Health system snaps up Klingensmith

PITTSBURGH, Pa. - With its acquisition of Klingensmith Healthcare, Allegheny Health Network (AHN) has a “key piece” in its mission to expand health care beyond hospital walls.

“We aim to provide services to all of our patients and this was one of the key missing pieces to be able to really wrap total-home based services around patients,” said Brian Holzer, senior vice president of diversified services for AHN. “We get the highest level of clinical quality and infrastructure that Klingensmith has built and merge it with our complex patient profile.”

Per the deal, AHN acquired a majority ownership of the Ford City, Pa.-based Klingensmith and Johns Hopkins Home Care Group has acquired a minority stake. Klingensmith is one of the largest independent providers in western Pennsylvania, offering HME, respiratory and rehab services to more than 9,000 patients annually throughout the region, which includes parts of West Virginia and Ohio.

Of particular attraction for AHN: Klingensmith has been ahead of the curve in developing programs to reduce hospital readmissions for respiratory diseases like COPD and CHF. Unfortunately, that level of service and infrastructure can be hard to sustain, said Holzer.

“They are really doing the compliance program the right way but you don't necessarily get paid for it,” he said. “To be unaffiliated with a healthcare system puts you in a difficult spot where you don't have the sustainable volume to support your investment.”

The deal is part of a larger plan on the part of AHN to build a continuum of home-based health services, said Holzer. In November, AHN announced a joint venture with Celtic Healthcare, a large provider of home health and hospices services in the region.

Down the road, AHN may use Klingensmith as a platform to add new services, or may form additional strategic partnerships with other companies, he said.

To the extent that hospitals can reduce readmissions and manage patients better, getting into home-based health care can be of great financial benefit, and it's a trend analysts say they are seeing.

“Some hospitals have been getting away from the ancillary services business,” said Jonathan Sadock, managing partner/CEO of Paragon Ventures. “Others are absolutely looking to bring health care in its totality under their wings. What you are seeing is not just a vertical integration of providers but also horizontal across sectors.”