After years of urging its competitors to consolidate even as it remained independent, Phoenix-based PMH Health Resources is looking for a merger partner itself.
PMH Chief Executive Officer Reginald Ballantyne confirmed last week that his organization had retained New York-based investment banking firm Cain Brothers and legal counsel to aid in its search. A deal is expected to close by year-end, he added. Ballantyne noted that all "reasonable options," including a potential acquisition of PMH, are being considered.
"I want to make this a Christmas gift to Arizona," said Ballantyne, who has led not-for-profit PMH for 27 years.
Sources close to PMH said the Phoenix division of Fargo, N.D.-based Banner Health System, San Francisco-based Catholic Healthcare West and Nashville-based Vanguard Health Systems are among the potential suitors. All operate hospitals in the Phoenix area and have been scouring the local market for acquisitions.
Banner spokesman Dan Green confirmed there were internal discussions about working with PMH but declined any further comment. A Vanguard spokesman declined comment. A CHW spokesman was unavailable at deadline.
If such a transaction is consummated, it would be the third major hospital deal to occur in Phoenix in little more than a year. Phoenix-based Samaritan Health System merged with Lutheran Health Systems last year to create 32-hospital Banner. Phoenix-based Baptist Hospitals and Health Systems sold two of its four acute-care facilities to Vanguard and one to Brentwood, Tenn.-based Community Health Systems earlier this year. Baptist allowed the fourth hospital to disaffiliate.
The outspoken Ballantyne, a past chairman of the American Hospital Association who's long sounded the clarion call for consolidation of acute-care services in Phoenix and nationwide, cited the need for greater clout as a reason for making a deal. He said PMH has been exploring options for the past four years but that attempts to consolidate with other local players never progressed much further than initial conversations.
Ballantyne acknowledged the irony of PMH's being among the last hospitals in Phoenix to move toward consolidation. "We're one of the last Mohicans," he said. But he added that the need to preserve PMH's mission was a paramount concern.
Although it owns the 50,000-member Phoenix Health Plan and a dozen regional outpatient clinics, PMH operates only one hospital, 195-bed Phoenix Memorial Health System, which is in a less-affluent area of the city near downtown. Plans have been on the drawing board to build a second acute-care facility in the southwest suburbs, but Ballantyne said construction is probably a few years away.
The hospital lost $7.8 million on net patient revenue of $162.3 million for the fiscal year ended June 30, 1999, according to HCIA, a Baltimore-based healthcare research firm. Ballantyne projected a $6 million loss for 2000.
Phoenix Health Plan projects a $3 million profit on revenue of $105 million for 2000, Ballantyne said.