Regional News/Northeast: St. Francis Hospital (Hartford, Conn.) to join Ascension Health Care Network, and other news

HARTFORD, Conn.—One of Connecticut's largest hospitals could be the first hospital to join Ascension Health Care Network, a private equity-backed effort to launch a for-profit Catholic health system. St. Francis Hospital and Medical Center, Hartford, signed an exclusive letter of intent to join Ascension Health Care Network, a joint venture between the private equity firm Oak Hill Capital Partners and Ascension Health Alliance, which includes the nation's largest Catholic health system. Leo Brideau, president and CEO of Ascension Health Care Network, said the size and complexity of St. Francis' operations give it the market clout the for-profit system is seeking, but would also position the joint venture for other deals in Connecticut's consolidating marketplace. Christopher Dadlez, president and CEO for the 569-bed St. Francis Hospital, said the deal would provide greater access to capital for investments in strategies already under way to develop accountable care and population health management. That could include acquisitions, he said. St. Francis was among 106 organizations included in the latest accountable care contracts under Medicare. The deal would include St. Francis Hospital and Medical Center and other assets of St. Francis Care, including the Mount Sinai Rehabilitation Hospital and Connecticut Joint Replacement Institute. Terms were not disclosed, and Brideau said there was no deadline for the deal to close. Officials must first reach a definitive agreement, and regulators must approve a final deal.

—Melanie Evans

PITTSBURGH—Highmark's revised plans to acquire the faltering West Penn Allegheny Health System would push the Pittsburgh insurer's cost to launch an integrated delivery network to more than $1.6 billion, new regulatory filings show. The insurer, which first filed plans for the deal with state insurance regulators in November 2011, said in a new filing that Highmark would borrow the $600 million needed to buy out investors in West Penn Allegheny's bonds. Major bondholders agreed to sell the bonds at a loss, Highmark paying 87.5 cents on the dollar for the debt. Highmark plans to hold onto the bonds until West Penn Allegheny returns to tax-exempt bond markets for financing to buy back the debt. West Penn Allegheny, also based in Pittsburgh, has seen its speculative grade credit rating fall in recent months as its operating losses continue. The system lost $112.5 million on operations with revenue of $1.6 billion in its last fiscal year, which ended June 30, its unaudited financial records show. Highmark has already poured $200 million into West Penn Allegheny in less than a year, and the system is set to receive $75 million when the deal closes and could see another $200 million in loans. Highmark also said it would pay out $10 million to West Penn Allegheny each of the next five years “as part of its provider rate negotiations,” according to the latest filing. The insurer also has committed $525 million to its plans for an integrated network, the Pennsylvania Insurance Department said in a letter acknowledging Highmark's latest plan. The plan “significantly changes the level of risk and the transaction is now materially different than what was presented” in November 2011, the insurance department said.

—Melanie Evans

COLCHESTER, Vt.—The two big academic medical centers serving Vermont, often seen as rivals, joined with 13 other Vermont hospitals and health clinics to form a new accountable care organization—OneCare Vermont—to focus on efficiency and quality in healthcare. The announcement by Burlington-based Fletcher Allen, a teaching hospital affiliated with the University of Vermont College of Medicine, and the Dartmouth-Hitchcock Medical Center, the hospital affiliated with Dartmouth's Geisel Medical School, followed approval of the new ACO and 105 others by the CMS under Medicare contracts effective Jan. 1. OneCare will deliver care to 42,000 of Vermont's roughly 118,000 Medicare beneficiaries, and officials said it was the first in the country with statewide reach. “OneCare Vermont represents a huge shift in medical practice in Vermont,” said Dr. John Brumsted, president and CEO of Fletcher Allen Health Care. Todd Moore, senior vice president for accountable care and revenue strategy at Fletcher Allen, will serve as CEO of OneCare. The announcement was welcomed by Gov. Peter Shumlin, who is working to move the state toward a universal, single-payer healthcare system by 2017. “The success of healthcare reform depends on transforming into a more effective, efficient healthcare system,” Shumlin said in a statement. “We need our healthcare providers to lead this effort.” When Brumsted and Moore presented the OneCare plans to a state Senate committee, some members expressed concern that the statewide reach would lead to a healthcare monopoly in Vermont.

—Associated Press