Vanguard Health Systems will become Philadelphia's first for-profit hospital owner after it completes the purchase of six hospitals from Allegheny Health, Education and Research Foundation. The deal was announced last week.
Neither Vanguard nor Allegheny would release the purchase price, but Vanguard said it will pay cash for the six community-based facilities. Three are in Philadelphia.
Vanguard is the new for-profit chain started last July by former OrNda HealthCorp top executive Charles Martin Jr. AHERF is a not-for-profit system based in Pittsburgh.
Under the proposal, AHERF would retain control of its three tertiary hospitals in Philadelphia: Allegheny University Hospitals, Hahnemann; Allegheny University Hospitals, MCP; and St. Christopher's Hospital for Children.
David Cohen, former chief of staff to Philadelphia Mayor Edward Rendell, will be the new chairman of Vanguard's regional board of directors overseeing the six hospitals.
Vanguard's Martin said the newly acquired hospitals won't be competing with the remaining Allegheny facilities because they are community-based and will be referring patients to the Allegheny hospitals. Also, Vanguard will make an annual payment to the university for its medical teaching programs.
Once the deal is complete, Vanguard will own seven facilities. Its first purchase, 213-bed Maryvale Samaritan Medial Center in Phoenix, was made in late January. That deal is expected to close in June.
The only losers in the latest purchase are competitors of Vanguard and Allegheny, said Gerald Katz, president of Katz Consulting Group in Philadelphia.
"For Allegheny, this is a grand slam. They'll eliminate debt, which is their big problem," Katz said, referring to the system's outstanding debt reported to total at least $300 million. "For competitors, this is not a great deal because now you have (Vanguard) with a lot of capital and a zeal to grow," Katz added.