Tower Health System, formerly known as Reading Health System, bought five acute care hospitals in southeastern Pennsylvania from Community Health Systems last month for $418 million, according to news reports.
On Oct. 1, Tower Health acquired Pottstown Memorial Medical Center; Brandywine Hospital in Coatesville; Phoenixville Memorial Medical Center; Jennersville Regional Hospital in West Grove; and Chestnut Hill Hospital in Philadelphia.
West Reading-based Tower Health paid $137 million for Brandywine, Phoenixville and Jennersville hospitals, according to the Philadelphia Business Journal.
The deal with Tower Health was part of CHS’ planned divestiture of 30 hospitals. CHS, a for-profit health care system based in Franklin, Tenn., is the former owner of Easton Hospital.
Fitch Ratings assigned an “A” rating to $541 million series 2017 bonds issued by the Berks County Industrial Development Authority on behalf of Tower Health for the hospital acquisitions.
Proceeds from the series 2017 bonds will be used to retire a bridge loan that was used to fund the acquisition of the five hospitals, reimburse $151 million for prior capital expenditures, advance refund a portion of bonds and pay for issuance costs.
Tower Health’s five newly acquired hospitals have 763 licensed beds and had total revenues of $653 million in fiscal 2017, according to Fitch Ratings.
Fitch said Tower Health’s joint venture with UPMC Health Plan to form a provider-payor insurance plan “should benefit Tower Health’s operating performance over the medium- to longer-term.” It viewed as “credit positive” Tower Health’s alliance with a strategic regional partner, as well as added benefits of revenue diversification, brand connectivity and further build-out of its integrated delivery model.
Fitch rated Tower Health’s outlook as “stable,” but said its acquisition “presents a substantial amount of integration risk to the organization as the five hospitals were essentially unaffiliated with each other under CHS’ management.
“The acquisition also moves Tower Health’s market presence closer to Philadelphia, a very competitive metropolitan service area.”
It said the integration of the hospitals is expected to be finished in fiscal 2018, with full integration efforts expected to run through 2020.