Dive Brief:
- Ascension Health, the largest Catholic healthcare system in the U.S. with $17 billion in total operating revenue, on July 22 announced plans to sell a majority interest in its Arizona hospitals to two other healthcare systems through the creation of a joint venture.
- Ascension signed a non-binding letter of intent to create a joint venture with a subsidiary of for-profit Tenet Healthcare Corp. and Dignity Health in Arizona that would operate and own Carondelet Health Network of Tucson, Ascension’s nonprofit subsidiary that runs three hospitals in Arizona. Currently, Dignity runs four hospitals and Tenet runs six hospitals in Arizona.
- If the deal closes, Ascension would hold a minority interest in the joint venture. Tenet would be the majority partner with management responsibilities for all of Carondelet’s assets, including the three hospitals, affiliated medical group, specialist group and ancillary businesses.
- Under the three-way joint venture, Carondelet would join Tenet and Dignity’s accountable care organization (ACO), called Arizona Care Network.
Dive Insight:
The joint venture essentially means that Ascension is leaving the Arizona market, Brian Tanquilut, a Tenet analyst with Jefferies, a global investment banking firm, told the St. Louis Post-Dispatch. But he noted that the Federal Trade Commission has been cracking down on such deals when there is consolidation in a particular market. "It’s the right move for all three [i.e., Ascension, Tenet and Dignity Health], but it will be interesting to see how the government and regulators view this combination," he said.
For its part, Ascension stressed that once the deal closes, the joint venture would "maintain Carondelet’s heritage and identity, continuing Carondelet’s Catholic sponsorship." Ascension said the move would connect Carondelet to a regional healthcare system, including the Tenet/Dignity Health ACO; strengthen and grow Carondelet’s relationships with physicians, and fund strategic growth initiatives in southern Arizona.