Ascension to acquire Presence Health

Chicago-based Presence Health has signed a letter of intent to merge into Ascension, combining the largest Catholic-sponsored healthcare system in Illinois with the nation’s largest Catholic health system, the companies announced Tuesday.

If the deal is completed, 12-hospital Presence will be owned by Ascension but operate in a joint venture called Amita Health that Ascension already has with Adventist Midwest Health.

Only Presence’s senior-care unit, Presence Life Connections, will be integrated into Ascension, the companies said in a release Tuesday.

“We believe this will strengthen Catholic healthcare not only in the region but throughout the country as we are all dedicated to delivering personalized, compassionate care,” Ascension CEO Tony Tersigni said in a statement.

Presence heads into the deal with a two-year turnaround effort still trying to get traction in the intensely competitive Chicago hospital market.

Presence posted an operating loss of $40 million in 2016, far better than the $186 million operating loss in 2015. But it was still short of system targets, Presence CEO Mike Englehart recently said.

In the first quarter, Presence returned to the black operationally, posting an operating gain of $12.4 million on revenue of $661.4 million.

Its 10% market share will now be combined into Amita Health, a 2-year-old joint venture that encompasses nine hospitals and a large physician network across the western and northwestern suburbs of Chicago.

Amita is an operating tie-up between Hinsdale, Ill.-based Adventist Midwest Health and Ascension’s Alexian Brothers Health System, based in Arlington Heights, Ill.

The new deal with Ascension is not expected to affect an agreement that Presence recently inked to divest two downstate hospitals to Peoria-based OSF HealthCare: Presence Covenant Medical Center in Urbana and Presence United Samaritans Medical Center in Danville.

That deal is expected to be completed in early 2018 but is subject to regulatory approvals.

For Ascension, the Presence acquisition is its largest deal since acquiring financially healthy Wheaton Franciscan Healthcare of Milwaukee in March 2016.

Tersigni has in numerous interviews stressed his personal commitment to strengthening and expanding Catholic healthcare wherever Ascension is needed.

Ascension and Presence executives would not comment Tuesday beyond their news release.

Ascension is the nation’s largest not-for-profit hospital company, with 141 hospitals and fiscal 2016 revenue of $21.9 billion.

Two other Catholic healthcare giants, Dignity Health and Catholic Health Initiatives, are discussing a merger to see if they can operate more efficiently together than apart.

Presence beat long odds a year ago when, in the face of its large 2015 operating losses, Englehart and his financial staff were able to pull off an outsized $1 billion bond offering that provided the financial flexibility to continue the system’s turnaround.

Cardinal Health profit declines as generic drug prices deflate

Cardinal Health reported an 18% drop in earnings in its fourth quarter, driven by dwindling generic drug prices, the company said Wednesday.

The Dublin, Ohio-based pharmaceutical and medical products distributor saw its earnings fall to $274 million for the quarter ended June 30, down from $333 million from the same period the year before. Revenue was up 5% to $33 billion.

Cardinal’s pharmaceutical segment profit dropped 7% to $505 million, largely due to deflating generic drug prices and ongoing investment in its pharmaceutical IT platform, the company said. Fourth quarter revenue for its pharmaceutical business was up 5% to $29.6 billion, helped along by a growing customer base and a boost from its specialty products.

On the year, Cardinal’s pharmaceutical segment profit decreased 12% due to declining generic prices, a lost drug distribution contract with Safeway and a slowdown in price increases for branded drugs. Cardinal’s rival McKesson Corp. also cited the sluggish branded drug price increases as a cause of its diminished profit last week. Companies along the pharmaceutical supply chain have taken a financial hit resulting from the increasing scrutiny surrounding surging drug prices.

“While these last 12 months were clearly a dynamic period in healthcare and certainly presented challenges for our fiscal 17, it was also a year in which we took important actions to strengthen our market positioning, grow our scale, add new, long-term drivers of growth, and improve the overall balance of our integrated portfolio,” George Barrett, chairman and CEO of Cardinal Health, said in a statement.

Cardinal scaled up when it closed its $6.1 billion acquisition of Medtronic’s patient care, deep vein thrombosis and nutritional insufficiency business Monday, which will likely bolster its medical supply segment.

Fourth quarter profit for Cardinal’s medical supply segment jumped 13% to $138 million on revenue of $3.4 billion, a 6% increase from the fourth quarter last year, led by positive post-acute product performance and growth in distribution services, the company said.

On the year, profit for that segment increased by 25% to $572 million while revenue rose 9% to $13.5 billion.

Overall profit for fiscal year 2017 dropped 10% from 2016 to $1.29 billion and revenue increased 7% to $130 billion.

In April, the company cautioned that its 2018 outlook would reflect continued declines in generic drug prices, which could result in a drop in profit for the company’s pharmaceutical business. The company’s operating expectations have not meaningfully changed, Barrett said, but they are taking some “discrete actions” to improve its trajectory.

By Modern Health.