Liberty Hospital joins The University of Kansas Health System
Transaction Announcement
New Liberty Hospital District (Liberty) in Liberty, Missouri, has completed its partnership with The University of Kansas Health System (UKHS). Juniper was pleased to advise Liberty on the transaction. As part of consideration, UKHS committed to invest $324 million in capital projects to grow clinical services, fund facility improvements, infrastructure, and information technology systems (EPIC). This includes commitments to Liberty’s employees, patients, services, pursuit of Magnet designation, and provision for local governance.
“Joining The University of Kansas Health System enables us to ensure high-quality healthcare in the Northland keeps pace with the expanding needs of our growing community. This partnership is designed to make sure we meet the demand for years to come.” Dennis Carter, Chair, Liberty Hospital Board of Trustees.
Below is a news conference interview with the leaders of both Liberty Hospital and UKHS speaking about their vision and enthusiasm for the partnership:
Representative of Industry Trends
This transaction is representative of two important trends in the health system M&A market: (1) local-government hospitals seeking a larger partner, and (2) academic medical centers, often state-sponsored, seeking growth
In 1995, there were ~1,350 political subdivision hospitals in the US. That number is down to ~900 today. That doesn’t mean that ~450 went out of business; rather, the majority entered into some form of partnership with a larger organization, often via a long-term lease. Concurrently, the average size of an independent hospital seeking a partner over the last two decades has grown from ~$100 million in revenue to ~$800 million in revenue, indicating that scale is becoming increasingly important for not just smaller organizations, but larger ones as well.
A similar transformation has occurred within the academic medical center (AMC) acquiror universe, where AMCs are winning more competitive processes. Historically content being ivory tower teaching institutions performing quaternary care from one urban hub, academic medical centers today have newfound medical and economic imperatives to grow into community settings. State AMCs in particular view themselves as the de facto safety net institution state-wide. AMCs are often viewed favorably by public hospital sellers due to their medical prestige, operational durability, ability to expand access to high-quality care, and favorable regulatory stature. Community hospitals can provide care close to home and ease capacity constraints in tertiary referral centers.
Today’s M&A market advantages regional tax exempt acquirors given their: (a) lower cost of capital, (b) ability to participate in programs like 340B, (c) freedom from sales and property taxes, and (d) perception of higher quality. Investor-owned companies won ~37% of change-of-control transactions ten years ago and only ~8% today. The dearth of new company formation (public or private) has played a role in the decline as well.
About Liberty Hospital
Now in its 50th year of serving the health and well-being of the community, Liberty Hospital has more than 2,000 employees and 330 physicians who deliver compassionate, high-quality care using state-of-the-art technology. Liberty Hospital’s expansion in recent years includes 15 primary and specialty care clinics. The hospital holds the unique distinction of being the only hospital in the Northland to receive Level 3 Geriatric Emergency Department Accreditation and is only one of four hospitals in the state to attain this accreditation in addition to Level II Time Critical Diagnosis in trauma, stroke and heart attack. Liberty Hospital is a public hospital and is a political subdivision district hospital under Chapter 206 of the Revised Statutes of Missouri.
About The University of Kansas Health System
The University of Kansas Health System is the region’s premier academic health system, providing a full range of care. It includes The University of Kansas Physicians, the region’s largest multispecialty physician group. The health system is affiliated with The University of Kansas Schools of Medicine, Nursing and Health Professions and their leading-edge research projects. In the Kansas City metro area, the health system offers more than 140 hospital and clinic locations, including its flagship hospital in Kansas City, Kansas, a hospital at Indian Creek Campus in Overland Park, hospitals in Olathe and Miami County, and two mental and behavioral health hospitals in the Kansas City area. The health system in Kansas City has received Magnet nursing designation four times in a row for the highest level of care and has ranked every year since 2007 on U.S. News & World Report’s Best Hospitals lists (best in Kansas and Kansas City). It provides the region’s most experienced, nationally verified burn center and Level I Trauma Center, as well as a leading transplant program in liver, pancreas, kidney, heart, and blood and marrow. The cancer program is part of The University of Kansas Cancer Center, one of 57 National Cancer Institute-designated comprehensive cancer centers. In addition to Kansas City metro locations, the health system has locations in Great Bend, Topeka and elsewhere. It receives no state or local appropriations, instead relying on operating revenue, bonding authority and philanthropy.
To learn more, please refer to the Liberty Hospital website. For more information about Juniper, contact Rex Burgdorfer at 312.506.3006 or [email protected].
About Juniper
Juniper is a specialized investment banking firm focused exclusively on non-profit hospital system mergers and acquisitions. The team is generally considered the largest and most experienced in the country advising health systems on business combination transactions for four decades.
Liberty’s management team and board of trustees engaged Juniper to proactively assess strategic alternatives and to implement a controlled competitive process to evaluate a range of structural options. Juniper designed and managed a rigorous market-clearing process involving over 30 companies, drafted information materials, and identified partners that shared a desire for growth both horizontally and vertically in the market, and negotiated the transaction terms, conditions, and value.