Dignity Health selling controlling interest in U.S. Healthworks

Jordan Burnham tells his story to Saugus High School students during a presentation sponsored by Matt's Foundation and Saugus High's Not-One-More-Teen-Suicide Active Minds Club on Friday, March 24, 2017. Katharine Lotze/The Signal

Dignity Health and  Select Medical Holdings Corp. signed an agreement to combine their occupational medicine and urgent-care subsidiaries, Dignity’s Valencia-based U.S. Healthworks, and Select’s Concentra Group Holdings.

Concentra will acquire all of the issued and outstanding shares of stock of U.S. HealthWorks from Dignity, paying in stock and cash.

Following the closing of the transaction, Dignity Health will own a 20 percent equity interest in the combined entity.

Select Medical will retain a majority voting interest in the combined entity following the closing of the transaction. The transaction, which is targeted to close in the first quarter of 2018, subject to a regulatory review and other closing conditions.

Dignity declined to comment on the deal’s potential impact on U.S. Healthworks’s headquarters in Valencia. “Dignity Health and Select Medical look forward to a partnership that, through the new entity holding Concentra and U.S. HealthWorks, will provide exceptional patient care to America’s workforce,” the company said. “The transaction is targeted to close in the first quarter of 2018, pending regulatory approval. We have no further details to share at this time.”

The transaction values U.S. HealthWorks at $753 million, and Dignity’s 20 percent equity interest in the combined entity at $238 million.

“We are excited about our partnership with Dignity Health, which enables us to join forces and deliver best-in-class occupational medicine and urgent care to communities and corporate work sites nationwide,” said Robert A. Ortenzio, executive chairman and co-founder of Select Medical in a statement. “Together, we will provide high-value, outcome-based care for thousands of patients every day.”

U.S. HealthWorks, a subsidiary of Dignity Health since 2012, operates occupational healthcare centers with about 250 medical and onsite clinics in 21 states.

Concentra, created through a joint venture between Select Medical Corp. and equity investors, operates 315 occupational health centers in 38 states. Concentra also provides contract services at employer worksites and Department of Veterans Affairs community-based outpatient clinics.

Earlier this year, Select Medical and Dignity Health formed a joint venture to construct and operate a 60-bed acute inpatient rehabilitation hospital in the greater Las Vegas, Nevada, metro area, expected to open in 2019. That agreement also includes joint operation of 12 outpatient rehabilitation clinics in the Las Vegas area. This partnership will expand upon the relationship.

“Caring for America’s workforce creates a healthier population which means more productivity for business, a stronger economy, and connected communities,” said Daniel Morissette, Dignity Health’s senior executive vice president and chief financial officer. “Combining the two organizations will strengthen the delivery of clinical care, standardize best practices and improve service for employers and employees.”

Select Medical began operations in 1997 and has grown to be one of the largest operators of specialty hospitals, outpatient rehabilitation clinics, and occupational health centers in the United States based on the number of facilities. The company, based in Mechanicsburg, Pa.,  operates 102 long term acute care hospitals and 21 acute medical rehabilitation hospitals in 28 states and 1,608 outpatient rehabilitation clinics in 37 states and the District of Columbia.

Dignity Health, based in San Francisco, is the fifth largest hospital system in the nation and the largest not-for-profit hospital provider in California. Dignity Health was founded in 1986 by the Sisters of Mercy under the name Catholic Healthcare West. It adopted its current name in 2012 when it revised its governance structure to become legally independent of the Roman Catholic Church.

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