Bioscience

Banner completes acquisition of Sun Health

September 3, 2008

By Flinn Foundation

[Source: Ken Alltucker , The Arizona Republic] – Banner Health this week completed its $316 million purchase of Sun Health Corp. and immediately swapped out the management teams and changed the names of Sun Health’s two hospitals located in the Sun City area.

Long-time fixtures in the Sun City and Sun City West communities, the facilities are now named Banner Boswell Medical Center and Banner Del. E. Webb Medical Center.

Up to 40 duplicate executive and administrative positions have been eliminated as a result of the merger, and more positions may be impacted as hospital operations are converted over the coming months, Banner representatives said Tuesday. Non-executives whose jobs are eliminated will receive job-assistance service through Banner’s career-transition center.

The deal bolsters Banner’s position as Arizona’s largest hospital group, creating a dominant 11-hospital organization with about 28,000 employees, 3,300 beds, and significant influence over the Valley’s health-care system. Banner is the second-largest private employer in the Phoenix area, trailing only Wal-Mart.

“All of our planning efforts have been focused on this week for a long time,” Banner CEO Peter Fine said. The Sun City communities “can expect Banner to continue to invest resources into their community to provide the best health-care service that we can and continue to support all the efforts they have had over time.”

The Banner-Sun Health merger was announced nearly one year ago and received clearance from the Federal Trade Commission in late June, removing one potential regulatory hurdle to the combination of the two hospital groups.

In July, Banner issued about $1.3 billion in bonds to refinance debt, fund ongoing capital projects and pay for the $316 million purchase of Sun Health.

Terms of the merger required Banner to assume just over $200 million in Sun Health debt.
Three entities from the original Sun Health – Sun Health Foundation, Sun Health Auxiliary and Sun Health Properties – all will keep their name because they were not part of the merger.

Sun Health Research Institute (SHRI), which has drawn national acclaim for its research of age-related diseases such as Alzheimer’s, will retain its name after the merger. But like the hospitals, its management was reshuffled.

SHRI CEO Joe Rogers agreed to step down and take a position as a staff scientist. Bill Camp was named CEO of Sun Health Research Institute and Marwan Sabbagh was named chief medical officer.

“I’m just going to be one of the scientists now,” Rogers said Tuesday. “But I had a wonderful ride. I am looking forward to getting back in the lab and continue what I started 35 years ago: creating a cure,” for Alzheimer’s disease.

Banner representatives said that Sun Health’s volunteers and community fundraising efforts will be pivotal to the hospital system’s overall financial success. The Sun Health hospitals were heavily dependent on Medicare, which often reimburses at a lower rate than private insurers.

Other Sun Health entities that would be folded into Banner include Sun Health MediSun, Sun Health Boswell Rehabilitation Center, Sun Health Residence for Special Adults, Sun Health Olive Branch Senior Center and Sun Health Community Education & Wellness Center.

Meanwhile, Phoenix Children’s Hospital is among the hospitals interested in the outcome of the Banner-Sun Health merger.

Last year, Phoenix Children’s Hospital announced plans to open a pediatric urgent-care clinic with Sun Health at a planned medical campus in Surprise.

“That was moving along nicely before the merger, but it has since been on hold, appropriately so,” said Robert Meyer, chief executive officer of Phoenix Children’s Hospital. “We would obviously have an interest in continuing discussions.”

Still, Banner is expanding its own children’s hospital at Banner Desert Medical Center in Mesa, and has significantly ramped up its pediatric services. It’s unclear if Banner would need to partner with Phoenix Children’s Hospital in Surprise.

Fine said Banner has not yet made a decision whether to continue the Surprise development.
“There are other things that were in early stages of development – Surprise being an example of one – that we will take our time and review,” he said.

Meyer said Phoenix Children’s Hospital has continued its expansion in the West Valley, purchasing a building near 51st Avenue and Loop 101 with plans to open a pediatric urgent-care facility there by mid-2009.