Wisconsin Health Systems Flex to Keep Pace with Market Dynamics

May 1, 2013

The last 12 months have been rife with activity in the Wisconsin hospital/health system market. Following are five interesting examples of transactions and affiliations involving some of Wisconsin’s largest health systems.

  1. Ministry and Ascension Merger. On April 1, 2013, Ministry Health Care and two other regional health systems that comprised the Marian Health System — Via Christi Health in Kansas and St. John Health System in Oklahoma — joined Ascension Health, a subsidiary of St. Louis-based Ascension Health Alliance. Ministry has presence in Wisconsin and Minnesota with operations generating more than $2.2 billion in annual revenue among 15 hospitals, 46 clinics and nearly 12,000 employees. In September 2012, Ministry Director of Public Relations Geoffrey Huys explained the merger would provide Ministry “with things like access to capital for building projects, expansion, to keep up with technologies and the things we need to deliver the highest level of care to the people we serve.” Ministry Health Care is the second healthcare ministry of Ascension Health in Wisconsin, joining Columbia St. Mary’s in the greater Milwaukee area.
  2. Froedtert Expansion. In April 2013, Froedtert Hospital received approval from the state of Wisconsin to proceed with expansion to address significant capacity issues in surgical, outpatient and inpatient care areas. From 2001 to 2011, the number of surgeries at Froedtert Hospital increased by 72 percent, with more than 18,000 surgeries performed in 2011. The complete project cost, including equipment and furnishings, is approximately $117 million and will be financed by the proceeds of an upcoming bond issue. Executives at Froedtert said the 480,000-square-foot-structure will help address capacity constraints by expanding the Wauwatosa campus to house Froedtert’s heart and vascular center and a growing transplant center.
  3. UW Bond Offering. In February 2013, the University of Wisconsin Hospital and Clinics Authority entered the market with a $263 million offering that would double its debt levels to help finance a five-year, $670 million capital program that includes a major new off-campus facility. Most of the proceeds from the offering will go toward projects such as an acute-care facility and an addition to a children’s hospital. Some of the funds will also be used to retire debt and pay a $2.6 million fee to the Goldman Sachs Group to terminate an interest-rate swap.
  4. ACO Activity. Several Wisconsin hospitals have sought better coordinated care and improved quality of care through the formation of accountable care organizations (ACOs). For example, in 2011, Bellin Health, ThedaCare and a network of nearly 700 physicians participated in an innovative Medicare pilot payment program, which led to the formation of an ACO, Bellin-ThedaCare Healthcare Partners. Also in 2011, ProHealth Solutions, an ACO, was formed by ProHealth Care hospital system of Milwaukee, Wisconsin, and the Waukesha Elmbrook Health Care independent physician association. In 2012, Aurora Health Care and Aetna formed an ACO that went into effect Jan. 1, 2013, and includes more than 1,500 physicians, 15 hospitals and 160 clinics. Most recently, however, is the formation of UW Health Accountable Care Organization, which includes University of Wisconsin Hospital and Clinics, University of Wisconsin Medical Foundation and University of Wisconsin School of Medicine and Public Health.
  5. Aurora and IASIS Partner. In August 2012, Aurora Health Care of Milwaukee and IASIS Healthcare of Tennessee announced a wide-ranging partnership that includes the formation of a development joint venture, Aurora IASIS Health Partners, to pursue healthcare acquisitions, new construction, management of facilities and development of clinical services with an initial focus on new and existing markets in Wisconsin and northern Illinois. “Healthcare is undergoing rapid and fundamental change and leading-edge systems are finding ways to manage these changes,” said Nick Turkal, CEO of Aurora Health Care. “We believe, and national trends support this fact, that partnerships will be critical to meeting the challenges of the future.” Although the only announced project is a cancer care center in Kenosha, Wisconsin, that is expected to be part of the larger Aurora development, Aurora IASIS Health Partners will evaluate opportunities in other markets on a case-by-case basis.

While Wisconsin is a great example of a state that is active with hospital and health system affiliation and expansion activity, it is not alone. The current trends are likely to continue on a national level through 2013 and beyond.