UCHealth’s Merger With A 100-Year-Old Pueblo Hospital Strengthens Its Dominant Spot In The Health Care Market

On a chilly morning last month, Darrin Smith, the president and CEO of Pueblo’s Parkview Health System, stood outside the 100-year-old system’s flagship hospital and gazed upon a bundled-up crowd.

“This is a wow moment,” Smith said. “This is a wow moment for Parkview and for the citizens of southern Colorado.”

The occasion was to announce that Parkview would no longer be an independent health care system. Instead, with Parkview’s absorption into the UCHealth system, it became the latest example of a trend of consolidation sweeping through the hospital industry, including in Colorado.

Both systems are nonprofit, so this was a merger and not a purchase. Terms of the deal were simple: As part of the merger, UCHealth committed to spending at least $175 million over the next 10 years for the benefit of Parkview, and it cut a $5 million check to the related Parkview Foundation to fund various projects and services in the community. The merger also provides additional strength to UCHealth, which has been expanding its footprint. Already, UCHealth is the state’s largest hospital system in terms of net patient revenue.

“It’s just the next step in an overall trend of the last 15 years or more of consolidation of hospitals and hospital systems,” said Allan Baumgarten, a Minnesota-based health care analyst who produces studies on the Colorado hospital market. “In the case of UCHealth, they’ve been expanding and basically establishing a presence certainly along the entire Front Range and a little bit into the mountains.”

Why Parkview Wanted The Merger

The two health systems first agreed to a merger letter of intent in October 2022, and Colorado Attorney General Phil Weiser signed off on the merger in May. But Judy Fonda, the chair of Parkview’s board of directors, said at last month’s ceremony to mark the transition that discussion around a merger with another health care system had been ongoing for quite a while.

“Our board has recognized for some time that the hospital would be strengthened by partnering with a larger health care system,” Fonda said.

The motivation for that can be found in Parkview’s balance sheets. Like many non-metro Denver hospitals, Parkview has struggled financially in recent years. The health system lost $11 million last fiscal year and $43 million the year before that, according to an audited financial statement filed with the federal Municipal Securities Rulemaking Board. The bulk of those losses came from operations — meaning the hospital wasn’t getting paid enough to cover its costs of providing medical care.

In 2022, Parkview closed its inpatient psychiatric unit, citing financial burden, according to The Pueblo Chieftain. In the merger notice it provided to the Colorado Attorney General’s Office, UCHealth pledged that Parkview will continue to provide maternity care and comprehensive women’s health care — something that’s significant given that those services are often targets for cash-strapped hospitals.

In talking about the merger, Parkview leaders often spoke of continuity — that Parkview would continue to exist to provide care, that it would continue to be a major employer and contributor to the region’s economy.

“Becoming part of the UCHealth family strengthens the care provided in our community, ensuring the patients and residents in Pueblo and southern Colorado will continue to have access to high-quality care,” Smith said during the merger ceremony.

Why UCHealth Wanted The Merger

In her remarks at the ceremony, UCHealth president and CEO Elizabeth Concordia likewise framed the merger in terms of patient care.

“We are very, very focused on making sure that Parkview thrives and that patients can continue to come here close to home for their care,” Concordia said.

But Baumgarten said the merger also strengthens UCHealth’s hand financially in the state.

“Having that geographic footprint and having that site gives them considerable bargaining strength when they’re negotiating with the major payors in the state,” Baumgarten said.

In other words, UCHealth can now negotiate higher prices with private insurers. This is one of the major concerns surrounding the consolidation trend. Studies have found that hospital consolidation drives up prices and insurance costs.

That’s one explanation for the merger craze in the hospital industry nationwide. By one analysis, there were more than 1,800 hospital mergers in the U.S. between 1998 and 2022, reducing the number of independent hospitals by 2,000. A Kaiser Family Foundation analysis found that, by 2017, two-thirds of hospitals nationally were part of health systems, up from a little over 50% in 2005.

In Colorado, UCHealth scooped up Yampa Valley Medical Center in Steamboat Springs in 2017. CommonSpirit Health acquired St. Elizabeth Hospital in Fort Morgan in 2022, and Colorado-based SCL Health merged with Intermountain Health the same year.

