Sutherland insights healthcare news flash june 16, 2014

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HEALTHCARE NEWS FLASH June 16, 2014


Table of Contents Sales & Marketing ................................................................................................................. 3 Finance ................................................................................................................................. 6 Technology ............................................................................................................................ 9 Strategy .............................................................................................................................. 13

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Sales & Marketing Parrish Medical Center Becomes Part of Mayo Clinic Care Network June 13, 2014 | Becker’s Hospital Review http://www.beckershospitalreview.com/hospital-transactions-and-valuation/parrish-medicalcenter-becomes-part-of-mayo-clinic-care-network.html Parrish Medical Center in Titusville, Fla., has become the 29th member of the Mayo Clinic Care Network. The Mayo Clinic Care Network, established by Rochester, Minn.-based Mayo Clinic, is a network of hospitals and health systems that work to improve the quality and delivery of care in their regions. The collaboration gives providers around the nation access to Mayo Clinic’s expertise. Parish Medical Center clinicians now have access to various Mayo Clinic resources such as the AskMayoExpert database and electronic consulting that connects physicians with Mayo Clinic experts to answer questions about diagnosis, care management or therapy, according to a news release. The deal does not involve a change in ownership. The network launched in 2011 and has member organizations in more than 14 states, as well as Puerto Rico and Mexico.

The Ohio State University Wexner Medical Center Announces Affiliation June 12, 2014 | Becker’s Hospital Review http://www.beckershospitalreview.com/hospital-transactions-and-valuation/the-ohio-stateuniversity-wexner-medical-center-announces-affiliation.html The Ohio State University Wexner Medical Center in Columbus and Ohio Valley Health Services and Education — the parent company of Wheeling, W.Va.-based Ohio Valley Medical Center and Ohio Regional Hospital in Martins Ferry, Ohio — are affiliating to help improve the quality and costeffectiveness of healthcare services in the Ohio Valley region. Although the two health systems will remain independent under the affiliation agreement, they will work together to develop care options that are closer to home for Ohio Valley residents who would normally travel to Wexner Medical Center for highly-specialized treatments, according to a news release. “We’re proud to bring advanced, specialized care from a nationally ranked academic medical center to our patients and to serve a critical need in the Ohio Valley,” said Michael J. Caruso, president and CEO of Ohio Valley Health Services and Education, in the news release. “Additionally, by working with Ohio State, we’ll achieve greater efficiencies, lower costs and build a stronger community hospital system through shared electronic health records, group purchasing programs and other shared services.”

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Medina Memorial Hospital Signs Affiliation Agreement With Catholic Health June 11, 2014 | Becker’s Hospital Review http://www.beckershospitalreview.com/hospital-transactions-and-valuation/medina-memorialhospital-signs-affiliation-agreement-with-catholic-health.html Medina (N.Y.) Memorial Hospital, part of Orleans Community Health, has signed an affiliation agreement with Catholic Health in Buffalo, N.Y. Under the agreement, Catholic Health will assist Medina Memorial in its operations and support the hospital’s physician recruitment efforts. Orleans Community Health Board of Directors will retain governance responsibility for Medina Memorial. “With the changes we are experiencing in healthcare, it was clear we needed to align our hospital with a larger health system that could support and strengthen the services we offer in Orleans County,” said Dolores Horvath, president and CEO of Orleans Community Health, in a news release. “Our goal is to earn the trust of the residents of Orleans County by first helping to strengthen healthcare services in the local community, and then, when needed, by improving access to specialty services, like advanced cardiac, stroke, orthopedic and vascular care,” said Joe McDonald, president and CEO of Catholic Health, in the release.

Kadlec Health System Announces Affiliation With Providence Health & Services June 11, 2014 | Becker’s Hospital Review http://www.beckershospitalreview.com/hospital-transactions-and-valuation/kadlec-healthsystem-announces-affiliation-with-providence-health-services.html Richland, Wash.-based Kadlec Health System and Providence Health and Services have signed a final definitive agreement to affiliate. Under the agreement, Kadlec will remain a separate 501(c)3 organization, and it will remain secular, according to a news release. To allow Kadlec to remain secular and Providence to maintain its Catholic identity, Western HealthConnect, a non-religious organization, was created. “Kadlec has long recognized that its ability to meet the community’s needs in the changing healthcare environment would require an affiliation with a system with the expertise and financial resources to keep up with the needs of the region,” said Rand Wortman, president and CEO of Kadlec, in the news release. “As we evaluated potential partners, Providence was clearly the best fit with its service-driven mission and efficient resources.”

