West Reading, Pa.-based Tower Health has turned down a $706 million offer from StoneBridge Healthcare, a hospital turnaround firm, making this the fourth purchase offer rejected by the system since 2021.
StoneBridge received an email from Andrew Turnbull, a managing director at Houlihan Lokey, an investment bank that works with Tower Health, saying that there had been a board meeting and the firm’s offer had been rejected, Joshua Nemzoff, CEO of StoneBridge Healthcare, told Becker’s.
“I’m not sure what they’re thinking. We have requested multiple board meetings, but we’ve never had a chance to meet with the board. We’ve just gotten emails back saying they’re rejecting the offer,” Mr. Nemzoff said.
WoodBridge, a nonprofit sister organization to StoneBridge, initially shared a nonbinding agreement in principle with Tower Health, which included the intent to purchase the system’s assets.
“We’ve given them a number of other offers. I think the last one was more than a year ago. They’ve lost $400 million in operations in the last two years, and they’re $1.8 billion in revenue and $1.5 billion in debt, and 30 days of cash,” Mr. Nemzoff told Becker’s.
Tower Health initially turned down a $675 million offer from StoneBridge in November 2022. In partnership with Allentown, Pa.-based Lehigh Valley Health Network, the firm also made two conditional offers to acquire the system’s assets for $600 million in 2021, which were also rejected.
“Given their cash position and given their extraordinary amount of debt, I think our plan is just to frankly to wait for them to go bankrupt and show up in court for the auction. I think that’s going to happen next year,” Mr. Nemzoff said.
StoneBridge was formed in 2020. The firm currently does not own or operate any hospitals. Like StoneBridge, WoodBridge has also not completed any hospital deals, Mr. Nemzoff told Becker’s.
The new year is always an ideal time for healthcare leaders to reflect on the state of our industry and their own organizations, as well as the challenges and opportunities ahead.
As the CEO of a large health system, I always like to reflect on one basic question at the end of each year: Are we staying true to our mission?
Certainly, maintaining an organization’s financial health must always be a priority but we should also never lose sight of our core purpose. In a business like ours that has confronted and endured a global pandemic and immense financial struggles over the past several years, I recognize it’s increasingly difficult to maintain our focus on mission while trying to find ways to pay for rising labor and supply costs, infrastructure improvements needed to remain competitive and other pressures on our day-to-day operations.
After all, the investments we need to make to promote community wellness, mental health, environmental sustainability and health equity receive little or no reimbursement, negatively impacting our financial bottom lines. During an era of unprecedented expansion of Medicaid and Medicare, we get less and less relief from commercial insurers, whose denial and delay tactics for reimbursing medical claims continue to erode the stability of many health systems and hospitals, especially those caring for low-income communities.
Despite those enormous pressures, it’s imperative that we continue to support underserved communities, military veterans struggling with post-traumatic stress, and intervention programs that help deter gun violence and addiction.
The list of other worthy investments goes on and on: charity care to uninsured or underinsured patients who can’t pay their medical bills, funding for emergency services that play such a critical role during public health emergencies, nutritional services for families struggling to put food on the table, programs that combat human trafficking and support women’s health, the LGBTQIA+ community and global health initiatives that aid Ukraine, the Middle East and other countries torn apart by war, famine and natural disasters.
We must also recognize the key role of healthcare providers as educators. School-based mental health programs are saving lives by identifying children exhibiting suicidal behaviors, anger management issues and other troublesome behaviors. School outreach efforts have the added benefit of helping health systems and hospitals address their own labor shortages by introducing young people to career paths that will help shape the future healthcare workforce.
Without a doubt, the “to-do” list of community health initiatives that support our mission is daunting. We can’t do it all alone, but as the largest employers in cities and towns across America, health systems and hospitals can serve as a catalyst to get all sectors of our society — government, businesses, schools, law enforcement, churches, social service groups and other community-based organizations — to recognize that “health” goes far beyond the delivery of medical care.