The exterior of the University of Colorado Hospital on the Anschutz Medical Campus in Aurora, photographed on Oct. 18, 2019. The hospital is the flagship of the UCHealth system. (PHOTO CREDIT: John Ingold, The Colorado Sun)

Baumgarten said the Parkview merger has other benefits for UCHealth beyond negotiating leverage. For one, as a system with teaching and research as part of its core mission, it now has access to more patients who can potentially be recruited for clinical trials. The merger also gives UCHealth specialists a larger patient base for referrals.

According to another document filed with the MSRB, Parkview saw roughly 150,000 outpatient visits and more than 68,000 inpatient days last fiscal year.

“Each of those patients has value to the UCHealth system,” Baumgarten said.

Standing outside his hospital last month, Smith, Parkview’s CEO, focused instead on the value the hospital’s new owner will bring to his patients.

“I am filled with hope for what lies ahead,” Smith said. “This partnership between UCHealth and Parkview heralds a new era of progress and innovation for Pueblo and southern Colorado.”

 

Source: Colorado Sun

McKesson Looks To Offload Full Building At Global HQ In Las Colinas

McKesson Corp. has placed an entire building at its owner-occupied global headquarters in Las Colinas on the leasing market, adding to the thousands of square feet of office space available in Dallas-Fort Worth.

Brokers at CBRE have been tapped to fill the 271K SF space at 6535 N. State Highway 161. The pharmaceutical and medical supplies company relocated from the San Francisco Bay Area to the two-building campus in Irving in 2019.

The pandemic brought changes to the firm’s real estate needs, and in 2021 it announced it would save $60M to $80M per year by allowing more employees to work from home.

CoverMyMeds, a subsidiary of McKesson, added 52K SF of its 420K SF campus in Columbus, Ohio, to the sublease market earlier this summer. The company also said it would close its office in Scottsdale, Arizona, in April of this year.

“Companies across sectors are looking to shed office space, but healthcare-related firms have made up a big piece of the pie as of late,” said Steve Triolet, senior vice president of research and market forecasting for Partners Real Estate.

Reata Pharmaceuticals is also trying to offload space, having put its new 327K SF headquarters in Plano on the sublease market for the second time in November. AmerisourceBergen has listed its 300K SF building in Carrollton.

“Tenants in the same industry often mimic each other in their real estate decisions,” Triolet said in an email. “In this case, all of them are trying to shed a significant amount of office space in the DFW market.”

Close to 30% of Dallas’ office space was available for lease in the third quarter of 2023, CBRE data shows. Sublease availability of 10.6M SF makes up a large chunk. The McKesson listing isn’t a sublease since the firm owns the building.

McKesson plans to consolidate operations into the larger building on-site and has filed plans with the state for more than $20M in renovations to its cafe, meeting spaces, conference center and lobby, according to The Dallas Morning News.

 

Source: Bisnow

Coming To A Consensus About Healthcare Deals

Social and cultural shifts are making big impacts on the way healthcare facilities are built, managed and used. So said panelists at the recent GlobeSt. Healthcare conference in Scottsdale, AZ.

A rise in med-tail services, and the robust growth of life sciences have provided new avenues for CRE executives to invest and build medical properties and panelists said that business discipline has never been as important as it is today.

When Angie Weber, first vice president at CBRE, asked Ross Caulum, regional real estate director at Trinity Health, about what are some of the ways that owners, brokers and developers can do to make their life easier at Trinity Health, he simply said to “have patience,” noting that it takes a while to make a decision, then joked about rethinking that decision once everyone comes to a consensus.

“The way that the best transactions happen is when there is a compelling business case for advancing healthcare delivery, and that takes time,” Caulum said. “Today’s medical office building isn’t like yesterday’s MOB. The MOB of then was five days a week, 8-5. Not, it is seven days a week and is about providing the platform of delivering healthcare where and when it needs to be. But the challenge of that is finding the staff and the physicians, noting that there is a major shortage. The labor shortage, he noted, has affected the thought process in real estate decisions. We constantly have to ask ‘will the staff be there? You have to get to a stabilized staffing cost and I am not sure how it will get done.”

 “Back in the day, staffing wasn’t part of the thought process,” Weber explained “Now, decisions are being made with staffing in the forefront of the mind.”

“There has become more business discipline because of the capital constraint and the pressure on profitability too,” said Caulum. “You have to really walk through what the business case is, view it with open eyes, and not just think you can get the staff onboard because when you look at the past few years and track record, it hasn’t happened that way.”

 

Source: GlobeSt.