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Northern Westchester Hospital Pursues Partnership With North Shore-LIJ Health System June 06, 2014 | Becker’s Hospital Review http://www.beckershospitalreview.com/hospital-transactions-and-valuation/northernwestchester-hospital-pursues-partnership-with-north-shore-lij-health-system.html Mount Kisco, N.Y.-based Northern Westchester Hospital has signed a letter of intent to enter into exclusive partnership talks with North Shore-LIJ Health System in Manhasset, N.Y, by the end of the year. Under the agreement, North Shore-LIJ will supply NWH with resources that will allow it to provide more efficient care while reducing costs. “We are excited to be taking this first step toward becoming partners and we look forward to working closely with the hospital’s leadership team,” said Michael J. Dowling, president and CEO of North Shore-LIJ, in a news release.

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Finance Henry Ford Health System Had $4.52B in Revenue in 2013 June 12, 2014 | Becker’s Hospital Review http://www.beckershospitalreview.com/finance/henry-ford-health-system-had-4-52b-inrevenue-in-2013.html Detroit-based Henry Ford Health System’s revenue grew from $4.48 billion in 2012 to $4.52 billion in 2013. The health system’s expenses also increased. Its benefits, supplies, plant operations, salaries and health plan expenses were all up in 2013. Henry Ford Health System had a $12 million operating loss in 2013, which was partially attributable to the installation of its electronic health records system and a failed merger with Royal Oak, Mich.based Beaumont Health System, according to a Detroit Free Press report. However, the health system was still able to post a net income of $500,000 for the year due to the sale of its dialysis unit last August.

New Reimbursement Models to Eclipse Fee-for-Service by 2020 June 11, 2014 | Becker’s Hospital Review http://www.beckershospitalreview.com/finance/mckesson-new-reimbursement-models-toeclipse-fee-for-service-by-2020.html Payers and hospitals both expect fee-for-service to dramatically decrease over the next five years, according to a new study commissioned by McKesson and conducted by ORC International. The study, titled The 2014 State of Value-Based Reimbursement, was based on survey responses from 114 payers and 350 healthcare providers. The study found 90 percent of payers and 81 percent of hospitals currently offer a mix of fee-forservice and other reimbursement models. The study also found payers and hospitals anticipate two-thirds of payments will be based on complex reimbursement models with value measures by 2020. The payers and healthcare providers surveyed had different views on how value-based reimbursement models will impact the financial health of their organization. The study found 60 percent of payers believe making the transition to value-based care will have a positive financial impact on their organizations, while only 35 percent of providers believe value-based models will have a positive impact financially.

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Independence Blue Cross Has 25% Drop in Profits Due to Rise in Medical Costs June 16, 2014 | Becker’s Hospital Review http://www.beckershospitalreview.com/finance/independence-blue-cross-has-25-drop-in-profitsdue-to-rise-in-medical-costs.html Independence Blue Cross’ net income fell from $191.5 million in 2012 to $142.6 million in 2013, according to a Philadelphia Inquirer report. Independence’s net income fell, even though its revenue grew from $10.48 billion in 2012 to $11.05 billion in 2013. This was due to large investments made by the company into new technology, tools and processes to service many of its new customers — many who retained health coverage for the first time in 2013. The company said the decrease in net income can be partially attributed to an increase in medical costs. Independence spent 84.7 percent of all premiums on medical claims in 2013, up from 83.9 percent in 2012, according to the report.

