Similar joint ventures are under way outside of Massachusetts. Duke LifePoint, a joint venture between Duke University Health System, Durham, N.C., and LifePoint Hospitals, completed its fourth acquisition this month when it closed its deal to buy Marquette (Mich.) General Hospital St. Louis-based Ascension Health announced plans in February 2011 to join with Oak Hill Capital Partners to acquire Catholic hospitals. The venture, called Ascension Health Care Network, has not yet completed any deals.
Such partnerships involving academic medical centers are “a win-win,” said Megan Neuburger, an analyst with Fitch Ratings. For-profit companies can tap into an academic medical center's reputation, while community hospitals will have access to new resources and management experience. The participants, she said, also gain more negotiating power with payers without having to commit to the same level of capital needed in an acquisition.
As part of the Tufts joint venture, Vanguard will take majority stakes in the hospitals acquired, and Tufts will make minority investments. Tufts also would take a minority stake in Vanguard's 158-bed MetroWest Medical Center in Framingham, according to a Vanguard spokesman.
In the Massachusetts market, where at least five hospital deals and affiliations have been announced since January, the joint venture is designed as an alternative for the community hospitals that are increasingly looking to align with larger health systems.
The state's two largest health systems—12-hospital Partners HealthCare System and the 11-hospital Steward Health Care System—have each acquired one hospital in Massachusetts so far this year. Steward, Vanguard and Kindred Healthcare, which owns two small hospitals in Peabody and Brighton, are the only operators of for-profit acute-care hospitals in Massachusetts.
Daniel Steingart, an analyst with Moody's Investors Service, attributed the rise of for-profit market activity in Massachusetts to the growth of Steward, which has acquired five hospitals in less than two years.
“The question on people's minds has been: What is Tufts going to do?” Steingart said. “Now you have the answer.”