RWJBarnabas Health, Saint Peter’s integration deal wins NJ approval, awaits FTC signoff

https://www.fiercehealthcare.com/providers/rwjbarnabas-health-saint-peters-integration-deal-wins-nj-approval-awaits-ftc-sign

RWJBarnabas Health (RWJBH) and Saint Peter’s Healthcare System’s proposed integration has received the blessing of New Jersey regulators, a key step forward as the systems look to form what they describe as the state’s “first premier academic medical center,” according to a Monday announcement.

The organizations are now awaiting a final approval from the Federal Trade Commission (FTC) before moving ahead with the deal.

“State approval now puts us on the cusp of being able to create New Jersey’s first multi-campus premier academic medical center that will draw top talent, increased research funding and more opportunities for groundbreaking clinical trials, while also enhancing specialized services and improving overall patient care,” Saint Peter’s President and CEO Leslie Hirsch said in a statement.

“New Jersey deserves to have a premier academic medical center of national distinction like many other states that will serve as a destination for patients from all walks of life to get lifesaving treatment for complex illnesses and as an anchor for medical innovation, educational opportunity and economic development,” Hirsch said.

The two health systems had signed a definitive agreement declaring their “intention to integrate” in late 2020.

The organizations said that in addition to increasing services and strengthening patient access, the premier academic medical center’s location in New Brunswick, New Jersey, would play a role in attracting more academic talent and research to nearby Rutgers University.

The systems’ announcement also cited affirmation from Superior Court Judge Lisa Vignuolo, who said when authorizing the transaction that the deal “will serve in the public interest and the public good.”

RWJBH is the larger of the pair, providing care to more than 3 million patients annually across 11 hospitals, four children’s hospitals and dozens of other centers. It’s already the largest academic health system in New Jersey thanks to a collaboration with Rutgers Robert Wood Johnson Medical Schools to train over 1,000 medical residents and interns across RWJBH hospitals yearly.

Formed in 2007, Saint Peter’s Healthcare System is a Catholic organization headlined by the 478-bed Saint Peter’s University Hospital in New Brunswick. It also operates a children’s hospital, primary and specialty care networks and a surgical center.

Under the previously announced terms of the agreement, Saint Peter’s would remain a full-service acute healthcare provider in New Jersey and continue to adhere to its Catholic healthcare mission. RWJBH would make significant strategic capital investments in St. Peter’s facilities, technology and innovation.

“This is a tremendous milestone in a years-long journey towards fulfilling our shared vision to bring transformative care to New Jersey,” RWJBH CEO Barry Ostrowsky said in a statement.

The beginning of the year already saw RWJBH officially acquire Trinitas Regional Medical Center, an Elizabeth, New Jersey-based Catholic teaching medical center.

Regulators’ green light for RWJBH’s moves contrasts with the recent opposition to Hackensack Meridian Health and Englewood Health’s now-nixed merger plans. The FTC and half of the country’s state attorneys general fought the proposal due to concerns that it would remove competition and harm residents in New Jersey’s Bergen County.

Charlotte, NC-based Atrium Health and Illinois- and Wisconsin-based Advocate Aurora Health announce plans to merge

The combined health system will become the sixth largest nationwide, with $27B in revenue and 67 hospitals across six Midwest and Southeast states. The system will be based in Charlotte, and known as Advocate Health, though Atrium will continue to use its name in its markets.

Atrium CEO Gene Woods is slated to ultimately lead the combined entity, after an 18-month co-CEO arrangement with Advocate Aurora CEO Jim Skogsbergh. While the cross-market merger is unlikely to create antitrust concerns about increased pricing leverage, the Biden administration has been making noises about applying stricter scrutiny to the impact of health system consolidation on labor market competition.  

The Gist: Earlier this year, Utah-based Intermountain Healthcare and Colorado-based SCL Health combined to create a 33-hospital, $14B health system, which became the 11th largest nationwide. While these mega-mergers of regional systems can realize cost savings from back-office synergies, there is a significant opportunity to create larger “platforms” of care to win consumer loyalty, deploy digital capabilities, attract talent, and become more desirable partners for nontraditional players like Amazon, Walmart, and One Medical.

It will be critical to watch whether the governance and cultural challenges that often hinder health system mergers come into play here. Advocate Aurora has had two prospective mergers fall apart in recent years, the first with Chicago-based NorthShore University HealthSystem, and the second with Michigan-based Beaumont Health (who subsequently finalized a merger with Spectrum Health earlier this year). 

