Ponder & Co delivers results. We invite you to explore our collection of Case Studies to see how we provided solutions to our client partners.

Akron General Health System

Akron General Health System engaged Ponder to pursue a strategic partner in light of significant capital needs, challenging volume trends, and a new strategic alignment between its nearest rival with one of the largest healthcare systems in the state.

 

Organization:

  • Akron General Health System (“AGHS”) includes Akron General Medical Center, a 537 bed acute care teaching hospital; Lodi Community Hospital, a 25 bed acute and skilled facility; a large employed physician group and many outpatient facilities, including three Health and Wellness Centers.
  • AGHS’ net revenue was $583.1 million in fiscal year 2013.

Situation:

  • The Board of Directors of AGHS determined that it was essential to find a well capitalized financial partner in light of a sub-optimal balance sheet, significant capital needs and a needed upgrade to its information technology platform.
  • Also, Summa Health, AGHS’ primary competitor, had recently obtained a minority equity investment from Catholic Health Partners, one of the largest healthcare systems in Ohio; the investment was estimated at approximately $250 million over a number of ensuing years.
  • Finally, AGHS recognized that to compete over the long term, it was very important to align with a partner that could support an integrated physician network and provide the resources for future healthcare delivery models.
  • Ponder developed a customized process designed to identify the optimum strategic partner.
  • Request for proposals were sent to a select group of for-profit and not-for-profit entities, and multiple proposals involving a variety of structures were received.

Outcome:

  • AGHS selected as its preferred partner a newly announced joint venture between Community Health Systems (“CHS”) and Cleveland Clinic, and the parties executed a letter of intent.
  • In the months that followed, AGHS ended exclusive negotiations as CHS and Cleveland Clinic were unable to reach an agreement on their joint venture.
  • Ponder reached out again to a select group of major healthcare providers, and after reviewing options again, the Board selected to develop a partnership with Cleveland Clinic, a not-for-profit multispecialty academic medical center based in Cleveland with 3,000 full-time salaried physicians and researchers and 11,000 nurses representing 120 medical specialties and subspecialties.
  • Ponder assisted in negotiating the terms of the new partnership which included a substantial capital investment in AGHS by Cleveland Clinic, as well as representation on each other’s Boards.
  • A key part of the agreement was enabling AGHS to participate in Cleveland Clinic’s Quality Alliance, which is a network, led by physicians, which will improve quality and consistency of care; reduce costs and increase efficiency; and provide access to expertise, data and experience.
  • AGHS will brand itself as a “Cleveland Clinic Affiliate”.

 

Saint Vincent Health System

In need of access to significant additional capital and physician resources to compete with its in-town rival, Saint Vincent reached an agreement to affiliate with Allegheny Health Network, a not-for-profit subsidiary of Highmark, one of the largest health insurers in the United States and the fourth largest Blue Cross and Blue Shield-affiliated company

 

Organization:

    • Saint Vincent Health System (“SVHS”) owns Saint Vincent Health Center, a 428-bed hospital located in Erie, PA and a smaller hospital in Westfield, NY.

Situation: 

    • In the Erie region, SVHS competes with UPMC Hamot, which merged in February 2011 with UPMC, a vertically integrated health system that owns 13 hospitals, an insurance company and employs over a thousand physicians in western PA.SVHS business was slowly declining due to competitive pressures of its much stronger competitor.
    • Highmark felt that in order to better serve its clients in northwestern PA, it needed to align with a financially strong alternative provider with an integrated approach to healthcare delivery in order to compete with UPMC Hamot.

Outcome: 

    • Ponder was retained to assist SVHS negotiate the terms and conditions of the affiliation agreement with Highmark’s affiliate, Allegheny Health Network.
    • The affiliation agreement provided a much need capital infusion for SVHS and, importantly, SVHS’ participation in the Allegheny Health Network, a patient centered integrated health care services company consisting of seven hospitals with medical staffs with more than 2,100 physicians.
    • This transaction closed only months after Highmark’s highly publicized merger with West Penn Alleghany Health System; these transactions represent two of the highest profile acquisitions of not-for-profit healthcare systems by a health insurer.
Mercy Health Partners, Tennessee Region

Catholic Health Partners made the strategic decision to divest its hospitals and assets in Tennessee and reinvest the proceeds in other system locations, and engaged Ponder for the divestiture

 
Organization:

  • Catholic Health Partners (“CHP”), which changed its name to Mercy Health in 2014, is one of the largest not-for-profit health systems in the United States.  At the time of the transaction, the system consisted of more than 100 organizations, including acute care hospitals, long-term care facilities, housing sites for the elderly, home health agencies, hospice programs and wellness centers.
  • Mercy Health Partners (“MHP”) of Knoxville, Tennessee, was an affiliate of CHP, and it included seven full service acute care hospitals that represented a total of 1,323 licensed beds as well as additional continuum-of-care services that are part of this East Tennessee health system.  Three of the hospitals were leased from city or county entities.

Situation:

  • MHP faced a challenging reimbursement environment due to a relatively low Medicare wage index and TennCare.
  • MHP also faced a significant debt burden due to its past merger with The Baptist Health System of East Tennessee in January 2008 and needed extensive capital investment.
  • The hospitals in and around Knoxville were CHP’s only assets in Tennessee and located at the southern most region of the CHP health system.
  • After considering a joint operating agreement with a local not-for-profit system, CHP determined that it was essential to pursue a partner or buyer that could recapitalize the system, also enabling CHP to retire debt and invest excess proceeds in its other operations outside Tennessee.
  • Following a successful prior engagement whereby Ponder advised CHP on the sale of its Pennsylvania assets, Ponder was engaged by CHP and advised CHP and MHP on the divestiture, managed the controlled auction process and negotiated the terms and conditions of the transaction.
  • Request for proposals were sent to a select group of for-profit and not-for-profit entities, and significant indications of interest were generated.