Fitch: Hospital Charge Growth Expected to Remain Slow June 10, 2014 | Becker’s Hospital Review http://www.beckershospitalreview.com/finance/fitch-hospital-charge-growth-expected-toremain-slow.html Hospital charge growth is expected to remain slow in the coming years, according to a Fitch Ratings report. According to CMS, average hospital charges for most services increased by less than 5 percent in 2011 and 2012, based on data from more than 3,000 hospitals that accept Medicare. Continuing pressure on reimbursements and flattening consumer price index growth for hospital services are expected to keep the growth rate for hospital charges below its historical average, according to Fitch. Furthermore, Medicare pay cuts resulting from sequestration — which took effect in April 2013 — will slow growth in hospital charges. Sequestration has an estimated annualized impact of $11 billion for healthcare providers, according to the report. The impact on hospitals will vary depending on reimbursement methodology and payer mix. The report states, “Providers reimbursed under the percentage of charge methodology will likely continue to use charge increases to offset reimbursement pressures from other payers, including Medicare. And providers with a very high exposure to government payers (Medicare and Medicaid) will only have a limited capacity to use charge increases to generate a meaningful benefit to their bottom line.”

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Nationwide Children’s Hospital Widens Operating Margin to 8.9% June 03, 2014 | Becker’s Hospital Review http://www.beckershospitalreview.com/finance/nationwide-children-s-hospital-widensoperating-margin-to-8-9.html Columbus, Ohio-based Nationwide Children’s Hospital’s operating margin increased from 7.6 percent in 2012 to 8.9 percent in 2013, according to a Columbus Business First report. Nationwide Children’s Hospital’s revenue grew from $1.49 billion in 2012 to $1.66 billion in 2013 — an 11 percent increase, according to the report. The hospital had a $110 million impact on the local community, down from $123.5 million in 2012, according to the report.

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Technology Humana, UC San Diego Health System Launch ACO June 12, 2014 | Becker’s Hospital Review http://www.beckershospitalreview.com/accountable-care-organizations/humana-uc-san-diegohealth-system-launch-aco.html UC San Diego Health System and Humana are partnering to form an accountable care organization aimed at serving Humana Medicare Advantage members in San Diego. The ACO will provide coordinated care to its patients and focus on improving health outcomes and patient satisfaction while cutting costs, according to a news release. The accountable care agreement includes value-based incentives for physicians. The incentives are tied to physician performance and their ability to meet quality measures. “This accountable care partnership with UC San Diego Health System is a natural fit for Humana, as we already share a focus on integrated health and patient-centered care,” said Jim Brown, president of Humana’s Senior Products in California, in the release.

EHR incentive cash climbs to $24B June 11, 2014 | Healthcare IT News http://www.healthcareitnews.com/news/ehr-incentive-cash-climbs-24b As of May, eligible hospitals and physicians have been paid out a whopping $23.7 billion in electronic health record incentive payments by the Centers for Medicare & Medicaid Services, according to Elisabeth Myers, policy and outreach lead at the CMS Office of eHealth Standards and Services at the June 10 monthly Health IT Policy committee meeting. The announcement comes as federal officials have proposed a reboot to the Office of the National Coordinator for Health Information Technology, taking into consideration the downsizing of ONC’s funding following the close-out of incentive payments. During discussions at the HIT Policy Committee meeting, differences of opinion continue to remain among EHR vendors, providers and policymakers as the difficulty in the meaningful use program has reached a head for Stage 2 and alternatives are under consideration to provide relief. Regardless, participation in the program continues to grow, according to Jennifer King, acting director, Office of Economic Analysis, Evaluation and Modeling at ONC. King presented to the HIT Policy Committee a report on eligible providers’ participation in the EHR incentive program from 2011 through 2013. As of 2013, only 3 percent of eligible providers in the U.S. have not signed up to participate in the

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program, King said. Some 59 percent have received meaningful use Stage 1 incentives; 15 percent have received AIU (adopt, implement and upgrade) incentives only, while 17 percent have registered for the program and have not yet received incentives, while five percent are enrolled in a regional extension center only, without moving forward yet. All in all, King said, participation continues to increase. Younger physicians and non-behavioral health providers were ranked among the more likely to achieve meaningful use Stage 1 after they signed up for the program, King said. Out of all sizes of physician practices, solo-practitioners faced the most relative risk of failing to achieve meaningful use, the analysis showed. Physicians in rural locations or in counties with the majority of its citizen living in poverty and physicians serving mainly minority patient populations also showed the greatest risk of failing to achieve meaningful use, King said. Physicians who participate in either or both regional extension centers and patient-centered medical homes were also more likely to achieve meaningful use, King said.

