a Roman Catholic not-for-profit and the other a for-profit chain -- have entered a joint venture involving seven of their hospitals in central California.
The mergerlike partnership, which became operational Jan. 14, pairs Catholic Healthcare West and Tenet Healthcare Corp. at a time when leaders of the Catholic hospital industry want their flock to shun deals with for-profit corporations.
MODERN HEALTHCARE disclosed the negotiations between San Francisco-based CHW and Santa Barbara, Calif.-based Tenet last August (Aug. 4, 1997, p. 4).
Under the joint venture agreement, the companies have placed the seven hospitals and the various medical groups they operate in the San Joaquin Valley, a region about 300 miles north of Los Angeles, into a single integrated network.
The operation, called Central Valley Healthcare, will negotiate managed-care contracts, share technology and provide consulting services to third parties.
The hospitals include the five facilities in CHW's St. Joseph's Regional Health System: 312-bed St. Joseph's Medical Center and 35-bed St. Joseph's Behavioral Health in Stockton; 40-bed St. Dominic's Hospital in Manteca; 33-bed Mark Twain St. Joseph's Hospital in San Andreas; and 101-bed Mercy Hospital and Health Services in Merced. The two Tenet properties are 289-bed Doctors Medical Center in Modesto and 73-bed Doctors Hospital in Manteca.
The hospitals have combined gross annual revenues of about $1.3 billion, according to American Hospital Directory, a Louisville, Ky.-based healthcare information company.
"It's an area where there are already some established providers. It's not as if you can build a stronger network through acquisitions and mergers, so the partnership model makes a lot more sense," said Tenet spokesman Lance Ignon.
CHW officials said the deal also would serve to strengthen their network.
No other deals between Tenet and CHW are in the works, officials said.
Steve Valentine, president of the Camden Group, an El Segundo-based consulting firm, agreed the deal "would strengthen both CHW and Tenet." He added that a limited HMO license that St. Joseph has applied for from state regulators could make Central Valley Healthcare a strong managed-care contracting vehicle.
Tenet and CHW officials did not provide projected revenues for the operation. They will divide revenues and expenses equally.
Central Valley Healthcare will be governed by a six-member board made up of three managers from both companies.
The companies said because the participating hospitals will not be changing hands and Central Valley is structured as a limited liability partnership, the transaction is not subject to state, federal or Internal Revenue Service approval.