The health of individuals, families and communities hinges on the prevalence of good-paying jobs, decent and affordable housing, quality education, access to healthy foods, medical care, transportation, clean air and water, low prevalence of crime and illicit drugs, and numerous other variables that typically depend on the zip codes where we live. Those so-called social determinants of health are the driving factors that enable communities and the people who live there to either prosper or struggle, resulting in disparities that are the underlying cause of why so many cities and towns across the country fall into economic decay and become havens for crime and hotbeds for gun violence, which shamefully is now the leading cause of death for children and adolescents.
To revive these underserved communities, many of which are in our own backyards, we have to look at all of the socioeconomic issues they struggle with through the prism of health and use the collective resources of all stakeholders to bring about positive change.
Health is how we work together to build a sense of community. Having a healthy community also requires everyone doing what they can to tone down the political rhetoric and social media-fueled anger that is polarizing our society. Health is bringing back a sense of civility and respect in our public discourse, and promoting the values of honesty, decency and integrity.
As healthcare providers and respected business leaders, we should all make a New Year’s resolution to stay true to our mission and do what we can within our communities to bring oxygen to hope, optimism and a healthier future.
As 2023 comes to an end and prognostics for 2024 pepper Inboxes, high anxiety is understandable. The near-term environment for hospitals, especially public hospitals and not-for-profit health systems, is tepid at best: despite the November uptick in operating margins to 2% (Fitch, Syntellis), the future for hospitals is uncertain and it’s due to more than payer reimbursement, labor costs and regulatory changes.
Putting lipstick on the pig serves no useful purpose:
though state hospital associations, AHA, FAH, AEH and others have been effective in fending off unwelcome threats ranging from 340B cuts, site neutral payments and others at least temporarily, the welcoming environment for hospitals in the throes of the pandemic has been replaced by animosity and distrust.
The majority of the population believes U.S. the health system is heading in the wrong direction and think hospitals are complicit (See Polling data from Gallup and Keckley Poll below). They believe the system puts its profit above patient care and welcome greater transparency about prices and business practices. In states like Colorado (hospital expenditure report), Minnesota (billing and collection), and Oregon (nurse staffing levels), new regulations feed the public’s appetite for hospital accountability alongside bipartisan Congressional efforts to limit tax exemptions and funding for hospitals.
It’s a tsunami hospital boards must address if they are to carry out their fiduciary responsibilities:
Set Direction: The organization’s long-term strategy in the context of its vision, mission and values.
Secure Capital: The amount and sourcing of capital necessary to execute the strategy.
Hire a Competent CEO and Give Direction: Boards set direction; CEOs execute.
Regretfully, near-term pressures on hospitals have compromised long-term strategic planning in which the Board play’s the central role. But most hospital boards lack adequate preparedness to independently assess the long-term future for their organization i.e. analysis of trends and assumptions that cumulatively reshape markets, define opportunities and frame possible destinations for hospitals drawn from 5 zones of surveillance:
Clinical innovations.
Technology capabilities.
Capital Market Access and Deployment.
Regulatory Policy Changes.
Consumer Values, Preferences and Actions.
In reality, the near-term issues i.e. labor and supply chain costs, insurer reimbursement, workforce burnout et al—dominate board meetings; long-range strategic planning is relegated to an annual retreat where the management team and often a consultant present a recommendation for approval. But in many organizations, the long-term strategic plans (LTSPs) fall short:
Most LTSPs offer an incomplete assessment of clinical innovations and technologies that fundamentally alter how health services will be provided, where and by whom.
Most LTSPs are based on an acute-centric view of “the future” and lack input about other sectors and industries where the healthcare market is relevant and alternative approaches are executed.
Most LTSPs are aspirational and short on pragmatism. Risks are underestimated and strengths over-estimated.
Most LTSPs are designed to affirm the preferences of the hospital CEO without the benefit of independent, studied review and discussion with the board.
Most LTSPs don’t consider all relevant ‘future state’ options despite the Board’s fiduciary obligation to assure they do.
Most rely on data that’s inadequate/incomplete/misleading, especially in assessing how and chare capital markets are accessing and deploying capital in healthcare services.
Most LTSPs are not used as milestones for monitoring performance nor are underlying assumptions upon which LRSPs are based revisited.
