CHICAGO — The nation's largest not-for-profit healthcare system — Ascension Health — will acquire the much smaller and lower-rated Wheaton Franciscan Healthcare's southeastern Wisconsin facilities.
The two announced on Thursday that they had signed a letter of intent for Ascension Wisconsin to acquire the Wheaton facilities in a deal expected to close in the first quarter of 2016 once all approvals are in place.
Ascension Wisconsin currently operates Ministry Health Care and Columbia St. Mary's in Milwaukee as well as other facilities. The Wheaton acquisition adds eight hospitals and other facilities to it ranks. Once completed, Ascension Wisconsin will operate 27 hospitals with $3.5 billion of revenue.
The St. Louis-based Ascension — a Catholic sponsored system — operates more than 100 acute-care hospitals and additional specialty hospitals in 23 states and the District of Columbia which generate $20 billion in annual operating revenues. Wheaton generated $1.8 billion of revenue last year.
"This decision came after a lengthy discernment process by the Sisters as we are aging and our numbers are getting smaller in the United States. We wanted to transfer our corporate ministries while these ministries are healthy, fiscally sound, and have a strong sense of mission and values," said Sister Pat Norton, chairwoman of the Wheaton sponsor board.
The transition in southeast Wisconsin is occurring in coordination with the Wheaton Franciscan Sisters' transfer of their other healthcare and housing ministries in Iowa, Illinois, and Colorado but no additional details on those plans were announced and won't be until the Wisconsin transaction closes.
The acquisition marks the latest in a steady stream of acquisitions pursued by Ascension that have bolstered its presence throughout the country, underscoring the trend of healthcare consolidation as the sector adapts to fiscal pressures and the demands of federal healthcare reform.
The systems did not provide details on how the acquisition would impact Wheaton's debt load. In joining forces with Ascension, Wheaton is headed to a much stronger system. Ascension carries double-A category ratings on more than $5 billion of debt while Wheaton is a triple-B level credit.
In affirming the Baa1 applied to $623 million of Wheaton debt, Moody's Investors Service last year said the system benefits from its "scale and broad geographic footprint, good liquidity of its unrestricted investments, and multiyear trend of healthy financial performance."
Rating agencies have said Ascension benefits from a light debt burden, diverse operations that limit exposure to any one market, strong liquidity and management that includes divesting of poor performing enterprises and a willingness to enter into joint venture partnerships.