Anthem, HealthCare Partners ACO saved millions June 09, 2014 | Fierce Health Payer http://www.fiercehealthpayer.com/story/anthem-healthcare-partners-aco-saved-millions/201406-09 California-based Anthem Blue Cross and HealthCare Partners’ accountable care organization saved $4.7 million during the first six months of 2013, HealthCare Partners announced. The partnership began in 2012 and emphasizes coordinating care. “The current fragmented healthcare system does not result in the best care possible,” Anthem spokeswoman Peggy Hinz previously told FierceHealthPayer after the insurer announced its plan. “ACOs financially incent healthcare professionals to deliver superior quality care to patients by encouraging greater collaboration among physicians, hospitals and health insurers and, more importantly, by paying for superior health outcomes,” she said. Anthem’s 14 ACOs across California, which provide care to 55,000 PPO patients, achieved savings through reduced hospital admissions (down 4 percent per 1,000 members), fewer hospital inpatient days (down 18 percent) and a reduction in lab tests (a drop of 4 percent), notes the announcement. The program also saw an increase in preventive health screenings and better management of chronic disease. The savings are notable because PPO patients can see doctors outside of the ACO. This is different from other ACO programs that cater toward the HMO population.

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“HealthCare Partners and Anthem have proven that the ACO model in the commercial space can be successful if focused on improving quality outcomes and increasing patient satisfaction while reducing costs,” Tom Paulsen, M.D., executive medical director of HealthCare Partners, said Friday in the announcement. Another key factor in the program’s success is that Anthem pays HealthCare partners an additional fee for its care coordination efforts, reports the Los Angeles Times. Additionally, Anthem shares more data with medical groups so they’re better informed about their patients’ conditions.

U.S. researchers, U.K. partner on open data healthcare framework June 04, 2014 | Fierce Health IT http://www.fiercehealthit.com/story/us-researchers-uk-partner-open-data-healthcareframework/2014-06-04 The creation of a blueprint for the use of open data in healthcare was the driving force behind a recent collaboration between researchers at New York University’s GovLab and England’s National Health Service. In a report developed as part of the partnership, “The Open Data Era in Health and Social Care,” researchers said that while there is currently “widespread recognition” of open data’s possibilities, the overall healthcare industry remains in the adolescent stages of understanding the best ways to take advantage of such resources.. “Policymaking is often easier than policy implementation: it is one thing to say what should be done, and quite another to know how to do it,” the researchers said in the report. The guide aims to help the healthcare industry get the most from sharing open data by helping to set priorities and ways to measure benefits. Evidence, the researchers noted, is vital. The blueprint presents a framework for developing evidence-based programs to guide investment and research, according to an announcement. Earlier this year, the U.S. Department of Health and Human Services signed an agreement with the National Health Service to share health IT information and tools with one another. Part of that agreement focuses on effectively using open data, as well as security and transparency issues. The U.S. Food and Drug Administration this week launched its openFDA initiative by releasing data on drug adverse events. The initiative aims to appeal to software developers who can devise ways to make the data more useful to researchers and the public.

Survey: More than 40% of hospital execs unhappy with their EHRs June 02, 2014 | Fierce EMR http://www.fierceemr.com/story/survey-more-40-hospital-execs-unhappy-their-ehrs/2014-06-02 There’s no getting around it: Despite the increase in electronic health record adoption, many hospitals are not happy with their systems, according to a new report from Premier, Inc.

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The report, Healthcare Trends from the C-suite, surveyed 127 healthcare leaders representing 112 hospitals across the country. It found that spending on clinical health IT is predicted to reach $26.1 billion a year by 2017, encompassing between 25 percent and 35 percent of a hospital’s capital budget. Nearly half of the respondents said they plan to make their largest capital investment in the next year in health IT, including EHRs. This category was the most often cited for the second consecutive year. However, this increase in investment does not mean that hospitals are happy with their EHR systems. More than 40 percent of respondents were either dissatisfied with or indifferent about their current systems. Executives from small and rural hospitals cited their unhappiness most often. Hospitals are under increased pressure to meet Meaningful Use requirements and related additional burdens pertaining to their EHRs. There have been many accounts of physicians being unhappy with EHR systems; it is not surprising, then, that so many hospitals also are not wild about them. “What we are hearing increasingly from healthcare leaders is dissatisfaction with their existing EHR systems, often citing cost and difficulty of use,” Michael Alkire, chief operating officer of Premier, said in an announcement. “Providers need a solution that integrates clinical, financial and operational data across their hospitals and health systems; the majority of EHR systems cannot do that.” The report also found that healthcare legislation/mandates was the second biggest driver of health care costs, eclipsed only by labor costs.

