Two CHE subsidiaries in talks to join other health systems

January 15, 2013

Two subsidiaries of Newtown Square, Pa.-based Catholic Health East are negotiating to join other health care systems. Mercy Health System of Maine is in talks to become part of Eastern Maine Healthcare Systems of Brewer, Maine; and Saint Michael's Medical Center of Newark, N.J., is negotiating with Prime Healthcare Services of Ontario, Calif.

Mercy and Eastern Maine have signed a nonbinding letter of intent and are seeking regulatory and canonical approval for their deal. They will not disclose Mercy's preliminary purchase price and have not yet determined when the deal will close. Eastern Maine is a not-for-profit system with seven hospitals, none of which are Catholic, and a network of other facilities in Maine; Mercy has two hospital campuses in Portland, Maine, and a network of primary care facilities in the Portland area.

CHE spokesman Scott Share said in an effort to respond to changes in the health care climate and reimbursements, Mercy had been seeking a new partner. Share said this decision was "actively supported by Catholic Health East as part of its strategic planning process."

He said Mercy explored several alternatives. In the summer, the system signed a nonbinding letter of intent and began negotiating exclusively with the Boston-based Steward Health Care System, which operates 11 hospitals in Massachusetts, six of them Catholic. But, said Share, the organizations were unable to reach a definitive agreement and terminated their letter of intent in December.

Share said, "It was determined that becoming a member of Eastern Maine Healthcare Systems was the best way for Mercy to extend its legacy of providing outstanding quality care while maintaining choice of care by having two hospitals in the Portland community."

Share said plans call for Mercy to continue to follow the Ethical and Religious Directives for Catholic Health Care Services under Eastern Maine, and according to a press release, Mercy will retain its Catholic identity.

In New Jersey, Saint Michael's and Prime have signed a nonbinding letter of intent for Prime to purchase Saint Michael's from CHE. At Catholic Health World's press time, the organizations were not disclosing details of the potential agreement, including preliminary purchase price and timing.

Under the deal, Prime, a for-profit hospital management company with 21 acute care hospitals in California, Nevada, Texas and Pennsylvania, would acquire the 357-bed Saint Michael's and its two ambulatory care campuses, Saint James Hospital and Columbus Hospital. Prime would continue to operate the New Jersey facilities "in a manner consistent with (Saint Michael's) historic mission." The parties were not disclosing whether that means that the facilities will remain Catholic providers.

CHE acquired three acute care facilities — Saint Michael's, Saint James and Columbus — from the Archdiocese of Newark in 2008 and converted Saint James and Columbus to ambulatory campuses. The facilities have experienced financial challenges; and, in early 2012, they began seeking a strategic partner "to sustain Saint Michael's mission through a merger, acquisition or joint venture," according to a Saint Michael's spokesman. He said Merrill Lynch approached 29 potential partners on Saint Michael's behalf before CHE, Saint Michael's and Merrill Lynch selected Prime for negotiations.

Prime also is in talks to acquire another Catholic facility, the stand-alone St. Mary's Hospital of Passaic, N.J.


Copyright © 2013 by the Catholic Health Association of the United States
For reprint permission, contact Betty Crosby or call (314) 253-3477.

Copyright © 2013 by the Catholic Health Association of the United States

For reprint permission, contact Betty Crosby or call (314) 253-3490.