Despite eight months of planning, a few late surprises emerged from last week's completion of Lutheran Health System's $345 million acquisition of Samaritan Health System-most notably, that the 32-hospital deal was a sale.
The sale was just one of several noteworthy hospital transactions that closed Sept. 1 (See related story, p. 26).
While long touted as a merger, officials disclosed that the Lutheran-Samaritan deal was actually structured as an acquisition by Fargo, N.D.-based Lutheran to satisfy strict covenants attached to the bond debt of Phoenix-based Samaritan.
The second surprise was the combined systems' new name: Banner Health System. The initial name chosen by one of the country's largest not-for-profit systems was Discovery Health System.
Also gone is equal governance: Lutheran will name eight members to the 15-seat Banner board to satisfy Samaritan's debt covenants, officials said.
The board is chaired by former Lutheran Chief Executive Officer Steven Orr, who retains the same title with Banner. Former Samaritan CEO James Crews is now CEO of Banner Health Arizona, which will oversee about 40% of Banner's 5,700 beds at six hospitals in the state. They represent Samaritan's original four hospitals and two of Lutheran's.
In total, the new system, which is headquartered in Fargo, operates 32 hospitals in 14 states. Last year, the two systems combined posted $108 million in profits on $1.6 billion in revenues.
The name change was prompted by the widely publicized launch last month of the Discovery Health Channel on cable television.
"Our trademark attorneys originally thought there wouldn't be any product confusion, but after it became apparent the degree of money that was being put behind the channel and its Web site, we decided confusion could become an issue," said Dan Green, Samaritan spokesman.
A team of executives from both systems sifted through hundreds of potential names to come up with the new moniker, which Green said represents leadership, standards and honor.
The change came so abruptly that a $426.5 million bond issue still bears the Discovery name. The bonds retired Samaritan's debt, another $60 million in other liabilities and will pay for $88 million in capital improvements at 511-bed Desert Samaritan Medical Center in Mesa, Ariz., and 220-bed Thunderbird Samaritan Medical Center in Glendale, Ariz. Work on the projects will be completed by early 2002, Green said.
No layoffs are planned as part of the deal, and all the hospitals will retain their original names, officials said.