My take:
The Board’s role in Long-Range Strategic Planning is, in many ways, it’s most important. It is the basis for deciding the capital requirements necessary to its implementation and the basis for hiring, keeping and compensating the CEO. But in most hospitals, the board’s desire to engage more directly around long-term strategy for the organization is not addressed. Understandable…
Boards are getting more media attention these days, and it’s usually in an unflattering context. Disclosures of Board malperformance in high profile healthcare organizations like Theranos, Purdue and others has been notable. Protocols for responding among Board members in investor-owned organizations is a priority, but less-so in many not-for-profit settings including hospitals often caught by surprise by media.
And Board members are asking for their organizations to engage them in more in strategy development. In the latest National Association of Corporate Directors’ survey, 81% of directors cited “oversight of strategic execution” and 80% “oversight of strategy development” as their top concerns from a list of 13 options. Hospital boards are no exception: they want to be engaged and cringe when treated as rubber stamps.
Hospital boards intuitively understand that surviving/thriving in 2024 is important but no guarantee of long-term stability given sobering realities with long-term impact:
The core business of hospitals–inpatient, outpatient and emergency services—is subject to market constraints on its prices, consumer and employer expectations and non-traditional competition. Bricks, sticks and clicks strategies will be deployed in a regulatory environment that’s agnostic to an organization’s tax status and competition is based on value that’s measured and publicly comparable.
The usefulness of artificial intelligence will widen in healthcare services displacing traditional operating models, staffing and resource allocation priorities.
Big tech (Apple (AAPL), Microsoft (MSFT), Alphabet (GOOG), Amazon (AMZN), Meta (META), Tesla (TSLA) and Nvidia (NVDA)—collectively almost 60% of all S&P 500 gains in 2023—will play a direct and significant role in how the healthcare services industry responds to macro-opportunities and near-term pressures. They’re not outside looking in; they’re inside looking out.
Private capital will play a bigger role in the future of the system and in capitalizing hospital services. Expanded scale and wider scope will be enabled through partnerships with private capital and strategic partners requiring governance and leadership adaptation. And, the near-term hurdles facing PE—despite success in fund-raising—will redirect their bets in health services and expectations for profits.
State and federal regulatory policies and compliance risks will be more important to execution. Growth through consolidation will face bigger hurdles, transparency requirements in all aspects of operations will increase and business-as-usual discontinued.
The scale, scope and effectiveness of an organization’s primary and preventive health services will be foundational to competing: managing ‘covered lives’, reducing demand, integrating social determinants and behavioral health, enabling consumer self-care, leveraging AI and enabling affordability will be key platform ingredients that enable growth and sustainability.
Media attention to hospital business practices including the role Boards play in LRSPs will intensify.
Granted: the issues facing hospitals are reliably short-term: as Congress returns next week, for instance, funding for the FDA, Community Health Center Fund, Teaching Health Center Graduate Medical Education Program, National Health Services Corps and Veterans Health is not authorized and $16 billion in cuts to Medicaid disproportionate share payments remains unsettled, so the short-term matters.
But arguably, engaging the hospital board in longer term planning is equally important. It’s not a luxury.
As seasonal virus activity surges across the United States, experts stress the importance of preventive measures – such as masking and vaccination – and the value of treatment for those who do get sick.
Tens of thousands of people have been admitted to hospitals for respiratory illness each week this season. During the week ending December 23, there were more than 29,000 patients admitted with Covid-19, about 15,000 admitted with the flu and thousands more with respiratory syncytial virus, or RSV, according to data from the US Centers for Disease Control and Prevention.
Nationally, Covid-19 levels in wastewater, a leading measure of viral transmission, are very high – higher than they were at this time last year in every region, CDC data shows. Weekly emergency department visits rose 12%, and hospitalizations jumped about 17% in the most recent week.
And while Covid-19 remains the leading driver of respiratory virus hospitalizations, flu activity is rising rapidly. The CDC estimates that there have been more than 7 million illnesses, 73,000 hospitalizations and 4,500 deaths related to the flu this season, and multiple indicators are high and rising.
RSV activity is showing signs of slowing in some parts of the US, but many measures, including hospitalization rates, remain elevated. Overall, young children and older adults are most affected.