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Strategy Value-based Payments to Double By 2019 June 13, 2014 | Health Data Management http://www.healthdatamanagement.com/news/value-based-payments-to-double-by-201948235-1.html Healthcare is moving rapidly to incorporate measures of value into payment models, with more than two-thirds of payments expected to be based on value measurement in five years, up from just one third today. That’s just one of the findings from The 2014 State of Value-Based Reimbursement, an independent research study of 464 payers and providers conducted by ORC International and released at the AHIP Institute 2014 Conference in Seattle. The report was sponsored by McKesson Health. McKesson’s Medical Director, David Nace, M.D., says the results point to a sea change in healthcare reimbursements, a change in attitude, and a call for action. “For stakeholders, it really is a matter of taking action now or risk being left behind, as dollars increasingly flow towards value-based models,” Nace says. But the study also reveals that healthcare transformation is painstaking work. Existing systems are being pushed to the breaking point, and administration of these new models requires nextgeneration healthcare IT to make them automated, scalable, and cost-efficient. The study reveals these and other challenges, as well as a wealth of data that can have a significant impact on strategic planning for payers and providers. In addition, Nace advises stakeholders on the seven steps payers, providers, and clinicians can take today to start aligning towards value-based reimbursement models. The study, available here, included 114 payers and 250 hospitals of various sizes.

Private exchanges grow quickly, but challenges loom June 12, 2014 | Healthcare Payer News http://www.healthcarepayernews.com/content/private-exchanges-grow-quickly-challengesloom#.U56315SSxuM An estimated three million people currently receive employer health benefits through a private exchange, according to new report released Thursday at AHIP Institute 2014. The report, by management consulting firm Accenture, showed three times as many people enrolled in private exchanges for 2014 benefits as the company originally forecast last year. Accenture analysts expect the trend to continue, projecting total enrollment in private exchanges will ultimately surpass state and federally funded exchanges, reaching 40 million by 2018.

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“Private exchanges are experiencing hyper growth and will significantly change the role consumers have in personalizing their own employer health benefits,” said Rich Birhanzel, managing director at Accenture Health Administration Services. “With the first material open enrollment period concluded last year, private exchanges have an unprecedented opportunity to differentiate and prove the value of this new model over traditional self-managed plans.” The study suggests that the rapid growth of private exchanges has expanded benefit choices but also presented employees with important financial trade-off decisions. Of those people currently enrolled in private exchanges, Accenture estimates 25 percent purchased less health coverage (measured in actuarial value) than they had previously. Birhanzel said those choices may have been to decrease monthly premiums, but they also added out-of-pocket costs for patients with higher deductibles. Accenture deems this a “benefit trade-off,” and it accelerates the amount of reimbursement that hospitals and physicians need to collect directly from patients. Accenture’s research estimates that out-of-pocket collections from patients with employersponsored plans will increase by 7 percent – or an additional $3.7 billion – by 2018. If accurate, this would add to the difficulties that health providers currently face with patient collections. The American Hospital Association estimates more than $45 billion in uncompensated care was provided by U.S. hospitals in 2012. Challenges facing private exchanges include both data and financial management. While exchanges allow employers to offer an expanded set of products across multiple carriers, the amount and complexity of data being managed also grows. The report indicates that, with such a large volume of information, issues arise around how to pass data back and forth across organizations and how to handle exception processes and reconciliation. Many exchanges are also deferring billing functionality or delegating it to carriers altogether. The report indicates that mature exchanges will help emulate an “ideal experience:” an employer pays one bill (consolidated billing) across all carriers and products with assurance that the balance matches employee elections on the health insurance exchange (reconciliation).