Outcome:

  • CHP and MHP selected Health Management Associates (“HMA”), one of the largest hospital companies in the United States and a leading operator of general acute care hospitals in non-urban and mid-size markets throughout the country, to acquire MHP.
  • Ponder negotiated the asset sale which resulted in a purchase price of $525 million plus the value of working capital, as well as a multi-year capital commitment.
  • The transaction included donations by HMA to two local foundations, continuation of MHP’s charity care policy, a commitment to keep all employees for a set period of time and a commitment to support Catholic programs.
Marion County Hospital District

Marion County Hospital District engaged Ponder to lead a Strategic Options Assessment, and due to a challenging payor mix, declining reimbursement, a major master facility plan to be funded and significant competition, it was determined that a strategic partner was needed.

 

Organization:

  • Marion County Hospital District (“MCHD”) was the owner of Munroe Regional Medical Center (“MRMC”), a 421-bed acute care facility located in Ocala, FL.
  • MCHD leased MRMC to Munroe Regional Health System, a standalone not-for-profit entity

Situation:

  • The boards of MCHD and MRHS knew that it was important to be able to pursue the implementation of MRMC’s master facilities plan; however, they lacked access to capital.
  • A tax referendum failed to secure public funding.
  • MCHD and MRMC also knew that participation in a larger state-wide network of hospitals would enhance the health system’s position under health care reform initiatives.
  • Ponder developed a customized process designed to identify the optimum strategic partner 
    Proposals were received from (1) Duke LifePoint Healthcare, a joint venture between the two organizations pursuing one of its first major transactions outside the traditional Duke Healthcare extended service area and (2) Health Management Associates (“HMA”) in partnership with UF Health Shands .

Outcome:

  • MCHD selected the HMA/UF Health Shands joint venture as its preferred strategic partner
    MRMC would be part of HMA’s 23 Florida hospital network and participate in the UF Health Shands clinical integrated network.
  • MCHD desired a 40-year lease, rather than a sale of MRMC.
  • Ponder assisted in negotiating the lease which contained an up-front payment of $200 million and  a commitment to fund $225 million for the master facility plan and other capital improvements.
  • In the midst of lease negotiations with HMA, the process was complicated by the maneuvers of an activist hedge fund investor in HMA and ultimately the acquisition of HMA by Community Health Systems (“CHS”).  However, through the efforts of Ponder, MCHD’s legal team and other advisors, the terms of the initial letter of intent with HMA remained in tact and were accepted by CHS.
  • The transaction closed on April 1, 2014.
  • MCHD was able to fund a community foundation with assets in excess of $200 million .
Mercy Health Partners, Northeast Pennsylvania

Catholic Health Partners made the strategic decision to divest its hospitals and assets in northeast Pennsylvania and reinvest the proceeds in other system locations, and engaged Ponder for the divestiture

 

Organization:

  • Catholic Health Partners (“CHP”), which changed its name to Mercy Health in 2014, is one of the largest not-for-profit health systems in the United States.  At the time of the transaction, the system consisted of more than 100 organizations, including acute care hospitals, long-term care facilities, housing sites for the elderly, home health agencies, hospice programs and wellness centers.
  • Mercy Health Partners (“MHP”), Northeast Pennsylvania, was an affiliate of CHP, and it included two full service acute care hospitals, 198-bed Mercy Hospital in Scranton and 48-bed Mercy Tyler Hospital in Tunkhannock.  The system also included Mercy Special Care Hospital, a 67-bed long-term acute care hospital in Nanticoke.

Situation:

  • Mercy Health, Northeast Pennsylvania, represented CHP’s only presence in Pennsylvania with limited synergy with its other asset and facilities in Ohio, Tennessee and Kentucky.
  • In the prior decade, multiple unsuccessful attempts had been made among the three largest hospitals in Scranton to consolidate.
  • Scranton had challenging demographics with declining population, and there was also a high level of union activity.
  • MHP struggled to achieve the profitability needed to support significant capital investment.
  • CHP determined that it was essential to a partner or buyer that could recapitalize the system, also enabling CHP to retire debt and invest excess proceeds in its other operations outside Pennsylvania.
  • After previously working across the table from CHP on a prior transaction, Ponder was engaged by CHP and advised CHP and MHP on the divestiture, managed the controlled auction process and negotiated the terms and conditions of the transaction.
  • Request for proposals were sent to a select group of for-profit and not-for-profit entities, and multiple proposals involving a variety of structures were received.

Outcome:

  • CHP and MHP selected Community Health Systems (“CHS”), one of the largest hospital companies in the United States, to acquire MHP.
  • Ponder negotiated the asset sale which resulted in significant proceeds for CHP, as well as a five-year capital commitment at an annualized rate almost 2.5 times the average annual amount spent for the prior four years.
  • The transaction included a donation to the local MHP foundation, a commitment to keep all employees for a set period of times and maintenance of certain Catholic initiatives.
  • The MHP hospitals became CHS’ 12th and 13th hospitals in the state of Pennsylvania.