On Friday, Boston-based Steward Health Care announced a definitive agreement to merge with Franklin, Tenn.-based IASIS Healthcare LLC. If the proposed transaction is successful, the combined entity will have 36 hospitals in 10 states, approximately 38,000 employees, a network of 5,600 physicians and projected revenue of nearly $8 billion in 2018.
“We’re a community-based model with a mission of driving the highest quality care we can that is cost-efficient,” Dr. Mark Girard, president of Steward’s physician network, told The Boston Globe. “We think we can replicate that in the other markets in the country.”
Steward just completed the $304 million acquisition of eight Community Health Systems (CHS) hospitals in Ohio, Florida and Pennsylvania. While the health system did not divulge the purchase price for IASIS, a person familiar with the situation placed it at $1.9 million, The Wall Street Journal reported.
IASIS operates 17 acute care hospitals and a behavioral health hospital in Arizona, Arkansas, Colorado, Louisiana, Texas and Utah, and employs approximately 13,400 employees, including more than 1,800 physicians.
Steward was formed in 2010 when private equity firm Cerberus Capital Management bought the financially troubled Caritas Christi Health Care system formerly operated by the Archdiocese of Boston. With the CHS acquisitions, Steward now has 18 community hospitals, a network of 3,500 physicians and more than 23,000 employees.
“We have come from a struggling collection of disparate hospitals to become one of the most influential health care operators in the country,” Steward CEO Dr. Ralph de la Torre wrote in a memo distributed to employees.
The deal is expected to close in the third quarter, pending state and federal regulatory approval. According to Dr. de la Torre, IASIS hospitals will then operate under the Steward name.
Our Take: This announcement is against the backdrop of the rapidly evolving merger agreement between Boston’s Beth Israel Deaconess Medical Center (BIDMC) and Burlington, Mass.-based Lahey Health, which at last count could include as many as five players. The board of Mount Auburn Hospital voted Wednesday to join the merger, and Anna Jaques Hospital’s board of trustees signed a letter of intent last Monday to explore taking the same step. New England Baptist Hospital’s board signed a similar letter of intent in April. If all five health systems merge, the resulting entity would have 11 hospitals and would be the second-largest health system in the state, after Partners HealthCare.
In fact, everyone part of the merger is looking to compete more effectively with Partners. It’s entirely the point of the deal.
Who would have predicted that Boston—with all of its venerable academic institutions—would become a hotbed of M&A activity in 2017?
The Steward merger is something different. Steward has more hospitals (8) than BIDMC (4) or Lahey (6), but lags behind in hospital revenues. It appears that Steward executives are calculating that the competition is heating up at home, and its best chance for growth lies by expanding nationally. It already has a presence in Pennsylvania, Ohio and Florida. Steward adds six more states and a managed Medicaid product by acquiring IASIS. And Steward is already a fully functioning integrated delivery network, with physician offices, urgent care, home health and hospice, and a health plan.
There’s one more benefit no one seems to be talking about. IASIS can finally shed its unfortunate name.