Banner’s Buyout of UA Health Network to be final Feb.27

The state’s largest hospital system, Banner Health, got even bigger this week, with the final approval by the Arizona Board of Regents (ABOR) allowing Banner Health to enter an academic affiliation agreement with the University of Arizona, and merge with the UA Health Network and employ its non-academic personnel.

UA Health Network and Banner Health enlisted Cain Brothers, an investment banking firm, to analyze the complex deal and give a “fairness” opinion on it. A representative of the firm told ABOR this week the analysis concluded the deal was fair to both sides.

The UA Health Network includes two hospitals, three health insurance plans, numerous clinics and University Physicians Healthcare, which staffs the hospital doctors from the UA. The two hospitals are the UA Health Network’s university campus at 1501 N. Campbell Road and the UA Health Network’s south campus at 2800 E. Ajo Way.

The university campus that was built with taxpayer money, houses the region’s only top-level trauma center, offering specialized treatments that aren’t available at other local hospitals and has research doctors with dual faculty appointments at the university.

As part of the deal, ABOR will lease the land on which the UA Health Network sits for $59 million. It also approved additional land for a replacement hospital. Banner is to pay an additional $1 million for the residual interest in the property and invest in new facilities for patient care that will enhance the Tucson hospital’s financial position.

The deal requires that the money be used only for capital expenditures and operating expenses of the UA College of Medicine-Tucson and to fund UA’s $39 million contribution to an Academic Enhancement Fund. With Banner providing around $261 million toward the $300 million Academic Enhancement Fund that is to provide ongoing funding for academic enhancements, faculty recruitment and program development at the medical schools in Phoenix, Tucson and state-wide.

Funds from the hospital operation will also leverage the ongoing state investment in graduate medical education.

The definitive agreement was signed Jan. 30 and the final deal is expected to close Feb. 27.

As part of the merger, the two nonprofits have created the Academic Management Council to help manage the relationship and announced name changes for the academic medical centers and physician group after Feb. 27:

• University of Arizona Medical Center – University Campus, to become
  • Banner – University Medical Center Tucson
• University of Arizona Medical Center – South Campus, to become
  • Banner – University Medical Center South
• Banner Good Samaritan Medical Center, to become
  • Banner – University Medical Center Phoenix
• University of Arizona Physicians, to become
  • Banner – University Medical Group

In a prepared statement, Banner Health President and CEO Peter Fine said the agreement will help elevate Arizona’s national profile as a leader in academic medicine.

The merger closure will bring Kathy Bollinger into the position of President of the Banner – University Medicine Division. Bollinger is moving into this new post after six years as President of Banner’s Arizona West Division.

Michael Waldrum, MD, current President and CEO of University of Arizona Health Network, whose role will dissolve with the merger, has chosen not to pursue an executive leadership position within Banner and will leave his post with the closure of the merger.

“While we are excited by the strengths Kathy Bollinger will bring to her role leading a large, complex and new division, we are also grateful for the inspired, dedicated and courageous leadership Michael Waldrum displayed in helping to negotiate the agreement and transition UAHN into Banner,” said Banner President and CEO Peter S. Fine. “We know Dr. Waldrum will be sought after for his skills and we look forward to his continued success as a health care leader.”

List of new leadership appointments:

• Kathy Bollinger, President, Banner – University Medicine Division
• Tom Dickson, CEO, Banner –  University Medical Center Tucson and South campuses
• Jeff Buehrle, CFO, Banner – University Medicine Division
• Beth Stiner, Vice President, Human Resources, Banner –  University Medicine Division
• Robert Groves, MD, Chief Medical Officer, Banner – University Medicine Division
• Cathy Townsend, RN, CNO, Banner –  University Medical Center Tucson and South campuses
• Jason Krupp, MD, CEO, Banner – University Medical Group
• Rob Gould, President, Arizona West Division
• Karen Mlawsky, CEO, Banner Desert Medical Center
• Deb Krmpotic, CEO, Banner Thunderbird Medical Center
• Courtney Ophaug, CEO, Banner Estrella Medical Center

Division executive appointments will take effect with the closure of the merger. Between now and the closure, newly identified leaders will be introducing themselves to their new colleagues through the division as well as community leaders. However, these newly identified leaders will not become involved in operational decision-making until the merger closure.

Headquartered in Phoenix, Banner Health is one of the largest, nonprofit health care systems in the country. The system manages 25 acute-care hospitals, the Banner Health Network and Banner Medical Group, long-term care centers, outpatient surgery centers and an array of other services including family clinics, home care and hospice services, and a nursing registry. Banner Health is in seven states: Alaska, Arizona, California, Colorado, Nebraska, Nevada and Wyoming. For more information, visit www.bannerhealth.com.