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10 of the most interesting healthcare transactions of 2015

From the growing trend of private equity investment in healthcare to major health systems coming together to increase market power and population health efforts, consolidation in the healthcare industry continued in 2015.

Here are 10 of the most interesting healthcare industry transactions that made headlines in 2015.

1. SSM Health buys SLU Hospital

The players: The deal involves St. Louis-based SSM Health, St. Louis University and Dallas-based Tenet Healthcare.

The deal in a sentence: After owning SLU Hospital for 17 years, Tenet sold the facility back to Saint Louis University, which then contributed the hospital to SSM Health in exchange for a minority membership interest and governance rights in SSM's St. Louis operations.

Hospitals involved: SLU Hospital is a 365-bed academic medical center. When the deal closed in September, SSM said it would invest $500 million to build a replacement hospital and outpatient center.

What makes it interesting: The exchange of governance rights involved in the transaction is significant. "Not only did the university retain an interest in the academic medical center itself, it actually gained a financial and governance interest in SSM's entire St. Louis system," says Newpoint Healthcare Advisors Chairman Joe Lupica. "This move weaves together town and gown, offering the university a link with community care. As population health grows more essential to the curriculum and training experience, that link advances SLU's educational and clinical missions," he says.  

2. Tenet makes huge ambulatory play

The players: The deal involves Dallas-based Tenet Healthcare, private equity firm Welsh, Carson, Anderson & Stowe and Dallas-based United Surgical Partners International.

The facilities involved: USPI's 49 ambulatory surgery centers and 20 imaging centers across the nation.

The deal in a sentence: Tenet entered into a joint venture transaction with Welsh Carson that combines the short-stay surgery and imaging center assets of Tenet and USPI to create a new short-stay surgery network.

What makes it interesting: The transaction made Tenet the largest U.S. provider of ambulatory surgery services. Tenet owns 50.1 percent of the new USPI, while Welsh Carson and other existing shareholders in USPI own the remaining 49.9 percent. Over the next five years, Tenet will have the option of acquiring the remainder of the joint venture.

3. Aetna's acquisition of Humana

The players: The deal involves health insurers Aetna, based in Hartford, Conn., and Humana, based in Louisville, Ky.

The deal in a sentence: Aetna entered a definitive agreement in July to acquire all outstanding shares of Humana in a deal valued at $37 billion.

What makes it interesting: If the deal goes through, the Medicare Advantage market would be significantly more concentrated. There is little or no competition in MA insurance markets in 97 percent of U.S. counties, according to an issue brief from the Commonwealth Fund. Humana is one of the nation's largest providers of MA policies, making it an attractive target for Aetna, but the combination of the two entities has the potential to substantially lessen competition in the MA market.

4. Anthem's takeover of Cigna

The players: The deal involves Indianapolis-based Anthem and rival health insurer Cigna, based in Bloomfield, Conn.

The deal in a sentence: Anthem entered into a definitive agreement in July to acquire Cigna in a cash and stock transaction valued at $54.2 billion — a buyout that would create the nation's largest health insurer by enrollment.

What makes it interesting: With Aetna acquiring Humana and Anthem entering into a deal to takeover Cigna, the health insurance landscape drastically changes to one with three key payers instead of five. Based on that, the Anthem-Cigna deal has received significant opposition from players both inside and outside the healthcare industry.

5. Capella sold to real estate investment trust

The players: The deal involvesCapella Holdings — the parent company of Franklin, Tenn.-based Capella Healthcare — and Birmingham, Ala.-based Medical Properties Trust.

The deal in a sentence: MPT acquired Capella for $900 million in cash, which includes a $600 million investment in Capella's real estate and an investment of approximately $300 million in Capella's operating entities.

Hospitals involved: Capella's hospitals include: Capital Medical Center in OIympia, Wash.; Carolina Pines Regional Medical Center in Hartsville, S.C.; Eastar Health System in Muskogee, Okla.; Kershaw Health in Camden, S.C.; National Park Medical Center in Hot Springs, Ark.; Saint Mary's Regional Medical Center in Russellville, Ark.; Southwestern Medical Center in Lawton, Okla.; and Willamette Valley Medical Center in McMinnville, Ore.

What makes it interesting: This transaction is one of the first between a hospital operating company and a real estate investment trust. Through this collaboration, which was finalized in fall 2015, MPT will own Capella's real estate, while operations of the health system's hospitals will be jointly owned and managed by MPT and Capella's senior management.

6. 38 CHS hospitals spin off as new company

The players: The deal involves Franklin, Tenn.-based Community Health Systems.

The deal in a sentence: CHS plans to spin off 38 hospitals and its hospital management and consulting business, Quorum Health Resources, into a separate company to strengthen CHS' focus on larger markets.

Hospitals involved:

Cherokee Medical Center (Centre, Ala.)
DeKalb Regional Medical Center (Fort Payne, Ala.)
L.V. Stabler Memorial Hospital (Greenville, Ala.)

Forrest City (Ark.) Medical Center
Helena (Ark.) Regional Medical Center

Barstow (Calif.) Community Hospital
Watsonville (Calif.) Community Hospital

Trinity Hospital of Augusta (Ga.)
Fannin Regional Hospital (Blue Ridge, Ga.)
Clearview Regional Medical Center (Monroe, Ga.)
Barrow Regional Medical Center (Winder, Ga.)

