CHICAGO--(BUSINESS WIRE)--Steward Health announced its $1.9B acquisition of Iasis Healthcare last week. When completed, Steward will be among the nation’s largest health systems with approximately $8 billion in annual revenues. More notable than the transaction’s size is its unique funding structure. Medical Properties Trust, a real estate investment trust (REIT) headquartered in Birmingham, AL, will acquire the Iasis hospitals and lease them back to Steward.
The article, Letting Go: Steward Sells Its Hospitals and Embraces Patient-Centric Care, details Steward Health’s innovative approach to operations, capital formation and growth. The company is well-positioned for rapid expansion into new markets with highly-coordinated care delivery. The Iasis acquisition as well as this month’s acquisition of 8 Community Health System (CHS) hospitals exemplify Steward’s commitment to building high performing community-wide integrated, patient-centric and efficient delivery systems across the country.
Co-authors Robert Fraiman, President and CEO of Cain Brothers, a pre-eminent healthcare investment bank, and David W. Johnson, Founder and CEO of 4sight Health, a leading healthcare advisory and investment firm, chronicle Steward Health’s rapid evolution from a troubled not-for-profit system to a dynamic, “asset-light” health company well-positioned to compete in a post-reform rapidly evolving value-based environment.
Steward’s modern story begins in 2008, when new CEO Dr. Ralph de la Torre assumed leadership at then-Caritas Christi Health Care and began a search for a better operating model. Working with Cain Brothers, Caritas Christi explored private equity funding alternatives. They chose to partner with Cerberus Capital Management and become a for-profit hospital company under the name of Steward Health Care.
Steward restructured its debt, invested in its facilities, integrated its care delivery network, and became profitable. Additional funding enabled Steward to expand into new markets through internal growth and targeted hospital and physician group acquisitions. Today, Steward is New England’s second-largest health system.
Last year, Steward sold its 9 New England hospitals to MPT and entered into 15-year sale-leaseback agreements to operate the facilities. This landmark transaction became the model for Steward’s national expansion program.
As co-author, David Johnson notes, “Steward’s acquisition of Iasis represents a profound shift in how health systems can operate and fund growth. It replicates capital formation strategies employed in other industries, most notably hospitality. Not owning hospitals enhances Steward’s operating and strategic flexibility. Tracking Steward as it builds value-based integrated care networks within multiple communities will be among healthcare’s most interesting stories.”
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About 4sight Health and David W. Johnson
Dave Johnson is the CEO and founder of 4sight Health, a Chicago-based healthcare consulting firm specializing in thought capital, strategy and venture investing. The company provides a unique perspective on post-reform healthcare that emphasizes market-driven transformation. Mr. Johnson is the author of recently-published Market vs. Medicine: America’s Epic Fight for Better, Affordable Healthcare. He is the author-in-residence at MATTER, the Chicago-based healthcare incubator, and the Health Management Academy. Johnson also writes the widely-read “Market Corner” commentaries.
About Robert J. Fraiman, Jr.
Robert Fraiman has been President and CEO of Cain Brothers since January 2010. As an investment banker with over 30 years’ experience, he has advised clients in mergers & acquisitions, debt and equity capital rising, and strategic growth initiatives.
Cain Brothers is a pre-eminent investment bank focused exclusively on healthcare. Our deep knowledge of the industry enables us to provide unique perspectives to our clients and is matched with the knowhow needed to efficiently execute the most complex transactions of all sizes. www.cainbrothers.com