Scottsdale (Ariz.) Healthcare and John C. Lincoln Health Network in Phoenix are forming an umbrella company to operate their five not-for-profit hospitals in order to adjust more nimbly to new payment and delivery models.
Under a definitive agreement reached Thursday, Scottsdale Healthcare President and CEO Thomas Sadvary will be CEO of the new company, to be called Scottsdale Lincoln Health Network. Lincoln President and CEO Rhonda Forsyth will be president.
The assets of the two systems, which compete in the Phoenix area with Banner Health and Dignity Health, would remain separate. A single board with balanced representation of Scottsdale and Lincoln would govern both organizations and the new umbrella company. The transaction is expected to close Oct. 1 pending regulatory approvals.
The combined system, according to a news release, would strive for more access to acute and preventive services, better care coordination, integration of health information technology and shared best practices.
Forsyth said the structure of the deal was devised to meet those goals without an asset merger that would carry implications for each organization's debt and obligated group.
Scottsdale Healthcare earned $27.8 million in operating income on $850.7 million in revenue for the fiscal year ended Sept. 30, 2012, according to financial statements reported to bondholders. John C. Lincoln reported $21.7 million in operating income on $520.2 million in revenue for the fiscal year ended Dec. 31.
John C. Lincoln Health Network includes an accountable care organization that's participating in the Medicare Shared Savings Program. Scottsdale Healthcare, meanwhile, is applying to participate in that program with Scottsdale Health Partners, operated as a managed-service organization with physicians. Scottsdale Health Partners recently entered a private accountable care contract with Cigna.
“How those organizations will work together—that's one of the things we still need to work through,” Forsyth said in an interview.
“We both are very healthy organizations—this is not an affiliation where one partner needs help,” Forsyth said. “It's really a response to a changing landscape, to create an organization that can respond to capacities around population management, improving quality and lowering costs. Together, we're much more likely to be effective in that.”
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