But the combination with Atrium is structured as a joint operating agreement, essentially creating a new superstructure atop the two legacy systems. This may allow the combined entity more flexibility in local decision-making, but the ultimate question will be how the combined entity will create value for consumers. Time will tell.

Trinity to become sole owner of MercyOne, acquire CommonSpirit’s share

Livonia, Mich.-based Trinity Health and Chicago-based CommonSpirit Health have signed an agreement for Trinity to acquire all MercyOne Health System assets and facilities.

Clive, Iowa-based MercyOne has 16 medical centers, 27 affiliate organizations and more than 420 care sites, according to a joint news release. It employs more than 20,000 people.

Trinity and CommonSpirit decided it would be best for MercyOne and the communities it serves for it to have a sole parent company, according to the news release. MercyOne facilities will transition to Trinity’s strategies and operations.

The transaction is expected to be finalized this summer.

“True to our shared Catholic mission, our goal is to provide high-quality, compassionate care with the best patient/member experience possible. We will accomplish that goal through a holistic approach, with a range of health services and technologies that are fully connected and coordinated,” Mike Slubowski, president and CEO of Trinity Health, said in the news release. “This agreement creates a fully integrated MercyOne to care for more people in a unified way.”

Intermountain Healthcare completes its merger with SCL Health

Salt Lake City-based Intermountain and Broomfield, CO-based SCL Health have now formed a 33-hospital, $14B nonprofit health system, which immediately becomes the 11th largest nationwide. The system will operate across seven states under the Intermountain brand, although the SCL hospitals will keep their legacy names and Catholic affiliation. Regulators signed off on the interstate merger after the systems agreed not to close any locations or services.  

The Gist: Intermountain has been trying to build scale across the Mountain West in the last few years, having recently come up short in an attempt to merge with South Dakota-based Sanford Health. 

The SCL deal will allow Intermountain to expand its SelectHealth insurance plan and integrated care model into the fast-growing Denver metro area, as well as into Kansas and Montana. As with any merger, the difficult work of combining cultures and demonstrating meaningful value for patients and consumers lies ahead.  

Optum looks to acquire Houston-based Kelsey-Seybold Clinic

According to unnamed Axios sources, UnitedHealth Group’s Optum has signed a deal to acquire the independent 500-physician multispecialty group, which operates more than 30 clinic locations and one of the largest ambulatory surgery centers in Texas. With more than 41,000 enrollees, Kelsey-Seybold controls 8 percent of the lucrative Medicare Advantage market in the Houston metro area.

In January 2020, private equity firm TPG Capital made a minority investment in the 73-year-old group, valuing it at $1.3B, to help expand its footprint. Should the current deal come to fruition, Kelsey-Seybold’s physicians would join the ranks of over 60K physicians owned by, or exclusively affiliated with, Optum.

The Gist: Fresh off last year’s acquisition of 700-physician, Boston-based Atrius Health, Optum is continuing its buying spree of large physician groups with a history of managing risk. It will be interesting to see how quickly UnitedHealth Group can combine its Optum-owned physician assets with its commercial insurance platform to create a compelling, lower-cost option for employers and Medicare Advantage enrollees—building on the model of its Harmony network in Southern California.

Of note, Kelsey-Seybold and United Healthcare have offered a co-branded insurance product for years, and UHG executives have said they plan to roll out Harmony in Texas and Seattle next. 

Kelsey-Seybold is one a dwindling number of very large, independent multispecialty groups, and its sale to Optum may have other groups wondering about their ability to remain independent in an increasingly concentrated healthcare market.  

$5.4B acquisition dramatically expands Optum’s home healthcare footprint

UnitedHealth Group’s Optum announced plans to acquire publicly traded, postacute care behemoth LHC Group for $5.4B. The Lafayette, LA-based company, which had $2.2B in revenue last year, operates more than 550 home health locations, 170 hospice sites, and 12 long-term acute care hospitals across 37 states, reaching 60 percent of the country’s Medicare-eligible seniors. LHC also has more than 430 hospital joint venture partners.  

The Gist: This deal will greatly expand Optum’s ability to provide home-based and long-term care, with the goal of moving more care for the insurer’s Medicare Advantage enrollees to lower-cost settings. The acquisition puts Optum’s home healthcare portfolio on par with competitor Humana, which has been the leader in amassing home-based and postacute care assets, and recently moved to take full control of home health provider Kindred at Home. LHC will be part of a growing portfolio of care assets managed by Optum Health, which also includes the company’s owned physician assets. 

