Category Archives: Investor Owned

Tenet, HCA, Optum compete for market share in emerging battleground

Posted on by • Posted in Ambulatory Surgery Centers (ASC), Competition, For-Profit, Investment Strategy, Investments, Investor Owned, Outpatient Care, Outpatient Medical Management, Outpatient Migration, Outpatient Surgery, Private Equity, Strategic Attention, Strategic Resource Allocation, Strategic Target Monitoring, Strategy, Strategy National • Leave a comment
https://www.beckershospitalreview.com/finance/tenet-hca-optum-compete-for-market-share-of-emerging-battleground.html?utm_medium=email&utm_content=newsletter

Health systems are ramping up investments in ambulatory surgery centers and forming joint ventures with outpatient partners to accelerate the development of new centers. The trend is picking up steam as complex procedures increasingly move to ASCs, which are steadily growing as the preferred site of service for physicians, patients and payers. 

Tenet Healthcare, one of the largest for-profit health systems in the country, has been paying close attention to outpatient migration for years and has cemented itself as the leader in the ASC space. It now operates more than 445 ASCs — the most of any health system — and 24 surgical hospitals, according to its first-quarter earnings report. 

United Surgical Partners International, Tenet’s ASC company, strengthened its footing in the ASC market after its $1.2 billion acquisition of Towson, Md.-based SurgCenter Development and its more than 90 ASCs in December 2021. Over the next several years, USPI will inject more than $250 million into ASC mergers and acquisitions and work with SurgCenter to develop at least 50 more ASCs, according to terms of the transaction. 

The SurgCenter acquisition was completed shortly after Tenet sold five Florida hospitals to Dallas-based Steward Health Care for $1.1 billion. In 2022, Tenet also acquired Dallas-based Baylor Scott & White Health’s 5 percent equity position in USPI to own 100 percent of the company’s voting shares and paid $78 million to acquire ownership of eight Compass Surgical Partners ASCs.

These ASC investments and hospital sales make it clear that CEO Saum Sutaria, MD, sees surgery centers to become Tenet’s main growth driver in the coming years. Dr. Sutaria has described USPI as the company’s “gem for the future,” and aims to have 575 to 600 ASCs by the end of 2025.

While Tenet continues to increase its ASC market share, its closest competitor is Deerfield, Ill.-based SCA Health, which UnitedHealth Group’s Optum acquired for $2.3 billion several years ago. 

SCA has more than 320 ASCs, but has expanded its focus on value-based care under Optum and is doubling down on supporting physicians across the specialty care continuum rather than operating as an ASC company “singularly focused on partnering with surgeons in their ASCs,” SCA CEO Caitlin Zulla told Becker’s.

While Tenet may operate the most ASCs among health systems, it lags behind Optum in terms of the number of physicians it employs. Optum is now affiliated with more than 70,000 physicians, making it the largest employer of physicians in the country, and is continuing to add to that through mergers and acquisitions.

Nashville, Tenn.-based HCA Healthcare, another for-profit system, employs or is affiliated with more than 47,000 physicians, but is also ramping up its surgery center portfolio. HCA comprises 2,300 ambulatory care facilities, including more than 150 ASCs, freestanding emergency rooms, urgent care centers and physician clinics, according to its first-quarter earnings report. 

Like Tenet and Optum, HCA is heavily focused on expanding its outpatient portfolio. The company ended 2021 with 125 ASCs, four more than it had at the end of 2020, and added more than 25 ASCs last year. It is focused on both developing and acquiring surgery centers in the coming years. 

The other big ASC operators include Nashville, Tenn.-based AmSurg, with more than 250 surgery centers, and Brentwood, Tenn.-based Surgery Partners, with more than 120 centers. Surgery Partners spent about $250 million on ASCs acquisitions last year and recently signed collaboration agreements with two large health systems —- Salt Lake City-based Intermountain Health and Columbus-based OhioHealth. 

Oakland, Calif.-based Kaiser Permanente has 62 freestanding ASCs and outpatient surgery departments on its hospital campuses, a spokesperson for the health system told Becker’s. 

Fitch: Outlook is negative for CHS

Posted on by • Posted in Credit Downgrade, Credit Quality, Credit Ratings, For-Profit, Health System, Investment Banking, Investor Owned, Net Income, Nonoperating Income, Operating Expenses, Operating Income, Operating Margin, Operating Metrics, Operating Model, Operating Performance, Operating Revenue • Leave a comment
https://www.beckershospitalreview.com/finance/fitch-outlook-is-negative-for-chs.html?utm_medium=email&utm_content=newsletter

Fitch Ratings has affirmed the “B-” long-term issuer default ratings of Franklin, Tenn.-based Community Health Systems, and revised the company’s rating outlook to negative from stable. 