Union County Hospital (Anna, Ill.)
Metro South Medical Center (Blue Island, Ill.)
Galesburg (Ill.) Cottage Hospital
Gateway Regional Medical Center (Granite City, Ill.)
Heartland Regional Medical Center (Marion, Ill.)
Crossroads Community Hospital (Mt. Vernon, Ill.)
Rest Bud (Ill.) Regional Hospital
Vista Medical Center (Waukegan, Ill.)
Vista Medical Center - West (Waukegan, Ill.)

Kentucky River Medical Center (Jackson, Ky.)
Three Rivers Medical Center (Louisa, Ky.)
Paul B. Hall Regional Medical Center (Paintsville, Ky.)

Mesa View Regional Hospital (Mesquite, Nev.)

New Mexico
Mimbres Memorial Hospital (Deming, N.M.)
Alta Vista Regional Hospital (Las Vegas, N.M.)

North Carolina
Sandhills Regional Medical Center (Hamlet, N.C.)
Martin General Hospital (Williamston, N.C.)

Affinity Medical Center (Massillon, Ohio)

McKenzie-Willamette Medical Center (Springfield, Ore.)

Lock Haven (Pa.) Hospital
Sunbury (Pa.) Community Hospital

Henderson County Community Hospital (Lexington, Tenn.)
McKenzie (Tenn.) Regional Hospital

Big Bend Regional Medical Center (Alpine, Texas)
Scenic Mountain Medical Center (Big Spring, Texas)

Mountain West Medical Center (Tooele, Utah)

Evanston (Wyo.) Regional Hospital

What makes it interesting: This transaction will allow CHS to focus on its larger and more urbanized markets, while the spin off company, called Quorum Health Corp., focuses on the rural facilities. The hospitals that will comprise Quorum Health Corp., are primarily located in markets with a population under 50,000, and 84 percent of them are the sole acute care providers in the their communities.

7. Daughters of Charity gets capital injection after Prime backs out of deal

The players: The deal involves Los Altos, Calif.-based Daughters of Charity Health System and hedge fund BlueMountain Capital Management.

The deal in a sentence: After Ontario, Calif.-based Prime Healthcare Services backed out of a deal to acquire Daughters of Charity's hospitals in March due to restrictions placed on the transaction by the California Attorney General's Office, BlueMountain was selected in July to manage and operate the system's facilities.

Hospitals involved: Daughters of Charity's California hospitals include: O'Connor Hospital in San Jose; Saint Louise Regional Hospital in Gilroy; Seton Medical Center in Daly City; Seton Coastside in Moss Beach; St. Francis Medical Center in Lynwood; and St. Vincent Medical Center in Los Angeles.

What makes it interesting: The transaction, which is short of a sale, involves BlueMountain infusing $250 million into the Daughters of Charity system and creating a new company, Integrity Healthcare, to manage the system. A huge hedge fund such as BlueMountain does not normally acquire a nonprofit health system. However, the deal includes an option for BlueMountain to purchase Daughters of Charity after three years.

8. TeamHealth inks deal to buy IPC Healthcare

The players: The deal involves Knoxville, Tenn.-based physician staffing company TeamHealth and North Hollywood, Calif.-based IPC Healthcare, an acute hospitalist and post-acute provider organization.

The deal in a sentence: TeamHealth agreed to buy IPC for $1.6 billion to expand its footprint in both acute and post-acute physician services.

What makes it interesting: This transaction will allow TeamHealth to expand into IPC's specialist area of post-acute care. IPC is the leading national platform in the post-acute sector, providing services in 1,200 post-acute facilities across the country.

9. Tenet, Ascension and Dignity's joint venture

The players: The deal involves Dallas-based Tenet Healthcare, St. Louis-based Ascension and San Francisco-based Dignity Health.

The deal in a sentence: Tenet, Ascension and Dignity entered into a joint venture to own and operate Tucson, Ariz.-based Carondelet Health Network — with Tenet as the majority partner and Ascension and Dignity owning minority interests — and also launched a new organization focused on efficiently providing high-quality care.

Hospitals involved: Carondelet's facilities include two hospitals in Tucson — St. Mary's Hospital and St. Joseph's Hospital — and Nogales, Ariz.-based Holy Cross Hospital.

What makes it interesting: Accountable care is driving the deal.Tenet and Dignity separately own and operate hospitals in the Phoenix area and together manage an accountable care organization — the Arizona Care Network. The joint venture connects Carondelet to the ACO.

10. Barnabas Health, Robert Wood Johnson to merge

The players: The deal involves New Brunswick, N.J.- based Robert Wood Johnson Health System and Barnabas Health, based in Orange N.J.

Hospitals involved: Barnabas Health's seven New Jersey hospitals — Clara Maass Medical Center in Bellville, Community Medical Center in Toms River, Jersey City (N.J.) Medical Center, Monmouth Medical Center in Long Branch, Monmouth Medical Center Southern Campus in Lakewood, Newark (N.J.) Beth Israel Medical Center and Saint Barnabas Medical Center in Livingston — and Robert Wood Johnson's four New Jersey hospitals: RWJUH in New Brunswick, RWJUH in Somerville, RWJUH-Hamilton and RWJUH-Rahway.

The deal in a sentence: Barnabas and RWJUH signed a definitive agreement to merge, creating a system with more than $4.5 billion in annual operating revenue and a staff of nearly 30,000 employees.

What makes it interesting: The deal would create the largest health system in New Jersey. Barnabas Health President and CEO Barry Ostrowsky, who will serve as president and CEO of the combined system, said the deal provides an opportunity for the two entities to better manage their population health initiatives and adapt to changing payment systems. The merger, which is subject to regulatory approval, is expected to close in the 2016.

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