HCA purchase of St. Joseph and St. Mary’s medical centers is called off

Feb. 01--St. Joseph Medical Center in south Kansas City and St. Mary's Medical Center in Blue Springs will not become part of the vast HCA Midwest Health System.

HCA and Ascension Health, which owns the two nonprofit hospitals, announced Friday evening that they were calling off the deal because they had not gotten approval from the Federal Trade Commission, the agency that reviews hospital acquisitions for antitrust issues.

Carondelet spokeswoman Cyndi Fahrlander said she expected the hospitals to remain open but could not say whether Carondelet would look for other buyers.

With eight hospitals that control about 22 percent of the market, HCA Midwest is the Kansas City area's largest health care system. It is part of the national HCA chain of for-profit hospitals.

If HCA Midwest acquired St. Joseph and St. Mary's, it would command about 28 percent of the market based on inpatient discharges, according to a 2013 report by HealthLeaders-Interstudy, a market research company. That would put HCA Midwest far ahead of the next-largest hospital group, the nonprofit St. Luke's Health System, which has seven hospitals and 16 percent of the market, according to the HealthLeaders-Interstudy report.

HCA announced in May that it was buying St. Joseph and St. Mary's for an undisclosed sum from Ascension Health, owner of Carondelet Health, which has operated both facilities since 2002. HCA had said it expected the transaction to be completed by the end of 2013. The sale to HCA was contingent upon FTC approval.

"Carondelet Health, Ascension Health and HCA Midwest have been working diligently to bring the transaction to conclusion, including undergoing the required Federal Trade Commission regulatory review," a statement Friday from Carondelet said.

"Unfortunately, after a lengthy FTC review process, it has become clear that a timely, supportive decision from the FTC will not be forthcoming. As a result, Ascension Health and HCA Midwest have discontinued plans for the sale."

Rob Dyer, HCA senior vice president for strategy and development, said in an email: "We are disappointed that all of the anticipated regulatory approvals have not been forthcoming. We were looking forward to getting this deal completed, but unfortunately this puts an end to our negotiations."

Seeking deep pockets to maintain the hospitals' viability, Carondelet Health had been exploring a merger, partnership or acquisition by another Kansas City area hospital organization since at least early 2012. It reportedly had several suitors before entering negotiations with HCA later that year.

The New England Journal of Medicine reported this month that there had been a nationwide "merger frenzy" among hospitals seeking to maintain their market shares and improve efficiency. The increase in mergers was unleashed, the journal said, by the Affordable Care Act, which offers hospitals incentives to create health care organizations that can provide patients comprehensive care aimed at keeping them well.

But hospital consolidations also have been shown to raise costs without necessarily improving the quality of patient care. Large hospital groups with substantial shares of their market can demand higher reimbursement rates from insurance companies. The FTC has become more aggressive in recent years blocking mergers it determines stifle competition.

To reach Alan Bavley, call 816-234-4858 or send email to abavley@kcstar.com. To reach Diane Stafford, call 816-234-4359 or send email to stafford@kcstar.com.

___

(c)2014 The Kansas City Star (Kansas City, Mo.)

Visit The Kansas City Star (Kansas City, Mo.) at www.kansascity.com

Distributed by MCT Information Services