“It’s a wave of winter respiratory pathogens, especially respiratory viruses. So it’s Covid, it’s flu, and we can’t diminish the importance of RSV,” said Dr. Peter Hotez, dean of the National School of Tropical Medicine at the Baylor College of Medicine. “So it’s a triple threat, and arguably a fourth threat because we also have pneumococcal pneumonia, which complicates a lot of these virus infections.”
Respiratory virus activity has been on the rise for weeks. Now, flu-like activity is high or very high in two-thirds of the United States, including California, New York City and Washington, as well as throughout the South and Northeast, according to the CDC.
“Remember, all of these numbers are before people got together for the holidays,” Hotez said. “So don’t be disappointed or surprised that we even see a bigger bump as we head into January.”
Vaccines can help prevent severe illness and death, but uptake remains low this season – despite a historic first, with vaccines available to protect against each of the three major viruses. Just 19% of adults and 8% of children have gotten the latest Covid-19 vaccine, and 17% of adults 60 and older have gotten the new RSV vaccine, CDC data shows. Less than half of adults and children have gotten the flu vaccine this season.
“We have, as a population, underutilized both influenza and the updated Covid vaccines, unfortunately,” said Dr. William Schaffner, an infectious disease expert at Vanderbilt University. “But it’s not too late to get vaccinated, because these viruses are going to be around for a while yet.”
According to the CDC, hospital bed capacity remains “stable” nationally, including within intensive care units. But with high levels of respiratory viruses, hospitals in at least five states are returning to requiring masks.
Mass General Brigham spokesman Timothy Sullivan said it will require masking for health-care staff who interact directly with patients starting Tuesday, and patients and visitors will be “strongly encouraged to wear a facility-issued mask.”
In Wisconsin, UW Health and UnityPoint Health – Meriter have expanded mask policies to cover more people. UW requires all staff, patients and visitors to wear a mask for patient interactions in clinic settings, including waiting areas and exam rooms.
UnityPoint Health – Meriter says masks continue to be required for team members and visitors in patient rooms.
Bellevue, a public hospital in New York City, said on social media last week that it had reinstated its mandatory masking policy due to an uptick in respiratory illnesses.
In Pennsylvania, the University of Pittsburgh Medical Center has required everyone to wear a mask when entering or inside since December 20. The systemwide masking policies were adjusted to “address the increase of respiratory virus cases” but may change when there is a “marked decrease in respiratory health cases,” according to the health care system.
An order posted last week by the Los Angeles County Health Officer requires all health-care personnel and visitors to mask while in contact with patients or in patient-care areas, based on the CDC’s categorization of Covid-19 hospital admission levels.
During the week ending December 23, more than 230 US counties were considered to have “high” levels of Covid-19 hospital admissions, defined by the CDC by at least 20 new hospital admissions for every 100,000 people. Nearly a thousand other counties, about a third of the country, have “medium” Covid-19 hospital admission levels, with at least 10 admissions for every 100,000 people.
Vaccines and masks can help reduce the risk of severe illness before getting sick, but treatments are also available to help prevent people from getting very sick if they do become infected.
Antiviral treatments for Covid-19, such as Paxlovid, and flu, such as Tamiflu, can be especially helpful for people who are more likely to get very sick, including people who are 50 or older and those with certain underlying conditions, such as a weakened immune system, heart disease, obesity, diabetes or chronic lung disease.
“If more people at higher risk for severe illness get treatment in a timely manner, we will save lives,” the CDC said in a recent blog post. But “not enough people are taking them.”
Seasonal respiratory virus activity can be hard to predict, but CDC forecasts suggest that hospitalization rates will continue at elevated levels for weeks and that this season, overall, will probably result in a similar number of hospitalizations as last season.
“One of the ways to help us all go into a happy new year is for us to be as protected as we can against these viruses,” Schaffner said.
“Of course, I continue to recommend vaccination, prudent use of the mask by high-risk people and, should you become sick, do not go to work and spread the virus further. Call your health care provider, because you may have some treatment available that will get you healthier sooner.”
HENRY KOTULA 