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Novant completes entrance into Virginia market
It gets federal approval to merge with the Prince William Health System
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Published: July 2, 2009
Novant Health Inc. has completed its entrance into the Virginia health-care market by bringing Prince William Health System under its umbrella.
Prince William is based in Manassas, Va., near metro Washington. The not-for-profit systems announced their intention to merge on March 27.
Novant said yesterday that it has gained approval from the Federal Trade Commission and the Virginia Attorney General's office for the merger. Novant was chosen out of 20 potential candidates.
Jim Tobalski, a senior vice president for Novant, said that no money has been exchanged in the merger.
"It is not a sale of any organization," he said.
However, Novant has committed more than $200 million to help Prince William meet demand for its health-care services. According to reports in the Manassas News & Messenger newspaper, securing the $200 million capital investment was a key requirement in Prince William's negotiations.
Novant's financial pledge would help pay for: increasing the number of private rooms on the Manassas campus; updating the critical-care unit, developing a cardiac catheterization lab; and paying to build a 60-bed hospital in Haymarket, Va. Prince William officials also plan to expand its medical staff by more than 50 additional physician specialists.
Tobalski said that Novant will benefit from the partnership by being able to make purchases at a more competitive rate as it becomes a larger health-care provider.
Novant's financial commitment comes at a time when Novant is reviewing the completion date of four community-hospital projects, including one in Kernersville, in response to a major hit to its investment portfolio in 2008.
Novant plans to spend $1.5 billion over the next five years on four major capital projects: Kernersville Medical Center; Brunswick Novant Medical Center, a replacement of Brunswick Community Hospital; and Presbyterian Hospital in Mint Hill. It also is renovating Presbyterian Hospital near downtown Charlotte, adding four stories to the top of the existing cancer center.
The capital investment does not include two proposed projects awaiting final state approval -- a $96 million hospital in Clemmons and a $26.6 million tower at Presbyterian Hospital in Huntersville.
Novant is on schedule for completing the building of the shell for Kernersville Medical Center by the end of this year, said Freda Springs, a company spokeswoman. But completion of the hospital could be pushed beyond 2010, she said.
Novant reported in February that it had a $174 million loss last year, caused by a $208 million blow to its investment portfolio from the stock-market downturn.
Officials stress that Novant remains financially healthy, but they said that it has implemented several measures to limit expenses in 2009. Those include no raises this year for senior executives -- from top management to department directors. All job openings, typically 300 to 400 a month, are being reviewed by senior management as to whether -- or when -- to fill them.
"Every hospital and health system in this country is making changes because of the economy," Springs said.
Novant is not alone in reporting a heavy investment loss, said Anthony Houston, the director of the public-finances group for Fitch Ratings.
"Most hospitals with a major exposure to the stock market last year took a major hit," Houston said.
■ Richard Craver can be reached at 727-7376 or at rcraver@wsjournal.com.
Prince William Health System
• Founded: 1964.
• Employees: 1,425.
• Physicians: 400.
• 2008 Revenues: $430 million.
• Patients: Inpatient, 10,338 discharges in 2008; patients in the emergency room, 59,000; outpatient, 143,000.
Source: Novant Health Inc.
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