LifePoint Health and Kindred Healthcare close deal, form new company

LifePoint Health and Kindred Health closed their transaction Thursday and formed a new company, consisting of 61 of Kindred’s long-term acute care hospitals and 18 of LifePoint’s community hospitals.

ScionHealth, which is expected to produce about $3.5 billion in annual revenue, is independently operated by former LifePoint and Kindred executives and a new board of directors. Kindred CEO Benjamin Breier left the company when the transaction closed, according to the company. ScionHealth doesn’t expect layoffs nor service line consolidation, executives said.

“Breaking apart the two companies with the resources they have at their disposal makes the most sense,” LifePoint CEO David Dill told Modern Healthcare, adding that the deal won’t affect LifePoint’s longstanding partnerships. “Launching Scion will allow both of our companies to respond more comprehensively to patient needs.”

LifePoint, which generates around $9 billion in annual revenue, will take on Kindred’s rehabilitation and behavioral health businesses as well as its acute rehabilitation units, outpatient centers and post-acute facilities. It now has around 65 community hospitals, 30 behavioral health and rehab hospitals and an additional 15 in the works, 170 outpatient and post-acute facilities and 50,000 employees. LifePoint had 84 hospitals, 85 post-acute and outpatient facilities and 48,000 employees prior to the deal.

Most of the 18 hospitals that LifePoint is offloading are in the for-profit hospital chain’s smaller markets. Under Louisville, Kentucky-based ScionHealth, the hospitals will receive more tailored attention for service line development and clinician recruitment, the companies said.

ScionHealth’s long-term care and community hospitals are not close together and will not directly refer patients, said Rob Jay, CEO of ScionHealth and former executive vice president of integrated operations at LifePoint.

“One of the unique things about this is the infrastructure and corporate support center from Louisville,” he said. “That will allow us to grow fast and incorporate different parts of the business rather than start something new.”

LifePoint and ScionHealth will have a transition services agreement that will ensure the new company has labor, IT, billing, legal and other types of support for a set period post-transaction, executives said. The financial details of the transaction and the privately owned companies’ earnings were not disclosed.

LifePoint and Kindred have complied with all of the Federal Trade Commission’s requests, Dill said, noting that there is no market overlap between the two organizations. The statutory waiting period under the Hart-Scott-Rodino Act expired, but the FTC could still challenge the deal after it’s completed.

While regulators have been more critical of horizontal transactions, such as when hospitals buy other hospitals, vertical consolidation like combinations of post-acute and inpatient facilities have typically drawn less scrutiny.

The FTC is reworking its vertical merger guidelines, although antitrust experts are skeptical that the update will thwart proposed transactions.

Private equity firms back both LifePoint and Kindred. Apollo Global Management acquired LifePoint in 2018 for $5.6 billion, while a TPG Capital and Welsh, Carson, Anderson & Stowe—in tandem with Humana—purchased Kindred for $4.1 billion in 2017 and divided the long-term care and home health businesses. Humana proposed to buy the remaining stake in Kindred’s home health segment for $5.7 billion in April.

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