Done deal: Princeton HealthCare joins Penn Medicine

Posted on Categories Healthcare, Member News, Mergers & Acquisitions

By John George – Senior Reporter, Philadelphia Business Journal
Jan 9, 2018, 9:00am

The University of Pennsylvania Health System’s biggest push ever into New Jersey became official Tuesday with its addition of Princeton HealthCare System.

“The joining together of Princeton HealthCare System and Penn Medicine represents an exciting new chapter in Penn Medicine’s growth,” said Ralph W. Muller, CEO of the Penn Health System. “[Princeton Healthcare] has an impressive reputation for providing high-quality care to patients close to home, and innovating in many types of community-based health and wellness initiatives. Now, we can offer a powerful partnership to patients throughout the region [Princeton HealthCare] serves, continuing the services they already depend on, coupled with access to world-class care for complex conditions and innovative clinical trials available at Penn Medicine.”

Princeton Healthcare — which operates the 319-bed University Medical Center of Princeton at Plainsboro, the 110-bed Princeton House Behavioral Health facility in Princeton, a home care division and a physician network — first reached a tentative agreement to join the Penn Health System in 2016. The two organizations spent more than a year going through the now-completed regulatory review process, which included getting the support of the state Attorney General’s Office and state Department of Health, and the approval of state Superior Court’s Chancery Division.

“This is a significant day in our history, and we look forward to being an even stronger organization, clinically and financially, as we continue to fulfill our almost century-old mission of serving this community,” said Princeton HealthCare President and CEO Barry S. Rabner. “We could not ask for a better partner than Penn Medicine.”

Rabner repeated the community members will continue to receive high-quality care locally, and added they also “will benefit from easier access to the latest medical breakthroughs, cutting-edge technologies and specialized clinical expertise—both here and elsewhere in the Penn Medicine system.”

Princeton Healthcare, which employs about 3,000 workers and has an active medical staff of more than 1,100 physicians, is based about 40 miles north of Philadelphia. As part of the transaction, the names of the health system and its affiliates will change. The system will be Penn Medicine Princeton Health. The hospital’s new name will be Penn Medicine Princeton Medical Center.

“Our trustees engaged community members, physicians and employees in a thorough, two-year process to evaluate and select a partner,” said Kim Pimley, Princeon HealthCare’s board chairwoman. “In Penn Medicine, we found a partner that shares our values. Together, we can make world-class care more accessible to the people in the communities we serve.”

Penn Medicine consists of the Raymond and Ruth Perelman School of Medicine at the University of Pennsylvania and the University of Pennsylvania Health System, which together form a $6.7 billion enterprise. The Penn Health System’s patient care facilities include: The Hospital of the University of Pennsylvania, Penn Presbyterian Medical Center, Pennsylvania Hospital, Chester County Hospital; Lancaster General Health; Penn Wissahickon Hospice; and Pennsylvania Hospital. It also operates Good Shepherd Penn Partners, a long-term hospital and rehabilitation care provider created through a partnership between Good Shepherd Rehabilitation Network and Penn Medicine. The health system also operates a network of outpatient and physician practice sites throughout the region, including Penn Medicine Cherry Hill and Penn Medicine Woodbury Heights in South Jersey.

Court records associated with the transaction provided the following narrative about how the two health systems came together.

Princeton HealthCare spent several years evaluating potential strategic options and partners before signing its deal with Penn. Its first step was initiating a competitive process of evaluating potential partners and partnership structures during the summer of 2015. Wells Fargo was brought in as a consultant and the firm identified 19 potential strategic partners, initiated contact with 17, and, sent a confidential draft and non-disclosure agreement to 11 organizations that expressed an interest in a fully-integrated strategic partnership.

By the end of 2015, Wells Fargo sent a formal request for proposal to nine potential strategic partners that best satisfied Princeton HealthCare’s “guiding principles.” Six potential partners provided a written response to the formal request for a proposal by February 2016. Princeton HealthCare narrowed the field to three “preferred partners” – Penn Medicine, a second Pennsylvania health system and a New Jersey-based health system. The identities of the other potential partners were not disclosed.

After more detailed proposals were submitted by the three potential partners, Princeton HealthCare’s strategic planning committee voted in May 2016 to recommend that the system enter into exclusive negotiations with the Penn Health System for three key reasons:

“Penn Medicine has the human, scientific, educational, financial and clinical resources necessary to enable Princeton HealthCare to provide the highest level of accessible care to the communities it serves long into the future. Penn Medicine has demonstrated that it shares Princeton Healthcare’s values;
“A partnership with Penn Medicine will enhance Princeton HealthCare’s ability to expand its clinical programs, care coordination and information technology and to provide its patients with better access to medical breakthroughs, clinical trials, cutting edge technologies and more specialized clinical expertise; and
“For more than two centuries, Penn Medicine has been committed to the highest standards of patient care, education and research. Penn Medicine’s commitment has been recognized across the nation.”

Princeton HealthCare entered into a non-binding letter of intent to join the Penn Health System in July 2016. A former affiliation agreement was signed in December 2016.

According to court records, the proposed transaction will not result in the payment of any purchase price or the sale of assets. Penn Health System has committed to spending a minimum of $200 million to fund “strategic capital projects for the benefit of the residents of the communities served by Princeton HealthCare and to improve the financial performance of Princeton HealthCare and its affiliates during the five-year period after the deal closes. Penn Health System has also committed to spend at least $12 million per year for “routine capital expenditures” on the University Medical Center’s campus.

The deal, according to court records, also involves Penn Health system assuming financial responsibility for Princeton HealthCare’s outstanding debt and pension obligations. All donor-restricted gifts made to Princeton HealthCare and its foundation will continue to be held and used for purposes consistent with the donor’s intent. In addition, after the closing, any gifts received by Princeton HealthCare through local fund-raising efforts will be used locally for the benefit of Princeton Healthcare and its affiliates. The deal stipulates Princeton HealthCare’s governing board will retain the right to approve any closure or relocation of any licensed health care facilities for six years following the closing of the proposed transaction.