Study Finds Some PPACA Exchange Plans Cheaper Than Non-Exchange Coverage June 09, 2014 | Becker’s Hospital Review http://www.beckershospitalreview.com/finance/study-finds-some-ppaca-exchange-planscheaper-than-non-exchange-coverage.html Some of the cheapest health plans available through the Patient Protection and Affordable Care Act health insurance exchanges cost notably less than the cheapest coverage available off the exchanges, according to a study conducted by consumer research company HealthPocket. HealthPocket analysts compared the lowest-cost bronze, silver and gold off-exchange plans sold by four insurance companies — UnitedHealthcare, Aetna, Cigna and Assurant — to exchange plans in the same metal tiers with the lowest premiums. The premium comparisons assumed the consumer was a 40-year-old non-smoker with health insurance effective July 1 of this year, according to the study.

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On average, the cheapest off-exchange bronze-level plans offered by the four insurers cost 45 percent more than the least expensive bronze plans offered through the exchanges, the analysts found. The average lowest exchange plan premium for bronze-level coverage across 39 cities studied was $205 per month. The average off-exchange plan lowest premiums averaged $291 for UnitedHealthcare, $280 for Aetna, $279 for Cigna and $278 for Assurant. The exchanges also had the cheapest silver and gold plans in 35 out of the 39 cities. According to HealthPocket, the exchange websites’ price comparison options could have driven the health plans to be more price competitive on the exchanges. Furthermore, it’s important to consider that the exchange plans having lower premiums doesn’t necessarily mean they offer better value. The study states, “For consumers that anticipate no healthcare usage, the premium is the only relevant cost for their health plan. However for all other consumers, lower deductibles and lower coinsurance can make up for the cost of a higher premium.”

Premiums grew average of 10% before reform June 06, 2014 | Fierce Health Payer http://www.fiercehealthpayer.com/story/premiums-grew-average-10-healthcare-reform/201406-06 Premiums grew by 10 percent or more each year during the pre-Affordable Care Act period of 2008 through 2010, according to a new report from the Commonwealth Fund. In 2008, premiums increased by 9.9 percent, followed by 10.8 percent in 2009 and 11.7 percent in 2010. The researchers collected rate change filings for the individual market in 30 states and found some variation across states. In 2008, Iowa saw an increase of 2.8 percent, while Wisconsin experienced an increase of 14.7 percent. In 2009, rates increased by 4.1 percent in New Jersey and 20.1 percent in Connecticut. In 2010, Idaho saw a 3.0 percent increase while Nebraska saw a 21.8 percent boost. “These findings provide a benchmark to compare future trends against to help determine if the Affordable Care Act is achieving one of its major goals and that is to provide comprehensive health insurance to nearly all Americans at a price they can afford,” David Blumenthal, president of the Commonwealth Fund, told The Hill. Looking ahead to next enrollment period, states are expected to release premium rates this summer. Many actuaries predict the rates will depend on the market and the specific insurance company. But certain trends will lead to higher premiums, including the reform tax on insurers and lower funds available for the law’s reinsurance protection, FierceHealthPayer previously reported. The data reflecting the time prior to ACA implementation sets the stage for what’s at stake for next year’s premiums, the researchers suggest. “The big advantage of the ACA is that there will now be data available on what rates actually are for all the states,” Blumenthal said. “From 2014 to 2015 for the first time ever we’ll have a comprehensive look at how are rates growing in this market.”

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Tenet Acquires Majority Interest in Texas Regional Medical Center June 05, 2014 | Becker’s Hospital Review http://www.beckershospitalreview.com/hospital-transactions-and-valuation/tenet-acquiresmajority-interest-in-texas-regional-medical-center.html A subsidiary of Dallas-based Tenet Healthcare Corp. has acquired a majority interest in Texas Regional Medical Center in Sunnyvale. Financial details were not disclosed. Texas Regional is the fourth Dallas-area hospital to join Tenet’s network, joining Lake Pointe Medical Center in Rowlett, Centennial Medical Center in Frisco and Doctors Hospital of White Rock Lake in Dallas, according to a news release. Physician owners still have a minority interest in the hospital. Tenet operates 78 hospitals through its subsidiaries. Last fall, the hospital operator completed a merger with Nashville, Tenn.-based Vanguard Health Systems in a transaction valued at $4.3 billion.

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