The Tribune Democrat, Johnstown, PA

News

July 3, 2014

Conemaugh officials provide look at how decision was made

JOHNSTOWN — Testimony at Wednesday’s hearing for Conemaugh Health System’s proposed sale included an insider’s look at how the system’s board decided to sell and also a competitor’s concerns for the future.

Board Chairman Ronald Vickroy said Conemaugh was celebrating the system’s financial turnaround when the question “Can we stand alone?” was asked at a board retreat: 

“The answer was: ‘No way,’ ” Vickroy said.

First, the system leadership looked into creating its own hospital network with three other major players, but that deal fell through.

Then an affiliation with a “Pittsburgh insurer” – reportedly Highmark’s newly formed West Penn Allegheny Health System – failed to materialize.

“At that point, we decided we needed an outside consultant,” Vickroy said.

The board selected Juniper Advisory, a Chicago-based investment bank working exclusively with hospitals and health systems, Conemaugh CEO Scott Becker testified.

“Juniper took management out of the role of lead negotiator,” Becker said.

“That’s not what we do. That’s what Juniper does.”

Juniper contacted 30 potential partners that included both national and regional players, Juniper Vice President Rex Burgdorfer testified.

Of the 30, 16 decided to participate in the selection process by signing confidentiality agreements, Burgdorfer said. With Juniper’s help, Conemaugh leaders narrowed the field to six, and then to three.

Each of the three suitors was given a day in this region that included tours of Conemaugh facilities, meetings with leadership and physicians and a presentation to the system board.

Becker compared it to speed dating.

A committee that included hospital executives, board members and physicians then visited other hospitals recently acquired by each of the finalists, Vickroy said.

“We spent some time with people there,” Vickroy said. “We were asking questions: What would you do differently? How were the people in this organization treated?”

Becker said he thought the site visits, which he calls “reverse due diligence,” were a mere formality. But the experience changed his mind.

“It was a chance to really get a feel of what it would be like after the acquisition,” Becker said. “It turned out to be the most important part.”

Juniper helped compare and contrast the finalists, Burgdorfer said, noting the company was familiar with the organizations from other deals.

The committee and Burgdorfer went to Marquette, Michigan, to check out Marquette General Hospital, Duke LifePoint's latest acquisition. That agreement was also initiated through Juniper’s consulting process, Burgdorfer said.

“It was nice seeing really good things that were taking place with our former client,” Burgdorfer said.

But Windber Medical Center President and CEO Tom Kurtz is not convinced the Conemaugh acquisition is good news for everyone.

Kurtz was the only witness Wednesday not called by the hospital’s attorney, Samuel W. Braver of Pittsburgh-based Buchanan Ingersoll and Rooney.

“It is not my intent to prevent or delay this proposed acquisition,” Kurtz said. “It’s my desire to call the court’s attention to the concerns of the health care providers that are not part of this transaction.

“Our hopes are that there are appropriate safeguards put into place to guard against unfair competition and intentional interference with established hospital-patient relationships.”

Kurtz gave the example of a Duke LifePoint-owned insurance company that would exclude Windber’s patients.

But there has been no discussion of such an insurance plan.

In fact, Becker in March pledged to continue accepting all current insurance plans.

“We will accept all insurance as long as they pay us fairly,” Becker said. “We will be agnostic with insurance. They need us and we need them.”

Randy Griffith covers health care for The Tribune-Democrat. Follow him on Twitter at @photogriffer57.

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