Jefferson, Temple sign definitive agreement for sale of Fox Chase Cancer Center

This article originally appeared on Philadelphia Business Journal.

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Thomas Jefferson University entered into a binding agreement Wednesday with Temple University under which Jefferson will acquire Fox Chase Cancer Center and Temple’s bone marrow transplant program.

The deal, which will require regulatory approvals, doesn’t end there.

Jefferson and Temple, which reached a preliminary deal back in July, said they also plan to collaborate in a variety of areas including cancer research and treatment, caring for the underserved, driving innovation, and increasing educational opportunities for students at both universities.

In a separate agreement, Jefferson and Temple have agreed to “transition” Temple’s membership interest in Health Partners Plan, a Philadelphia-based managed care company, to Jefferson. The organization said that transactions is subject to a number of conditions and a closing date for the deal has not yet been determined.

Financial terms of both transactions are not being disclosed at this time.

“Health care is on the cusp of a revolution and it will require creative partnerships to have Philadelphia be a center of that transformation,” said Dr. Stephen K. Klasko, president of Thomas Jefferson University and CEO of Jefferson Health. “For Jefferson, our relationship with Temple will accelerate our mission of improving lives and reimagining health care and education to create unparalleled value.”

The Fox Chase Cancer Center deal, once completed, would be one of a half dozen mergers or acquisitions Jefferson has negotiated since Klasko was hired to lead the university and health system six-and-a-half years ago.

With the definitive agreement in place for Fox Chase Cancer Center, Temple and Jefferson said they will proceed with an integration-planning process to complete the transaction. The sale expected to close in the spring of 2020.

“Today’s announcement launches a collaboration that will benefit patient treatment and medical education at both Temple and Jefferson for years to come,” said Temple President Richard M. Englert.

Fox Chase Cancer Center — a research institution and 100-bed specialty hospital with about 2,000 employees, which became part of the Temple University Health System in 2011 — is a National Cancer Institute-designated comprehensive cancer. That distinction has been given to 49 centers across the country that meet NCI standards for cancer prevention, clinical services and research.

Englert said the sale of Fox Chase will not only unite significant complementary expertise in cancer treatment and research to benefit patients, but it will also give Temple the opportunity to invest more resources in its health system’s core mission of serving the health care needs of people in North Philadelphia community.

Klasko told the Philadelphia Business Journal part of Jefferson’s motivation in pursuing the Fox Chase acquisition was a desire to keep the specialty hospital from falling under the control of an out-of-market owner.

“That’s what happened with Hahnemann, and we saw how that worked out,” Klasko said.

Hahnemann University Hospital was experiencing monthly losses of $3 million to $5 million a month when American Academic Health System, a for-profit hospital management company based in California made the decision in June to close the medical center. American Academic owned Hahnemann for less than two years having bought it from another for-profit hospital management company, Tenet Healthcare Corp., in January 2018.

Another undesirable option, he said, was having a large cancer center such as Memorial Sloan Kettering Cancer Center in New York or Dana-Farber Cancer Institute in Boston acquire Fox Chase and operate it as a satellite campus. “We know they were talking with four of five (potential buyers),” Klasko said.

The Jefferson deal, once finalized, will unite Fox Chase Cancer Center with Jefferson’s Kimmel Cancer Center is an NCI-designated cancer center, a distinction given to centers that meet NCI standards for cancer prevention, clinical services or research.

“This merger joins two historic Philadelphia institutions for the common purpose of leadership in world-class patient care and cutting-edge research in cancer,” said Dr. Richard I. Fisher, president and CEO of Fox Chase Cancer Center.”

Karen E. Knudsen, director of the Sidney Kimmel Cancer Center, said she expects the integration of the NCI-designated centers will have a significant impact on cancer care, both regionally and nationally. “Both centers are highly ranked and serve as home to national leaders in cancer detection, prevention, and management,” Knudsen said. “The combined center will accelerate the pace of discovery, and translate into improved outcomes for cancer patients in Philadelphia and beyond.”

The combined cancer centers will have one of the largest bone marrow transplant programs on the East Coast.

Klasko said its planned partnership with Temple along with its pending additions of Fox Chase Cancer Center and Einstein Healthcare Network aligns with Jefferson’s ongoing initiatives to address health disparities in Philadelphia. (Jefferson and Einstein signed a definitive merger agreement in September 2018 and the proposed deal is under review by state and federal regulators.)

Noting how health status and life expectancies differ greatly by zip code in Philadelphia because of factors ranging from access to healthy food, education and employment opportunities, Klasko said, “It’s time to stop talking about social determinants of health and time to start doing something about it.”

Since Klasko’s arrival at Jefferson in late 2013, the health system has grown from three to 14 hospitals through the additions of Abington Health in Montgomery County, Aria Health in Northeast Philadelphia and Bucks County, Magee Rehabilitation Hospital in Center City, and Kennedy Health System in South Jersey. It also merged Thomas Jefferson University with Philadelphia University. Those health system deals did not involve the exchange of money for assets, but instead were structured as mergers of equals where the goal was to bring advanced health services closes to patients in their communities.

The Jefferson system now has 32,000 employees and generates more than $5 billion in annual revenue and recorded a $51 operating income in fiscal 2019.

Temple University put Fox Chase Cancer Center up for sale during the summer of 2018. Temple said the sale was needed to strengthen its cash-strapped health system and preserve its ability to serve the health care needs of its core North Philadelphia community and beyond, while also maintaining the health system’s research and educational mission.

In fiscal 2019, according to Temple’s audited financial data, the cancer hospital generated $417.2 million in revenues and a net profit of $32.3 million.

Temple also considered selling Jeanes Hospital, a community hospital next to Fox Chase Cancer Center in the Burholme section of Philadelphia, but ultimately decided against it. The health system is revamping the services provided at Jeanes, shifting select bariatric surgeries and elective hip and knee surgeries from Temple University Hospital to the Jeanes campus and moving cased handled by Jeanes open-heart surgery program to Temple University Hospital.