Success in lowering cost of care will require Optum to integrate referrals and care management across a rapidly expanding portfolio—and ensure its physician base has confidence in these new models of care. 

Physician departures from Mission Health continue years after HCA Healthcare takeover

Since the for-profit system acquired six-hospital, Asheville, NC-based Mission Health in February 2019, there has been a series of reports about cascading community impacts, including a large physician exodus from the system. Local news outlet Asheville Watchdog counts 223 doctors who are no longer included in the system’s online directory, which currently lists about 1,600 physicians; HCA has also reportedly reduced health system staff by over 12 percent since the acquisition. Former Mission doctors say that patient care at the system is suffering, and that HCA doesn’t place the same value on primary care that Mission Health physicians historically did.

The Gist: The cultural shift from 130 years as a nonprofit community fixture to for-profit health system subsidiary has been rocky for Mission. Even before the HCA deal had been finalized, Mission physicians expressed concerns about how the company would implement its lean staffing and operational “playbook”. These expected changes were surely compounded by COVID-related staffing challenges. 

Physician stakeholders who feel uncertain about the impact of an impending merger can sometimes use their voice to stymie health system combinations (see Beaumont Health’s failed merger with Advocate Aurora Health), but may also vote with their feet when dissatisfied with new ownership, leaving critical gaps in patient care

Private equity-backed buyouts have physicians concerned

The Federal Trade Commission and the Justice Department are seeking comments on ways merger guidelines should be updated, and physicians are raising concerns about private equity-backed buyouts of provider practices. 

The FTC and the Justice Department announced in January that they’re seeking to revamp merger guidelines for businesses. Comments on how to “modernize the merger guidelines to better detect and prevent anticompetitive deals,” can be submitted to the agencies through April 21. 

Comments are pouring in from physicians. Many of the comments are anonymous, but the commenters self-identify as physicians. 

The physicians’ top concern are private equity-backed buyouts, according to an analysis by Law360. They’re also concerned by the profit-first attitude of healthcare and consolidation in the industry, according to the report. 

The commenters raised many concerns with private equity groups, saying theyput profits over patients” and “stifle the voices of physicians.”

The comments are coming in as private equity firms continue to buy up physician practices. 

Private equity firms acquired 59 physician practices in 2013, and that number increased to 136 practices by 2016, according to a research letter published in JAMA

Three companies combine in kidney care merger

Dialysis giant Fresenius Medical Care is creating a new $2.4B company by combining its US value-based care division, Fresenius Health Partners, with nephrologist network InterWell Health, and digital-first kidney care startup Cricket Health. Cricket Health CEO Robert Sepucha is set to lead the new company, which will be named InterWell Health, assuming the deal closes in the second half of 2022 as expected. 

The Gist: This move will enable Fresenius to move further up the renal care delivery chain, managing patients with earlier stage chronic kidney disease before they need dialysis. Fresenius says the new company will more than triple its total addressable market in the US, from $50B to around $170B. 

Seeing an opportunity to disrupt the dialysis market, which has been dominated by for-profit giants Fresenius and DaVita, significant capital has been flowing to numerous disruptors in the kidney care space who aim to bring care closer to consumers. Medicare, which spends nearly $115B annually on chronic kidney disease, is testing new payment models aimed at delaying the need for dialysis, as well as moving care into patients’ homes. 

But whether Fresenius’s latest moves will make a significant difference in lowering the cost of kidney care remains to be seen.

Even the largest health systems dwarfed by industry giants

https://mailchi.mp/f6328d2acfe2/the-weekly-gist-the-grizzly-bear-conflict-manager-edition?e=d1e747d2d8

Insurers, retailers, and other healthcare companies vastly exceed health system scale, dwarfing even the largest hospital systems. The graphic above illustrates how the largest “mega-systems” lag other healthcare industry giants, in terms of gross annual revenue. 

Amazon and Walmart, retail behemoths that continue to elbow into the healthcare space, posted 2021 revenue that more than quintuples that of the largest health system, Kaiser Permanente. The largest health systems reported increased year-over-year revenue in 2021, largely driven by higher volumes, as elective procedures recovered from the previous year’s dip.

However, according to a recent Kaufman Hall report, while health systems, on average, grew topline revenue by 15 percent year-over-year, they face rising expenses, and have yet to return to pre-pandemic operating margins. 

Meanwhile, the larger companies depicted above, including Walmart, Amazon, CVS Health, and UnitedHealth Group, are emerging from the pandemic in a position of financial strength, and continue to double down on vertical integration strategies, configuring an array of healthcare assets into platform businesses focused on delivering value directly to consumers.