Jefferson Health signed an exclusive agreement to consider buying Temple University Health System’s Fox Chase Cancer Center, the academic medical centers announced Thursday.
The Philadelphia-based organizations have an exclusive 90-day window to determine whether the acquisition will improve care for cancer patients in the region and be a good fit for their strategic goals. The due diligence period will also include evaluation of the sale of Temple’s interest in Health Partners Plans.
The 100-bed Fox Chase Cancer center would pair nicely with Jefferson’s Sidney Kimmel Cancer Center, Dr. Stephen Klasko, president of Thomas Jefferson University and CEO of Jefferson Health, said in prepared remarks.
“This negotiation period will allow us to better understand how partnering could improve lives for patients throughout Philadelphia and far beyond,” he said.
Temple said the transaction would help it further its mission of providing clinical care to its North Philadelphia community while maintaining its research and educational focus. If the organizations approve the deal and it clears federal and state regulators’ favor, Jefferson and Temple would enter into a long-term oncology-related academic affiliation agreement that would give Temple residents, fellows and students access to additional academic and research resources.
Building out oncology and other profitable business lines are often the focus of health systems seeking to establish regional hubs. Combining operations can boost patient access, which can help providers spread costs over a wider patient base. Health systems are also looking for more control over the entire continuum as areas like home and outpatient care grow.
But economists and policy experts warn that consolidation often provides more harm than good. In many cases, mergers and acquisitions put upward pressure on prices and stunt competition, they claim.
Temple reported operating income of $17.2 million in 2018 on revenue of $1.85 billion, up from $469,000 operating income in 2017 on $1.75 billion of revenue.
Temple’s Fox Chase Cancer Center reported excess of revenues over expenses of $38.6 million in 2018, down from $41.1 million the year prior.
Jefferson, which has 14 hospitals and more than 40 outpatient and urgent care centers, reported $12.1 million in operating income in 2018 on revenue of $4.73 billion, down from $48.8 million operating income on $3.95 billion of revenue in 2017.
Salaries and wages increased nearly 20% from year to year, which accounts for nearly half of Jefferson’s total expenses. Supply costs increased by almost 19% while purchased services jumped by more than 40%.
Jefferson is amid another deal with Einstein Healthcare Network that would create an 18-hospital system with nearly $6 billion in revenue. Their footprint would include more than 50 outpatient and urgent-care centers, rehabilitation and post-acute facilities, nearly 39,000 employees, and more than 2,000 residents and fellows, the most in the Philadelphia region.
Mergers and acquisitions will be a continued focus of health systems looking to grow their networks in 2019, according to a new survey.