Health Care Deal News: Spotlight on Hospitals - June 2012

In the only Hospital deal to come with a price in May, MultiCare Health System, a four-hospital integrated delivery system based in Tacoma, Washington, is acquiring Auburn Regional Medical Center, a 213-bed hospital in Auburn, Washington. The seller is Universal Health Services (NYSE: UHS), which will receive $98.0 million, including working capital, from the deal. Taking this as the purchase price, the price to revenue multiple is 0.72x and the price to EBITDA multiple is 5.8x. UHS is selling this facility because it no longer fits the company’s strategy of operating in mid-sized markets where it holds a market-leading position. Accordingly, we may see the company sell off other stand-alone facilities from time to time.

The Chicago hospital market continues the march toward consolidation. Holy Cross Hospital, a 274-bed acute care facility, is affiliating with Sinai Health System, an integrated delivery system with acute care, children’s and rehabilitation hospitals. Through a business combination, giving rise to a system with four hospitals, both parties would benefit from enhanced economies of scale. Vanguard Health Systems (NYSE: VHS) took a look at Holy Cross last year, but ultimately backed away from the deal. Under terms of the current deal, Holy Cross would retain its Catholic identity. The hospital has had financial difficulties in the recent past: in 2009, it had only four days of cash on hand, but has improved so that it now has approximately 45 days of cash on hand.

Although Mercy, a Catholic system based in Chesterfield, Missouri, recently announced divesting a non-core hospital in Arkansas (see our May 2012 issue), it is back in the news acquiring another hospital. In particular, it has agreed to buy Jefferson Regional Medical Center, a 251-bed acute care facility in Crystal City, Missouri. Mercy was one of four organizations invited to submit a proposal to acquire Jefferson Regional. It was selected due to a perceived commonality of corporate culture. Mercy also wants to expand in Jefferson County so this acquisition is mutually beneficial to both parties...................Want to read more? Click here for a free trial to The Health Care M&A Information Source and download the current issue today