Baptist Health System and Tenet collaborates to Create New Healthcare Network

Wednesday, June 24, 2015

Baptist Health System and Tenet Healthcare have agreed to create a joint venture that will unite two of the largest players in Birmingham's health care scene.

Tenet Healthcare (NYSE:THC) will take a controlling stake in the new system with a 60-40 percent split. Dallas-based Tenet is the parent company of Brookwood, which will be part of the new system along with Baptist's four hospitals in central Alabama. The new system will have 1,700 licensed beds.

Baptist CEO Keith Parrott has been named the CEO of the new system. A board of directors will oversee the system and will consist of five members from Baptist and five members from Tenet.

Parrott said the merger is expected to clear final regulatory hurdles by the third quarter of this year, and that the final organizational structure is yet to be determined. He said Brookwood Medical CEO Chuck Stark will most likely remain in his current role.

"We still have to gain (Federal Trade Commission) approval, but this is a big step for us and we're very excited because the merger will position both organizations to provide better care through the combined assets of the new system," Parrott said.

When the deal was proposed, Parrott said the combined company would receive a minimum capital investment of $250 million over the next five years to fund facility upgrades at Brookwood and Baptist's four hospitals: Princeton Baptist, Shelby Baptist, Walker Baptist and Citizens Baptist.

Baptist, which has seen its hospital count decrease from 11 to four over the last 20 years, was looking to partner with a larger health care network mainly due to the increasing costs of providing health care as a small system.

Tenet has been acquiring hospital networks around the country the last few years. Tenet CEO Trevor Fetter said during an earnings call earlier this year that the only way for the company to get a piece of the Baptist system was through a joint venture, since Baptist wouldn't be bought outright.

Garry Gause, CEO of Tenet's southern region, said that during the due diligence process, Tenet took into account the distribution of services that the merger will provide in the market and that Baptist's 100 year history lended itself to being a very good partner.

“We are excited to announce the partnership between Baptist Health System and Brookwood Medical Center,” Gause said. “Together, we will continue to improve health care delivery to communities throughout central Alabama while preserving each hospital’s remarkable legacies. The new organization will be able to meet the growing demands for quality care while navigating the changing dynamics of health care in Alabama.”