The credit rating agency said the negative outlook reflects operating performance deterioration in the first half of this year, with significant increases in labor costs. Higher costs, weakness in volumes and acuity mix drove a downturn in the for-profit company’s revenue, resulting in a reduction in its financial guidance for this year, Fitch said. 

CHS ended the first six months of this year with a net loss of $327 million on revenues of $6.04 billion. In the first half of 2021, the company posted a net loss of $58 million on revenues of $6.02 billion.

Fitch noted that CHS still benefits from its strengthened liquidity and balance sheet after several debt refinancing and exchange transactions. CHS also benefits from investments in outpatient care and higher-acuity inpatient services, the credit rating agency said. 

Investor sues UHS execs, alleging ‘unfair’ stock gains amid pandemic

Posted on by • Posted in Board, Conflicts of Interest, Excessive Compensation, Executive Compensation, For-Profit, Investor Owned, Lawsuit, Shareholder Primacy, Stock Options • Leave a comment
https://www.beckershospitalreview.com/legal-regulatory-issues/investor-sues-uhs-execs-alleging-unfair-stock-gains-amid-pandemic.html?origin=CEOE&utm_source=CEOE&utm_medium=email&utm_content=newsletter&oly_enc_id=2893H2397267F7G
The US should tax excessive CEO compensation

A Universal Health Services investor is suing several executives of the King of Prussia, Pa.-based system, alleging they unjustly enriched themselves through stock options amid the pandemic, according to Law360. 

The lawsuit, filed in the Delaware Chancery Court and made public July 9, accuses UHS executives and directors of taking advantage of a pandemic-related temporary hit in the company’s stock price and argues taking the stock options was “grossly unfair to the company and its stockholders.”

“The controllers and other company insiders took advantage of the temporary drop in the company’s stock price to grant and receive options to buy the company’s stock at rock bottom prices, thereby showering themselves in excessive compensation,” the lawsuit claims.

In particular, the lawsuit claims that in just 12 days after the stock options were granted, defendants made over $30 million in gains. 

Several top execs were named as defendants, including Alan Miller, UHS founder and chair and Marc Miller, CEO and president of UHS. Three other UHS execs were named, as well as Warren Nimetz, an administrative partner of law firm Norton Rose Fulbright’s New York office.

“UHS’s directors and officers deny any liability associated with the company’s routine and publicly disclosed options grant in March 2020,” attorney Matthew Madden of Robbins Russell Englert Orseck & Untereiner, representing UHS, its executives and Mr. Nimetz, told Law360. “The options grant was in line with the company’s compensation practices in prior years and took place at a board meeting scheduled months in advance.”

Mr. Madden added that UHS’ executives and officials “acted properly” and that the plaintiff’s claims are “baseless.” 

“UHS is proud of its service to patients, and stewardship of investor capital, during these unprecedented times in the healthcare industry,” Mr. Madden told Law360.

The lawsuit was filed by Robin Knight. 

Hastening the demise of independent physician practice

Posted on by • Posted in Disruption, Investment Banking, Investor Owned, Market Consolidation, Physician, Physician Acquisition, Physician Compensation, Physician Employment, Physician Independence, Private Equity, Value Creation, Value Proposition, Value-Based Healthcare • Leave a comment

https://mailchi.mp/bfba3731d0e6/the-weekly-gist-july-2-2021?e=d1e747d2d8

Physician Practice Sales to Private Equity Doubled in 3 Years

A new report from consulting firm Avalere Health and the nonprofit Physicians Advocacy Institute finds that the pandemic accelerated the rise in physician employment, with nearly 70 percent of doctors now employed by a hospital, insurer or investor-owned entity.

Researchers evaluated shifts to employment in the two-year period between January 2019 and January 2021, finding that 48,400 additional doctors left independent practice to join a health system or other company, with the majority of the change occurring during the pandemic. While 38 percent chose employment by a hospital or health system, the majority of newly employed doctors are now employed by a “corporate entity”, including insurers, disruptors and investor-owned companies.

(Researchers said they were unable to accurately break down corporate employers by entity, and that the study likely undercounts the number of physician practices owned by private equity firms, given the lack of transparency in that segment.) Growth rates in the corporate sector dwarfed health system employment, increasing a whopping 38 percent over the past two years, in comparison to a 5 percent increase for hospitals.

We expect this pace will continue throughout this year and beyond, as practices seek ongoing stability and look to manage the exit of retiring partners, enticed by the outsized offers put on the table by investors and payers.