Steward Health Care LLC (“Steward”) and IASIS Healthcare LLC (“IASIS”) announced they have entered into a definitive agreement to merge their operations. The transaction will make Steward the largest private for-profit hospital operator in the United States with 36 hospitals across 10 states – including four in Arizona, managed care operations in Arizona, Utah and Massachusetts, and projected revenues of almost $8 billion in 2018, the first year of consolidated operations. The merger is expected to close in the third calendar quarter of 2017, subject to customary regulatory approvals, terms and conditions. Terms of the transaction were not disclosed.
Steward currently operates 18 hospitals and directly employs more than 1,300 multi-specialty physicians in locations across Massachusetts, Ohio, Florida and Pennsylvania. IASIS operates 17 hospitals and one behavioral health hospital in locations across Utah, Arizona, Colorado, Texas, Arkansas and Louisiana. Through this transaction, Steward will operate nearly 7,500 patient beds across 10 states with approximately 38,000 employees including more than 1,800 directly employed multi-specialty physicians and several thousand aligned physicians.
The merger with IASIS positions Steward to leverage IASIS’s multi-state operating experience to bring Steward’s new model of health care and its award-winning health care services to patients across the nation. As part of the merger with IASIS, Steward will also begin managing the Health Choice managed care operations, which covers more than 680,000 lives. This will bring the total number of covered lives within Steward’s managed care and health insurance products to more than 1.1 million.
“Our physician-driven accountable care model focused on keeping patients healthy is transforming the health care industry as this transaction demonstrates,” said Dr. Ralph de la Torre, chairman and CEO of Steward Health Care. “Our model shows how the industry can successfully shift toward a more cost-effective local, coordinated approach that puts patients first.”
The new model of health care practiced by Steward emphasizes quality care and wellness. Steward pioneered its health care model in Massachusetts, where it turned around some of the state’s most struggling hospitals into a thriving health system that improved outcomes, lowered costs, and decreased overall health care spending.
“Since its formation nearly 20 years ago, IASIS’s mission has been to deliver high-quality, cost-effective health care to our patients and the communities we serve,” said W. Carl Whitmer, president and chief executive of IASIS. “We have accomplished this goal by investing in our growing hospitals and talented employees and by providing a broad and differentiated set of capabilities and assets to our high-growth, community-focused urban and suburban hospital markets. Steward’s innovative approach to reducing health care cost and improving quality of service will further this mission. It will be business as usual while all of us work toward a seamless merger of our operations.”
IASIS Healthcare’s 18 hospitals will all be merging under Steward Health Care, including these in Arizona: Mountain Vista Medical Center in Mesa, St. Luke’s Behavioral Health Center in Phoenix, St. Luke’s Medical Center in Phoenix and Tempe St. Luke’s Hospital.
Medical Properties Trust, Inc. (“MPT”) has agreed to acquire the interests of substantially all of IASIS’s hospital real estate subject to long-term leases and loans with Steward. Under terms of the merger agreement, cash proceeds paid by MPT and other financing sources will be used to retire IASIS’s senior secured-term loans and unsecured notes. Remaining cash proceeds will be paid to IASIS equity holders, including its majority stockholder, TPG Capital.
Cerberus Capital Management, LP, a private investment firm, is the majority shareholder in Steward Health Care LLC. Citi is acting as the sole financial advisor to Steward and is providing committed financing in connection with the transaction. J.P. Morgan Securities LLC is acting as sole financial advisor to IASIS.