Becker's Hospital Review

54 Hospital and Health System Transactions Don Berwick, MD, another candidate for gover- nor and former acting CMS administrator, has circulated an online petition seeking to block the deal. He said he planned to deliver the petition to the attorney general's office, and ultimately to the judge, when he has 2,000 signatures, according to the Boston Globe. 13. The deal has attracted national attention and extended the broader conversation about what consolidation means for healthcare prices and costs. In July, The New York Times published and editorial that said "it looks as if Massachu- setts made a serious mistake in 1994 when it let its two most prestigious (and costly) hospitals" merge into a single system. "The experience in Massachusetts offers a cautionary tale to other states about the risks of big hospital mergers and the limits of antitrust law as a tool to break up a powerful market-dominating system once it is entrenched," the editorial stated. 14. Partners President and CEO Gary Gottlieb re- sponded to the editorial with a letter to the editor, touting the system's accolades in innovation, sci- ence, education and quality. "We have made the commitment to cap our prices and restrict our physician and hospital growth. As a result, we will become the most regulated health care provider in Massachusetts, if not the country," Mr. Gottlieb wrote. 15. Suffolk Superior Court Judge Janet L. Sand- ers will decide whether to approve the antitrust settlement. A hearing on the AG-Partners deal has been granted another extension Sept. 29. The public comment period will run through Sept. 15, and Ms. Coakley has until Sept. 25 to respond to the comments. n Ascension, Dignity, Tenet to Enter Into Joint Venture By Helen Adamopoulos C arondelet Health Network, based in Tucson, Ariz., and its parent company, St. Louis-based Ascension Health, signed a nonbinding letter of intent in July with San Francisco-based Dignity Health and a subsidiary of Dallas-based Tenet Healthcare Corp. to create a joint venture. The joint venture — in which Ascension would maintain a minority inter- est — would own and operate Carondelet, according to a news release. Under the agreement, Tenet would be the majority partner and would hold man- agement responsibility for all operations of Carondelet's assets, although the joint venture would maintain Carondelet's heritage and identity. The joint venture will connect Carondelet to a regional healthcare system of hospitals owned and operated by Dignity and Tenet in the Phoenix area, as well as Tenet and Dignity's accountable care organization, Arizona Care Network. The health systems involved have entered a period of due diligence and are working toward a definitive agreement, according to the release. "We are excited to pursue this relationship with Tenet and Dignity Health," James K. Beckmann, president and CEO of Carondelet, said of the agree- ment. "Like Carondelet, Tenet and Dignity Health are committed to pro- viding high quality, low cost, person-centered care. This relationship is an opportunity to strengthen those efforts, enhance healthcare across Arizona, and continue Catholic sponsorship of Carondelet." n 5 Key Drivers of Acquisition and Affiliation Strategy By Helen Adamopoulos Consolidation in Healthcare: 3 Statistics By Ayla Ellison T he number of mergers and acquisitions in the healthcare industry is poised for substantial growth over the next year, according to a new study from the Nashville, Tenn.-based law firm of Bass, Berry & Sims. For the study, titled Healthcare & Life Sciences M&A Outlook, the law firm commissioned Mergermarket to interview 50 corporate and private equity respondents from the healthcare and life sciences sectors. More than 85 percent of the survey respondents said they expect merger and acquisition activity to increase in healthcare and life sciences in the coming year. Eighty-four percent of the respondents said they expect private equity activity to increase in relation to strategic mergers and acquisitions. Companies are looking to consolidate to build infrastructure, get access to new technology and increase market share, and rising demand for facility and equipment improvement was cited as the top strategic driver for merg- ers and acquisitions by 46 percent of survey respondents. "Consolidation is driven by a desire to achieve economies of scale and en- hanced bargaining power," said Leigh Walton, an attorney at Bass, Berry & Sims, in the study. "The Affordable Care Act's roll out has accelerated this trend as the law demands accountable care and cutting edge technology at lower reimbursement rates." n A cquisitions in the hospital industry are increasingly driven by strategic factors rather than financial need, according to the Healthcare Financial Management Association. HFMA identified some of those factors through interviews with providers and acquisition and af- filiation consultants. Here are five key drivers of acquisition activity in the current marketplace. 1. Operational efficiencies. Healthcare providers are looking to achieve greater economies of scale in purchasing and more centralized and stream- lined operational functions, according to HFMA. 2. Clinically integrated care delivery net- works. Providers are looking to establish clinically integrated networks to provide access to high- quality care at competitive prices. 3. Population health management. Many health- care organizations sense an inevitable shift to- ward a system where they assume financial risk for managing the health of defined populations, according to HFMA. 4. New capabilities. Acquiring or affiliating with other organizations can facilitate the develop- ment of important capabilities, such as managing physicians and running health plans. 5. Service line/asset rationalization. Shifts in uti- lization mean providers will likely need to coordi- nate to ensure they maintain affordable access to care. For instance, in markets with excess capacity, providers may look to reduce beds and rationalize services. n

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